Mutual associations - deductibility of contributions and derivation of income (volume allowances)

The establishment of a company said to be a mutual association with retailers as members. 2. The mutual association (a 'banner company') carries out marketing, advertising, merchandising and negotiates volume allowances on behalf of the retailers. 3. The company is said to not be a co-operative covered by Division 9 of Part III of the Income Tax Assessment Act 1936 (ITAA 1936). 4. The payment of monthly member contributions by the retailers to the company. 5. The redirection of volume allowances derived by the retailers so that they are paid directly from the wholesaler to the company as additional contributions by the retailers. 6. The return of surpluses of contributions over the company's expenditure to the retailer, in proportion to the volume allowance attributable to the retailer, on a regular basis. 7. The arrangements are typically marketed as a 'tax free income' scheme. 8. The arrangement differs from most bona fide mutual arrangements, because of the regular distributions of surpluses to members and the lack of parity between the contributions of members and the company's anticipated expenditure.