Income Tax Act 2007 section 809EZB

Meaning of "management fee" in section 809EZA

Section 809EZB defines what counts as a "management fee" for the purposes of the disguised investment management fees charge, and sets out the exclusions and conditions under which certain sums fall outside that definition.

• A management fee is broadly any sum — including loans, advances or profit allocations — arising from an investment scheme, unless it falls within one of three specific exclusions.
• The three exclusions are: repayment of the individual's own invested capital, an arm's length return on that capital, or carried interest that is not income-based carried interest.
• An arm's length return must be on the same kind of investment as those made by external investors, with a reasonably comparable rate of return and comparable terms.
• Where a sum takes the form of money's worth and the individual pays money for it, only the excess of its market value over the amount paid is treated as a management fee.