The Tax Office on Wed 11.1.2012, issued this Draft Determination which deals with the issue of when income tax of a private company will be a “present legal obligation” for the purposes of the distributable surplus calculation under s 109Y(2) of Div 7A of Pt III of the ITAA 1936.
It provides that if a private company has a liability to pay instalments for an income year under Pt 2-10 of Sch 1 to the Taxation Administration Act 1953, and some or all of an instalment is unpaid as at 30 June, then the unpaid amount of that instalment will be a “present legal obligation” for the purposes of the distributable surplus calculation worked out at that time.
Likewise, the Draft states that if a private company which is a full self-assessment taxpayer has an amount due and payable by reason of s 5(4) of the ITAA 1997, then this amount will be a present legal obligation for the purposes of the distributable surplus calculation worked out at 30 June of the income year which is subject to the deemed assessment under s 166A of the ITAA 1936.
It also states that if the Commissioner issues a private company with an amended assessment for any income year, then the amount payable under the amended assessment will be a present legal obligation for the purposes of the distributable surplus calculation worked out at the end of the income year subject to the amended assessment.
COMMENTS are due by 17 February 2012. ATO contact: Robert Mason – Tel: (03) 6221 0428; Fax: (03) 6221 0460; Email: Robert.Mason@ato.gov.au
Withdrawal and addendum
Following the issue of the Draft TD, the Tax Office also withdrew TD 2008/28 (When is income tax of a private company a “present legal obligation” for the purposes of the distributable surplus calculation under s 109Y(2) of Div 7A of Pt III of the ITAA 1936?) with effect from on Wed 11.1.2012. Also, the ATO has issued an Addendum to Taxation Determination TD 2007/28 (What is a “present legal obligation” of a private company for the purposes of s 109Y(2) of Div 7A of Pt III of the ITAA 1936) to cater for the changes in the Commissioner’s views now expressed in the Draft TD. The Addendum applies both before and after the date of issue of the Draft TD.
[LTN 6, 11/1]