Service trusts

The long awaited draft taxation ruling on “Deductibility of Service Fees paid to Associated Service Entities” was recently released by the ATO. It is likely to impact on many people in the Professional and Small Business sectors.

The ATO has long-held the position that service fees paid to a related entity for use of assets and employees are deductible as long as the services being provided are connected with the taxpayer’s income earning activities and that the fees charged are not excessive.

The new draft ruling focuses on the need to ensure the commerciality of the arrangement, both in its establishment and in the service fee charged.

We will be watching developments closely and contacting affected clients.

Published : 7 June 2005