Income tax treatment of the screen production industry under the Income Tax Act 2004: Part V - Other specific anti-avoidance provisions dealing with films
Chapter 10 - Specific provisions dealing with non-market transactions in relation to films
10.1 Deductions allowed under section DS 2 for film production expenditure will be reduced under the following circumstances:
- Non-market transactions for incurring film production expenditure (section GD 12)
- Manipulation of arrangements to incur film production expenditure (section GD 12B)
Section GD 12: Non-market transactions for incurring film production expenditure
10.2 Section GD 12 will apply to reduce the deduction otherwise allowable under section DS 2 for film production expenditure, if (section GD 12(1))-
- the Commissioner considers that a person (person A) and another person (person B) who supplied goods or provided services to person A in relation to a film were not dealing with each other at arm's length in relation to the goods or services; and
- person A incurred more film production expenditure than person A would have incurred if person A and person B had been dealing with each other at arm's length.
10.3 The deduction must be reduced to an amount equal to the film production expenditure that the Commissioner thinks person A would have incurred if person A and person B had been dealing with each other at arm's length (section GD 12(2)).
10.4 For the purposes of sections DS 2, EJ 7 and EJ 8, section GD 12A applies to treat certain film production expenditure as being incurred only at the time of payment where the payments for goods or services are deferred or contingent. (See paragraph 5.26 above for details of section GD 12A.)
10.5 If the Commissioner considers that two persons have made arrangements so that section DS 2, EJ 7 or EJ 8 applies more favourably in relation to a person in an income year than it would have applied without those arrangements, the deduction that a person is allowed under section DS 2 must be reduced to the amount that the Commissioner considers would have been allowed if the arrangements had not been made (section GD 12B(a)).
10.6 In addition, the deduction allocated under section EJ 7 or EJ 8 must be allocated to the income year to which the Commissioner considers it would have been allocated if the arrangements had not been made (section GD 12B(b)).
Date published: 25 Nov 2005
Back to top