This Draft Taxation Determination, issued on Wed 29.1.2014, states that capital support payments described in the Draft are not deductible for the purposes of para 8-1(2)(a) of the ITAA 1997, or under ss 230-15(2), 230-15(3), and 40-880.
The arrangement outlined in the Draft consists of a parent entity agreeing to provide a subsidiary with one or more of the following:
- a lease, license or other right to use one or more assets, not being money or a money equivalent;
- a legal or equitable interest in one or more such assets; or
- services.
The subsidiary agrees to provide consideration to the parent for the things referred to above. The parent also agrees to make a payment to the subsidiary which, objectively is broadly made because all or a part of the subsidiary has made losses or is likely to have made losses. In addition, the payment does not have the character of a price for assets or services supplied by the subsidiary to the parent, or a loan to the subsidiary.
The Draft also states that under the arrangement, the parent’s obligation to provide the things referred to above is not insignificant compared with the rights and obligations. It includes 6 examples to outline the applicability of various circumstances and payments.
DATE OF EFFECT: When the final Determination is issued, it is proposed to apply both before and after its date of issue.
COMMENTS are due by 28 February 2014. ATO contact: Natasha Zorzi – Tel: (07) 3213 5888; Fax: (07) 3213 5500; Email: Natasha.Zorzi@ato.gov.au
[LTN 18, 29/1/14]