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 9 - Specific anti-avoidance provisions: sections GC 11A and GC11B
9.1 Deductions otherwise allowed under section DS 1 for expenditure incurring in acquiring film rights will be reduced under the following circumstances:
- Non-market transactions to acquire film rights (section GC 11A)
- Manipulation of arrangements to acquire film rights (section GC 11B)
Section GC 11A: Non-market transactions to acquire film rights
9.2 Section GC 11A will apply to reduce deductions otherwise allowed under section DS 1 for expenditure incurred in acquiring a film right, if (section GC 11A(1))-
- the Commissioner considers that a person (person A) and another person (person B) from whom the film right was acquired were not dealing with each other at arm's length in relation to the acquisition; and
- the amount of the expenditure incurred by person A in acquiring the film right is more than the market value of the film right at the time it was acquired by person A.
9.3 The deduction must then be reduced to an amount equal to the market value of the film right at the time it was acquired by person A (section GC 11A(2)).
9.4 If person A acquires only a share of a film right, section GC 11A applies only to the part of the total market value of the film right that is attributable to that share (section GC 11A(3)).
Section GC 11B: Manipulation of arrangements to acquire film rights
9.5 If the Commissioner considers that two persons have made arrangements so that section DS 1, EJ 4 or EJ 5 applies more favourably in relation to a person in an income year than it would have applied without the arrangements, the deduction allowed to the person under section DS 1 must be reduced to the amount that the Commissioner considers would have been allowed if the arrangements had not been made (section GC 11B (a)).
9.6 In addition, the deduction allocated under section EJ 4 or EJ 5 must then be allocated to the income year to which the Commissioner considers it would have been allocated if the arrangements had not been made (section GC 11B(b)).
Date published: 25 Nov 2005
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