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Tolling Agreement Tax

Although the effect of s 51AD may be a simple concept, the determination is legally and effectively complex in its operation, which can potentially increase the compliance costs borne by a toll company. This complexity is illustrated in the following example. Suppose participants A, B and C based in Australia, through their Australian toll company T, own a power plant in Victoria, Australia, financed by debt without recourse. [124] Participants supplied coal to T, which in turn converted coal into electricity, for use in an aluminum smelter owned by A, B and C as a participant in a joint venture without its own legal personality. T also sells a small portion of the electricity generated in the Australian domestic electricity market (“NEM”). In the case of toll companies, a toll company imposes a toll on participants each year. The tolls are roughly the sum of the toll company`s deductible expenses for this year. Each participant pays these fees. On the other hand, a toll carrier`s taxable income is close to zero each year, with net revenues and expenses. Participants each recognize a deduction for the tolls they have incurred.

A toll company will use a tax accounting model to determine the quantum of the toll. Annual tax accounting is “one of the central pillars of the [Australian] tax system.” [45] While it is well established that accounting practice is relevant to determining a tax liability`s “taxable income,” the audits prescribed in the Ralph Review expressly recommended the inclusion in the trading of tangible assets produced, manufactured or purchased for the purpose of production, sale or exchange in the normal course of business operations. [31] This should not have a negative impact on businesses or toll participants. If the toll includes an amount for “intangible assets,” while the current rules may consider them to be commercial actions, they will not be defined in the definition of the proposed measure. [32] Toll companies where a loss or exit is not “due” in the sense of the term. Time differences “will result in the amount of income tax expenses being either higher or lower than the income tax payable for the [income] year in which the differences are original.” [57] For a tolled company, time differences are the provision for future accounts of non-performing costs and benefits (as described above in this article).

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