Private ruling: Deductibility of certain project payments
Date of advice: 8 December 2017
Published: April 2018

Ruling: Q1: Will the Payments incurred by Entity M be deductible pursuant to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: Entity M entered into an Agreement in respect of certain assets (the Project) with Entity Q. The Project comprises various phases. At the conclusion of the Project, Entity M’s rights to access the assets will come to an end and Entity Q will maintain its ownership of the assets. Entity M will have no proprietary rights in the assets. Entity Q will grant Entity M rights to access the assets and any areas necessary to undertake the Project. Entity M will pay the Payments to Entity Q over a period of the Project in order to enter the assets and provide the contracted services. Entity Q will pay certain Payments to Entity M over a period of the Project and will pay other amounts to Entity M over another period of the Project. Entity M will include the Amounts and other amounts in its assessable income. Entity M will subcontract parts of the Project to subcontractors.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Paragraph 8-1(1)(a) | Income Tax Assessment Act 1997 Paragraph 8-1(2)(a) | Income Tax Assessment Act 1997 Paragraph 8-1(2)(b) | Income Tax Assessment Act 1997 Paragraph 8-1(2)(c) | Income Tax Assessment Act 1997 Paragraph 8-1(2)(d) | Income Tax Assessment Act 1997 Division 230 | Income Tax Assessment Act 1997 Subsection 230-20(4) | Income Tax Assessment Act 1997 Paragraph 230-460(2)(e)

Reasons for decision: Summary: Summary The Payments will be deductible under section 8-1. Detailed reasoning The Payments incurred by Entity M will be deductible pursuant to section 8-1. Entity M incurred the Payments in the course of gaining or producing its assessable income and the Payments are not capital or capital in nature.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions. | Reasons for decision: All legislative references are to provisions of the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise stated.