Private ruling: Administration - Lodgment and tax obligations
Date of advice: 15 October 2015
Published: October 2015
Ruling period: Year ended 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: January 2014

Ruling: Q1: Is Company A required to lodge an income tax return? | A1: Yes.

Relevant facts and circumstances: Company A and Company B are Australian companies. The Director is the sole Director of both companies. Company A is a Registered Training Organisation (RTO). Company A holds certain accreditations and authorities issued by the Australian Quality Skills Authority (ASQA). Company A has no staff and does not engage directly with clients. During early 20XX, Company A and Company B entered into a Partnership Agreement (Agreement). A copy of the Agreement has been received. Company B provides vocational training. Company B is not a RTO. Company B engages staff, contractors and clients, receives and receipts monies, conducts advertising and delivers services to those clients. Training is done mainly at one location. Company A allows Company B to use its RTO status to issue statements of attainment at will (that is without a per certificate fee). In return Company B pays a licence fee to Company A in the form of: • Paying the ASQA renewal • Paying the ASIC renewal • Providing staff to compile and submit BAS and ITR forms • Providing sundry office and admin support. Company A has lodged "Nil" income tax returns for the relevant years.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 6(1) | Subsection 161(1) | Section 161AA | Income Tax Assessment Act 1997 Division 6 and | Section 995-1.

Reasons for decision: Summary: Companies that derive assessable income during an income year must lodge a tax return for that income year. Companies that are carrying forward losses that exceed $1,000 to the following income year must also lodge a tax return for the current income year even if no assessable income has been derived in that income year. A company must report its taxable income, tax offsets and credits, PAYG instalments and the amount of tax it is liable to pay on that income or the amount that is refundable. Subsection 161(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that every person must, if required by the Commissioner by notice published in the Gazette, give to the Commissioner a return for a year of income within the period specified in the notice. Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines "person" to include a company. Section 161AA of the ITAA 1936 specifies the contents of returns of full self-assessment taxpayers. In short a full self-assessment taxpayer must specify in a return for a year of income: (a) its taxable income or its net income (or that it has no taxable income or net income) for that year of income; (b) the amount of tax payable (or that no tax is payable); and (c) the total of its tax offset refunds (or that it can get no such refund). A full self-assessment taxpayer is defined in section 6(1) of the ITAA 1936 and includes a company in this definition. Company A allows Company B to use its RTO status to provide vocational training. As consideration for the use of the license, Company B pays on behalf of Company A Ltd it's ASIC and ASQA renewal fees. Company B also provides staff, office facilities, insurances and other sundries as part of the consideration. Whilst Company A does not receive physical payment for the use of the license by Company B, it has still derived assessable income in accordance with Division 6 of the ITAA 1997 as the amount, being the license fee, has been applied or dealt with on its behalf. Therefore, as Company A derives assessable income during the income year, Company A must lodge an income tax return for that income year.