Private ruling: Funding agreement
Date of advice: 17 November 2017
Published: April 2018

Ruling: In order to protect the privacy and commercial in-confidence components of this private binding ruling the following summary is provided. | The taxpayer (A Co) entered into a funding agreement with Entity B for funding of $x to assist with project costs. Under the funding agreement A Co will repay the full $x to Entity B. | The funding agreement provides that $x advanced to A Co is unconditionally repayable. The $x will be recognised as a liability in the accounts of A Co and is a ‘sub-ordinated’ debt. | The taxpayer sought a ruling on the assessability of the $x advanced under the funding agreement. | The Commissioner ruled that the $x satisfied the characteristics of a loan and therefore the amount was not assessable.