Virtual trader intercompany
It was held that the taxpayer was entitled to deduct the interest expenditure as its activities were designed to render the subsidiary profitable and promote the generation of assessable income by it and subsequently the derivation of assessable dividends by the taxpayer. Whether the hypothetical forex realisation loss made by Aust Co on the discharge of the inter-company loan is made in gaining or producing non-assessable non-exempt income will depend on the nature of the connection between that loss and the expected production of that income.
It requires a consideration of all the facts and circumstances, including the nature of the connection between the making of the inter-company loan and the relevant income earning activities of Aust Co.
The inter-company loan was on interest free terms. It was incapable of producing assessable income by way of interest for Aust Co. While discharge of the loan itself was capable of giving rise to a forex realisation gain, or loss, the purpose of advancing the loan was to enable Foreign Co to fund the acquisition of the foreign shares, thereby promoting the profitability of Foreign Co and the potential derivation of dividend income by Aust Co.
In these circumstances it is considered there is sufficient nexus between a hypothetical forex realisation loss arising on the discharge of the inter-company loan and the generation of divided income that would be non-assessable non-exempt.
Accordingly, a forex realisation gain, had it been a loss, would have been made in the course of gaining or producing non-assessable non-exempt income and will therefore be non-assessable non-exempt income under section of the ITAA Legislative references Updated references. Back to browse 1 related document.
This document has changed over time. This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.
If you reasonably apply this decision in good faith to your own circumstances which are not materially different from those described in the decision , and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax or repay any over-claimed credit, grant or benefit , provided the time limits under the law allow it. Please enter all position fields.
I currently work here. I have no work experience. Highest Level Of Education. Please enter valid information in all education fields. Less than 9th Grade. Select a major from the list. Aeronautical and Astronautical Engineering.
Criminal Justice, Law Enforcement, and Corrections. Digital, Radio, and Television Communication. Educational Administration and Supervision. Electronic Communication System Technology. Enterpreneurship and Small Businesses Development. Massage and Related Therapeutic Professions.