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On 23 April 2009, the ATO issued Taxpayer Alert TA 2009/9 entitled "Contrived cross-border arrangements that seek to generate debt deductions for non-assessable non-exempt income".

The Taxpayer Alert describes certain cross-border financing arrangements which seek to generate debt deductions in Australia. These arrangements have little or no commercial or economic purpose and appear to be driven by the tax benefits that arise under section 25-90 of ITAA 1997. Section 25-90 of the ITAA 1997 allows a deduction for an amount or outgoing that is a cost in relation to debt interests where the cost is incurred in deriving non-assessable non-exempt income under section 23AI, 23AJ or 23AK of ITAA 1936.

In an ATO media release issued the same day, the Commissioner, Michael D’Ascenzo, said these arrangements aim to inappropriately reduce taxable income in Australia. ““We are paying close attention to the emergence of these arrangements and will work with industry and the tax profession to address any concerns,” Mr D’Ascenzo said.

For a copy of TA 2009/9, go here.

For a copy of the ATO media release, No 2009/29, 23 April 2009, go here.

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