This Ruling, released on Wed 12.3.2014, deals with when commercial software developers derive income for the purposes of s 6-5 of the ITAA 1997 from licence agreements, and “hosted” or “cloud” arrangements.

Broadly, the Ruling states where an amount properly attributable to a contractual obligation is subject to a “contingency of repayment”, the amount is derived for the purposes of s 6-5 when the obligation is fully performed or the contingency of repayment otherwise lapses. It says a “contingency of repayment” in the event of non-performance includes a contractual obligation to make a refund, or contractual exposure for damages. The Ruling states that potential exposure to damages under tort or consumer protection law does not amount to a “contingency of repayment”.

The Ruling was previously issued as Draft Taxation Ruling TR 2013/D2 and is largely the same. It contains 2 additional examples from the Draft.

DATE OF EFFECT: Applies both before and after its date of issue.

[FJM Note:    This is hopefully in line with the Arthur Murray case (1965) 114 CLR 314.]

[LTN 48, 12/3/14]