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How are expenses deducted when resources are contributed "in kind" to a company?

Newbie

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Replies 2

Hi,

 

1. I am a director of a pty ltd company, along with others, and have day-to-day involvement in the running of the business.

2. I contribute personal time and effort to the company in return for shares

3. I also pay for some of the company's operating expenses in return for shares.

4. I also transfer ownership of some capital and trading stock assets to the company in return for shares

5. All my income from the company is in the form of dividends from those shares - I receive no other wages or directors fees

 

Under these conditions, can I consider the expenses I incur on behalf of the company in #3 above, or assets I transfer to the company in #4 above,  to be expenses from "carrying on a business", and can I deduct these against the dividends I receive, rather than capitalising them into the cost base of the shares?

Does this change if some (but not all) of the shares are "temporary shares" that, under the shareholder's agreement, expire and are revoked within 12 months of being issued?

 

Edit: After looking over section 8.1 of the ITAA (1997), would I be right in thinking that:

firstly, the expenses or in-kind loss of assets I am incurring from #3 and #4 above WOULD necessarily be deductable from my dividend income under 8.1(1)(b): "it is necessarily incurred in carrying on a * business for the purpose of gaining or producing your assessable income"

BUT - I could NOT deduct the contribution of any capital assets, under 8.1(2)(a) "it is a loss or outgoing of capital, or of a capital nature;"
Is that what that section means? In this case would it contribute to the cost base of shares I received in return?

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Former Community Support

Replies 0

Hi @JayG,

 

After speaking to a technical team, they have recommended that you lodge a callback request with Early Engagement as it is not possible to provide a simple, general answer to the questions raised. Thank you for your patience.

2 REPLIES 2

Community Moderator

Replies 0

Hi @JayG,

 

We're going to have a look into this one for you.

 

Thanks, Nate

Most helpful response

Former Community Support

Replies 0

Hi @JayG,

 

After speaking to a technical team, they have recommended that you lodge a callback request with Early Engagement as it is not possible to provide a simple, general answer to the questions raised. Thank you for your patience.