Posted: April 27th, 2016

Seller Pty Ltd provides a volume rebate discount of 10% when Buyer Pty Ltd purchases more than $50 000 worth of product in a calendar month.

Please read Taxation Ruling TR 2009/5 and answer the following questions. Taxation Ruling TR 2009/5 can be found on the ATO website at www.ato.gov.au .

(a) Seller Pty Ltd makes a payment of $10 000 to Buyer Pty Ltd to cover the cost of in-store promotional activities relating to its products. What is the appropriate tax treatment of the payment in the hands of both Buyer Pty Ltd and Seller Pty Ltd?

(b) Seller Pty Ltd provides a volume rebate discount of 10% when Buyer Pty Ltd purchases more than $50 000 worth of product in a calendar month. Buyer Pty Ltd has qualified for this discount ten times in the past twelve months.
What are the tax implications of the information given in (b) above?