Taxation Determination
TD 98/D19
Income tax: will a lender under a Land Transport Facilities borrowings agreement be denied deductions in respect of their own funding costs if they lend to the borrower at a lower rate of interest?
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Please note that the PDF version is the authorised version of this draft ruling.This document has been finalised.
FOI status:
draft only - for commentPreamble
| Draft Taxation Determinations (DTDs) present the preliminary, though considered, views of the Australian Taxation Office. DTDs should not be relied on; only final Taxation Determinations represent authoritative statements by the Australian Taxation Office. |
1. The extent to which the Commissioner would allow a deduction for funding costs where lenders become eligible for a tax offset will depend on the facts of each particular case.
2. A lender under a Land Transport Facilities borrowings agreement would be expected to lend at a rate of interest that provided it with a reasonable commercial return on its borrowed funds.
3. In Taxation Ruling TR 95/33 we stated that if an outgoing produces no assessable income, or the amount of the assessable income is less than the amount of the outgoing, then it may be necessary to examine all the circumstances surrounding expenditure to determine whether the outgoing is wholly deductible. This may include an examination of the taxpayer's subjective purpose, motive or intention. If the expenditure is genuinely used in the production of assessable income then a deduction would be allowable.
4. However, TR 95/33 also envisages apportionment of expenditure in some instances, notably where expenditure is explained by another objective, such as the derivation of exempt income or the obtaining of a tax deduction.
Your comments
5. If you wish to comment on this draft Determination, please send your comments by 15 January 1999 to:
| Contact officer details have been removed following publication of the final determination. |
Commissioner of Taxation
25 November 1998
This Draft Determination has been finalised by TD 1999/33
References
ATO references:
NO NAT 98/11493-0
Related Rulings/Determinations:
TD 95/33
Subject References:
land transport facilities tax offset
financing
negative gearing
non recourse loans
interest expenses
interest income
interest rates
Legislative References:
ITAA97 Pt 3-45 Div 396
ITAA97 Pt 1-3 Div8
Case References:
Fletcher & Ors v. FC of T
(1991) 173 CLR 1
66 ALJR 11
103 ALR 97
91 ATC 4950
(1991) 22 ATR 613