Income Tax Act 2007 section 564X

Treatment of principal under profit share agency arrangements

Section 564X determines how profits are allocated for income tax purposes between the principal (depositor) and the agent (deposit-taker) under profit share agency arrangements, ensuring the deposit-taker is taxed on all the profit generated.

• The principal (depositor) is not treated as entitled to the share of profits that belongs to the agent (deposit-taker) under the arrangement
• The agent (deposit-taker) is treated as entitled to all the profits — both their own retained share and the depositor's share
• The deposit-taker is therefore taxable on the full amount of profit resulting from the use of the deposited money
• The deposit-taker is entitled to claim relief for the portion of profit that is passed back to the depositor as their share