Taxation Ruling

IT 2635A - Addendum

Income tax: syndicated research and development arrangements

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FOI status:

may be released

NOTICE OF ADDENDUM

This Addendum amends Taxation Ruling IT 2635 as follows:

After paragraph 39

Insert:

'Impact of Income Tax Assessment Act 1997 and transitional provisions

'40. Changes to the way in which section 73D of the Act applies have been introduced by Subdivision 20-A of the Income Tax Assessment Act 1997 ('the new Act'). The Subdivision includes in assessable income an amount received by way of insurance, indemnity or other recoupment if it is for a deductible expense and it is not otherwise assessable income. The Subdivision applies to an assessable recoupment of a loss or outgoing, whenever incurred, received in the 1997-98 income year or a later income year: see Subdivision 20-A of the Income Tax (Transitional Provisions) Act 1997.

'41. Section 73D, a reduction of deduction provision, has not been amended but continues to apply to assessments for the 1997-98 income year and later income years (except in relation to an amount received as recoupment in the 1997-98 income year or a later income year).

'42. The explanatory memorandum to the Tax Law Improvement Bill 1996 describes the application of the rewritten sections in Subdivision 20-A of the new Act as follows:

"The rewritten sections will apply to recoupment amounts received in the 1997-98 or later income years...

In some cases, however, it is necessary that some recoupment provisions of the 1936 Act apply to assessments for the 1997-98 and later income years when those provisions deal with recoupments that were received before the 1997-98 income year....These provisions are "reduction of deductions" recoupment provisions that apply to expenditure deductible over more than one year. Under these provisions, a recoupment may still affect a deduction in the 1997-98 income year or a later income year, even if the initial expenditure was incurred, and the recoupment was received, before the 1997-98 income year." '

Commissioner of Taxation
23 July 1997

References

ATO references:
NO 97/3374-4 97/2189-4

Related Rulings/Determinations:

IT 2635

Legislative References:
ITAA 97 Subdivision 20-A
ITTP 97 Subdivision 20-A