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Section 100A Reimbursement Agreement

Any agreement under which a person waives their rights to repay credit funds or fails to take steps to recover credit funds is considered a money payment agreement. However, an agreement concluded within the framework of an ordinary family or commercial establishment is excluded from the definition of a reimbursement agreement. s100A (7): . an agreement. which provides for the payment of money or the transfer of goods. the provision of services or other services to a person. other than the beneficiary. Over the past five years, Section 100A has been revised to examine exclusions from repayment agreements, including: the compliance approach described above does not apply where the agent holds shares in the recipient company – see Example 5. However, this does not mean that the mere ownership of a recipient business triggers the application of Section 100A. As a general rule, this plan would constitute a repayment agreement if the beneficiary who was currently entitled to the trust`s income would pay a lower amount of tax than that due by the person who would have actually benefited from the economic benefits of that income. One area of particular concern for consultants should be client-focused clients who have wash schemes in place.

In the ATO Guidelines, the graph below shows a particular agreement that the ATO considers to be a repayment agreement. However, to the extent that a beneficiary`s right results from a repayment agreement, it is not taken into account in accordance with section 100A of the Income Tax Assessment Act 1936 (ITAA 1936). This means that net income that would otherwise have been taxed on the beneficiary (or trustee on their behalf) is instead taxed on the agent at the maximum marginal tax rate. In FCT v Prestige Motors Pty Ltd (1998) 82 FCR 195, the Tribunal considered two agreements. They concerned the agent of an automotive retail store. The Tribunal decided that these two agreements constitute repayment agreements, as they cannot be declared as ordinary commercial transactions. To be a refund agreement, at least one of the parties to the agreement must have entered into it for purposes or purposes that have reduced a person`s income tax obligation. .