A great reminder with related party transactions

Section 82KK of the ITAA36 is one of those section that I knew existed once but have not thought about for years. This section applies where there is a timing mismatch in payments to associates so that income is recognised in a later year than the matching deduction. When this section applies the deduction is deferred to the later year.

Well this section has raised its head again in ATOID 2014/34.

In this decision, an associate  legal services to a taxpayer. And due to the way the two entities return income (one on cash and one on accruals) there was a deduction and income offset.

But the decision reminds us that for this section to apply there needs to be an agreement to make this mismatch occur. So remember, if the mismatch is more than just coincidence, the deduction will be deferred.

Advertisements

About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
This entry was posted in Income Tax, Planning Idea, Planning Stuff. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s