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Bartercard Australia Pty Ltd and Commissioner of Taxation [2010] AATA 1058

March 10th, 2014

Regarding the matter of Bartercard Australia and Commissioner of Taxation, the Administrative Appeals Tribunal (AAT) assessed what classified as income for Bartercard under the Income Tax Assessment (ITA) Act 1997 and whether expenditure by Bartercard on R&D was deductible under the special rules in s. 73B of the ITA Act 1936.

Background:

• Bartercard received payments from terminating members in the total sum of $711,053.31 for the year ended 30 June 2002 and total $623,532.06 for the year ended 30 June 2003.

• The commissioner contends that these amounts are assessable income of Bartercard, while Bartercard says that it received the money from terminating members as an agent for another company, Exchange, and not in its own right.

• In 2003 Bartercard lodged applications for registration for R&D tax concessions, describing the project as “Development of the Bartercard Trade Exchange System”.

• The Commissioner has allowed Bartercard Australia a deduction (under s. 8-1 of the ITA Act 1997) for this expenditure but has refused the concessional element i.e. the extra 25%, under s. 73B of the ITA Act 1936 on the basis that the expenditure was for the purpose of carrying on R&D activities on behalf of another person.

Decision:

• The Tribunal set aside the Commissioner’s decision, remitting the matter to the Commissioner for reconsideration in accordance with the tribunals directions.

• The tribunal found that the amounts for the 2002 and 2003 income year received by Bartercard from terminating members are not assessable income;

• Bartercard is not entitled to concessional deductions for R&D expenditure under s. 73B of the ITAA 1936.

Click here to view the Bartercard Australia Pty Ltd and Commissioner of Taxation case.