24 Jan 12 Decision Impact Statement - BHP
The ATO has published a Decision Impact Statement in relation to the Full Federal Court's decision ( FCAFC 25; (2010) 182 FCR 526) and the High Court's decision ( HCA 17; (2011) 277 ALR 224) in FCT v BHP Billiton Finance Limited; FCT v BHP Billiton Limited.
The case concerned whether bad debt deductions were allowable for loans made by an in-house finance company and whether debt funding from the finance company to a special purpose group subsidiary was limited recourse debt so capital allowances could be adjusted. It was held that they were deductible and that neither Division 243 of the ITAA 1997 (limited recourse debt) nor Part IVA applied.
The Decision Impact Statement states that in relation to the application of Division 243, the legislation is directed at a debtor taxpayer who has not been fully at risk in relation to an amount of expenditure. However, the words "capable of being limited" are a reference to a power of a person to limit or bring about a limitation of a creditor's rights of recourse and such a power must exist at the inception of the loan.