Taxation Determination TD 2002/1







The number, subject heading, date of effect and paragraphs 1 to 5 of this Taxation Determination are a 'public ruling' for the purposes of Part IVAAA of the Taxation Administration Act 1953 and are legally binding on the Commissioner. The remainder of the Determination is administratively binding on the Commissioner. Taxation Rulings TR 92/1 and TR 97/16 together explain how a Determination is legally or administratively binding. | This Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20). | 1. Yes, provided that payments by the fund will be for managing the tax affairs of the contributors and are, therefore, 'tax-related expenses' under section 25-5 of the Act. | 2. The payment is incurred and is an allowable deduction to the contributor in the year in which the contribution is made to the fighting fund where the following conditions are met and can be demonstrated to the satisfaction of the Commissioner: | 3. Any amounts recouped from the trustee will be assessable income under section 20-30 of the Act in the income year they are received. | 4. In some cases it may not be practicable or possible to return surplus funds to contributors upon termination of the fund. In these circumstances, payment of the surplus to a deductible gift recipient under the Act will not result in the denial of the section 25-5 deduction. | Example: 5. The 'ABC Trust' is set up to fund litigation resulting from a disallowance of deductions in the B Investment Venture. The litigation involves Betty, a participant in the B Investment Venture who has had her deductions in relation to the scheme disallowed. John, who is also a participant in the scheme, contributes $5000 to the fighting fund during October 2001. John is entitled to claim a deduction for the $5000 in the income year in which the payment is made. | The total contribution from all contributors is $110,000. | At the completion of the litigation there is a surplus amount in the trust which is returned to the contributors. John receives 5000/110,000 of the surplus, which he includes in his assessable income in the income year in which he receives it. | Commissioner of Taxation 16 January 2002 | Previously released in draft form as TD 2001/D12


Legislative references: ITAA 1997 25-5 ITAA 1997 20-30
Subject references: Tax-related expenses Managing your tax affairs Tax affairs