The Australian Taxation Office (ATO) has discharged a draft Taxation Determination TD 2013/D3. The draft determination is appropriate to arrangements between a parent entity and its subsidiary entity.
According to the draft TD 2013/D3, support payments made by an Australian parent entity to a subsidiary are capital in nature for the purposes of paragraph 8 -1(2)(a) of the Income Tax Assessment Act 1997(ITAA 1997). Such payments are included in the cost base and reduced cost base of the parent’s investment in the subsidiary and are therefore not deductible under section 40-880 of the ITAA 1997.
