Private ruling: Application of section 974-80 of the Income Tax Assessment Act 1997
Date of advice: 18 October 2018
Published: December 2018
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: In the income year ended 30 June 20XX

Ruling: Q1: Does paragraph 974-80(1)(d) of the ITAA 1997 apply in respect of a loan from the Trustee of Operating Trust to Operating Company? | A1: No

Relevant facts and circumstances: Operating Company is Australian resident company. It borrowed money from a related entity, the Trustee of Operating Trust, to fund its investment in a business project. In order to provide the loan to Operating Company, the Trustee of Operating Trust borrowed funds from FinCo, a related company. FinCo borrowed those funds from external lenders.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 974 | Income Tax Assessment Act 1997 section 974-80 | Income Tax Assessment Act 1997 paragraph 974-80(1)(d)

Reasons for decision: Summary: Subsection 974-80(1) of the ITAA 1997 states: This section deals with the situation in which: (a) an interest carries a right to a variable or fixed return from a company; and (b) the interest is held by a *connected entity of the company; and (c) apart from this section, the interest would not be an *equity interest in the company; and (ca) the *scheme that gives rise to the interest is a *financing arrangement for the company; and (d) there is a scheme, or a series of schemes, designed to operate so that the return to the connected entity is to be used to fund (directly or indirectly) a return to another person (the ultimate recipient ). Considering the facts and circumstances of this case, the Commissioner is of the view that the requirements of paragraph 974-80(1)(d) are not satisfied.