Taxation Determination TD 96/45







2. The retailer is entitled to an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the gross amount at the time of the contract for the purchase of the goods (see paragraph 11 of Taxation Ruling TR 96/20). | 3. Where a discount is received for prompt payment, the amount of the discount is assessable income under section 6-5 of the ITAA 1997 at the time the liability is satisfied (see paragraph 19 of Taxation Ruling TR 96/20). | 4. Where the discount is transferred to the account of an affiliated person, the discount will have been received by the retailer and dealt with according to the retailer's instructions. The discount is still assessable income of the retailer under subsection 6-5(4) of the ITAA 1997. | 5. A similar result occurs where a retailer is given the opportunity of accumulating trading discounts (incentives/rebates), wholly or in part, which may be applied towards the acquisition of new shares in the wholesaler company. In this situation, the discount is also derived by the retailer upon (sufficiently prompt) payment of the invoice being made. | 6. Typically, however, there is no obligation to apply the account to the acquisition of shares, nor to leave any balance in the account indefinitely. The retailer can withdraw from the fund or make withdrawals from their incentive/rebate account at any time. Any such subsequent dealing with the moneys in the incentive account does not have taxation implications for the retailer. | Last Determination: This is the last Taxation Determination for the 1996 calendar year. The next Determination will be Taxation Determination TD 97/1. | Commissioner of Taxation 18 December 1996 | Previously released as TD 96/D13


Related rulings: TR 96/20
Legislative references: ITAA 1997 6-5 ITAA 1997 6-5(4) ITAA 1997 8-1
Subject references: allowable deductions assessable income cash settlement discount discount prompt payment settlement settlement discount trading stock