Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-95 - VALUE SHIFTING  

Division 727 - Indirect value shifting affecting interests in companies and trusts, and arising from non-arm ' s length dealings  

Subdivision 727-C - Exclusions  

Indirect value shifts involving services

SECTION 727-235   Services provided by gaining entity to losing entity for no more than a commercially realistic price  

727-235(1)    
An ^* indirect value shift does not have consequences under this Division if:

(a)    

there are ^* lesser benefits and, to the extent of at least 95% of their total *market value, the lesser benefits consist entirely of:

(i) a right to have services that are covered by section 727-240 provided directly by the gaining entity to the losing entity; or

(ii) services that are covered by section 727-240 and have been, are being, or are to be, so provided;

or both; and

(b)    as at the ^* IVS time, the total market value of the greater benefits is not more than the total of:

(i) the present value of the direct cost to the gaining entity of providing the services; and

(ii) the present value of a reasonable allocation of the total direct cost to the gaining entity of providing services that include the first-mentioned services (so far as it is not already covered by subparagraph (i)); and

(iii) the present value of a reasonable allocation of the indirect cost to the gaining entity of providing the first-mentioned services; and

(iv) the mark-up worked out under subsection (2) or (3) of this section.

To work out the costs and present values referred to in paragraph (1)(b) , see section 727-245 .

727-235(2)    
If it is reasonable to estimate that an entity providing the same quantity of services of the same kind in the same market would charge for them on the basis of a particular percentage mark-up, or on the basis of a percentage mark-up within a particular range, the mark-up for the purposes of subparagraph (1)(b)(iv) is:

• the total of the respective present values of the costs mentioned in subparagraphs (1)(b)(i) , (ii) and (iii) ;

multiplied by:

• that percentage mark-up, or the highest percentage in that range.

727-235(3)    
Otherwise, the mark-up for the purposes of subparagraph (1)(b)(iv) is 10% of the total of the respective present values of the costs mentioned in subparagraphs (1)(b)(i) , (ii) and (iii) .