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02 Jun 11 Deductibility of unpaid directors fees - TA 2011/4

On 2 June 2011 the ATO released Taxpayer Alert TA 2011/4, which describes an arrangement where a company claims a deduction for directors fees notwithstanding that there is no payment to the directors of these fees in the current income year and/or subsequent income year(s). There is no intention ever to make this payment in full or at all even though the company passed a resolution that directors fees of a specific amount be paid at some future time. The ATO is not concerned with normal business practice where a company passes a resolution that creates an unconditional commitment to pay directors fees and the payment occurs within a reasonable time period which could extend outside the immediate year of income.

The ATO is currently reviewing these arrangements.