Private ruling: purchase and leasing of an asset
Published: February 2014
Ruling period: Year ended 31 December 2013 | Year ending 31 December 2014 | Year ending 31 December 2015 | Year ending 31 December 2016 | Year ending 31 December 2017 | Year ending 31 December 2018 | Year ending 31 December 2019 | Year ending 31 December 2020 | Year ending 31 December 2021 | Year ending 31 December 2022 | Year ending 31 December 2023 | Year ending 31 December 2024 | Year ending 31 December 2025
Date scheme commenced: 1 January 2013

Ruling: Q13: Will the Commissioner make a determination under paragraphs 177F(1)(a), 177F(1)(b) or subsection 177F(2A) of the ITAA 1936 to cancel a tax benefit that has been obtained, or would, but for section 177F of the ITAA 1936 be obtained, under the scheme? Answer No.

Relevant facts and circumstances: The taxpayer has applied for a private ruling in relation to a leasing transaction.

Relevant legislative provisions: Subsection 128B(5A) of the ITAA 1936 | Section 128B of the ITAA 1936 | Subsection 128B(2B) of the ITAA 1936 | Subsection 128B(3) of the ITAA 1936 | Subparagraphs 128B(2B)(a)(ii) 1936 | Subparagraph 128B(2B)(b)(i) of the ITAA 1936 | Subsection 128B(1A) of the ITAA 1936 | Subsection 6(1) of the ITAA 1936 | Section 4 of the International Tax Agreements Act 1953 | Subsection 4(2) of the International Tax Agreements Act 1953 | Paragraph 17A(5)(b) of the International Tax Agreements Act 1953 Paragraph 6-5(3)(a) of the ITAA 1997 | Subsection 995-1(1) of the ITAA 1997 | Section 6C of the ITAA 1936 | Paragraph 6C(1)(a) of the ITAA 1936 | Subsection 6(C)(2) of the ITAA 1936 | Section 12-245 of Schedule 1 to the TAA 1953 | Division 11A of Part III of the ITAA 1936. | Section 12-300 of Schedule 1 to the TAA 1953 | Subsection 3AA(2) of the TAA 1953 | Section 301-175 ITAA 1997 | Section 306-15 of the ITAA 1997 | Division 840 of the ITAA 1997 | Subdivision 840-M of the Income Tax (Transitional Provisions) Act 1997 Subparagraphs 128B(2B)(a)(ii) of the ITAA 1936 | Subsection 40-25(1) of the ITAA 1997 | Section 40-30 of the ITAA 1997 | Subsection 40-30(1) of the ITAA 1997 | Section 40-40 of the ITAA 1997 | Subsection 40-25(2) of the ITAA 1997 | Subsection 40-25(7) of the ITAA 1997 | Subsection 8-1(1) of the ITAA 1997 | Subsection 8-1(2) of the ITAA 1997 | Division 820 of the ITAA 1997 | Division 230 of the ITAA 1997 | Subsection 230-15(2) of the ITAA 1997 | Section 230-45 of the ITAA 1997 | Section 230- 50 of the ITAA 1997 | Section 230-55 of the ITAA 1997 | Subsection 230-45(1) of the ITAA 1997 | Subsection 230-45(2) of the ITAA 1997 | Paragraphs 230-45(2)(a) of the ITAA 1997 | Paragraphs 230-45(2)(b) of the ITAA 1997 | Paragraphs 230-45(2)(c) of the ITAA 1997 | Paragraphs 230-45(2)(d) of the ITAA 1997 | Section 974-160 of the ITAA 1997 | Subsection 974-160(1) of the ITAA 1997 | Subsection 974-160(2) of the ITAA 1997 | Subsection 230-30(3) of the ITAA 1997 | Subsection 230-35(3) of the ITAA 1997 | Subsection 230-35(1) of the ITAA 1997 | Subdivision 230-H of the ITAA 1997 | Division 230 of the ITAA 1997 | Paragraph 25-20(1)(a) of the ITAA 1997 | Section 25-20 of the ITAA 1997 | Part IVA of the ITAA 1936 | Section 177F of the ITAA 1936 | Subsection 177F(1) of the ITAA 1936 | Paragraph 177F(1)(a) of the ITAA 1936 | Paragraph 177F(1)(b) of the ITAA 1936 | Subsection 177F(2A) of the ITAA 1936 | Paragraph 177C(1)(bc) of the ITAA 1936 | Section 177A of the ITAA 1936 | Section 177C of the ITAA 1936 | Section 177D of the ITAA 1936 | Subsection 177A(1) of the ITAA 1936 | Subsection 177C(1) of the ITAA 1936 | Paragraph 177C(1)(a) of the ITAA 1936 | Paragraph 177C(1)(b) of the ITAA 1936 | Subsection 177CB(1) of the ITAA 1936 | Section 177CB of the ITAA 1936 | Subsection 177CB(2) of the ITAA 1936 | Subsection 177CB(3) of the ITAA 1936 | Subsection 177CB(4) of the ITAA 1936 | Subsection 177D(1) of the ITAA 1936 | Subsection 177D(2) of the ITAA 1936 | Subsection 177A(5) of the ITAA 1936 | Subsection 177D(3) of the ITAA 1936 | Subsection 177D(5) of the ITAA 1936 | Section 177A of the ITAA 1936

Reasons for decision: Summary: The reasons for decision were provided to the rulee.

Subject: purchase and leasing of an asset: The Commissioner was asked to rule on the following questions. | Question 1: Is the sub-lessor liable to pay income tax under subsection 128B(5A) of the Income Tax Assessment Act 1936 (ITAA 1936) on payments it receives from the lessee under the sub-lease of the asset? | Question 2: Does the Commissioner consider that the sub-lessor has a permanent establishment in accordance with Article 5 of the relevant tax treaty and will it therefore require the sub-lessor to include the income it receives from the lessee under the sub-lease of the asset in its assessable income under subsection 6-5(3) of the ITAA 1997 in determining its Australian taxable income? | Question 3: Is the head lessor required to withhold an amount under section 12-245 of Schedule 1 to the Tax Administration Act 1953 (TAA) from interest it pays to non-resident third party lenders in relation to the 'future loans'? | Question 4: Is the head lessor liable to pay income tax under subsection 128B(5A) of the ITAA 1936 as a result of the payments it receives from the sub-lessor under the head lease of the asset? | Question 5: Does the Commissioner consider that the head lessor has a permanent establishment in accordance with Article 5 of the relevant tax treaty and will it therefore require the head lessor to include the income it receives from the sub-lessee under the head lease of the asset in its assessable income under subsection 6-5(3) of the ITAA 1997 in determining its Australian taxable income? | Question 6: Is the head lessor entitled to a deduction for the decline in value of 'the asset' under section 40-25 of the ITAA 1997? | Question 7: Subject to the potential application of thin capitalisation rules in Division 820 of the ITAA 1997, can the head lessor claim a deduction under section 8-1 of the ITAA 1997 for interest expenses incurred in relation to the 'future loans'? | Question 8: Subject to the potential application of the thin capitalisation rules in Division 820 of the ITAA 1997, and assuming that the head lessor is subject to the taxation of financial arrangements rules in Division 230 of the ITAA 1997, is the head lessor entitled to a deduction under subsection 230-15(2) of the ITAA 1997 for losses made in relation to the 'future loans'? | Question 9: Is the head lessor entitled to a deduction under section 8-1 of the ITAA 1997 for legal costs it incurred when negotiating and drafting agreements for the purchase of the asset and the company's lease of the asset to the sub-lessor? | Question 10: Is the head lessor entitled to a deduction under section 25-20 of the ITAA 1997 for legal costs it incurred when negotiating and drafting agreements for the company's lease of 'the asset' to the sub-lessor? | Question 11: Is the head lessor entitled to a deduction under section 8-1 of the ITAA 1997 for legal costs it incurred when negotiating and drafting agreements in relation to the sub-lease of the asset by the sub-lessor? | Question 12: Is the head lessor entitled to a deduction under section 8-1 of the ITAA 1997 for management costs it incurred in managing its lease of the asset to the sub--lessor?