Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 (Cth)
This is a compilation of the
This compilation was prepared on 21 August 2013.
The notes at the end of this compilation
(the
The effect of uncommenced amendments is not reflected in the text of the compiled law but the text of the amendments is included in the endnotes.
If the operation of a provision or amendment is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.
If a provision of the compiled law is affected by a modification that is in force, details are included in the endnotes.
If a provision of the compiled law has expired or otherwise ceased to have effect in accordance with a provision of the law, details are included in the endnotes.
Contents
This Act may be cited as the
Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 .
(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.
Sections 1 to 3 and anything in this Act not elsewhere covered by this table | The day on which this Act receives the Royal Assent. | 26 March 2009 |
Schedule 1, Parts 1, 2 and 3 | The day on which this Act receives the Royal Assent. | 26 March 2009 |
Schedule 1, Part 4 | Immediately after the commencement of the | 17 December 2003 |
Note: This table relates only to the provisions of this Act as originally passed by both Houses of the Parliament and assented to. It will not be expanded to deal with provisions inserted in this Act after assent.
(2) Column 3 of the table contains additional information that is not part of this Act. Information in this column may be added to or edited in any published version of this Act.
Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.
Insert:
Guide to Division 230
230‑A Core rules
230‑B The accruals/realisation methods
230‑C Fair value method
230‑D Foreign exchange retranslation method
230‑E Hedging financial arrangements method
230‑F Reliance on financial reports
230‑G Balancing adjustment on ceasing to have a financial arrangement
230‑H Exceptions
230‑I Other provisions
230‑J Additional operation of Division
This Division is about the tax treatment of gains and losses from your financial arrangements.
You recognise the gains and losses, as appropriate, over the life of a financial arrangement and ignore distinctions between income and capital unless specific rules apply.
If it is sufficiently certain that you will make a gain or loss, you use a compounding accruals method to recognise the gain or loss. Otherwise you use a realisation method. Instead of either, you may be able to choose to use a fair value or hedging method or to rely on your financial reports. You may also be able to choose to recognise foreign exchange gains and losses using a retranslation method.
(1) You have a financial arrangement if you have one or more cash settlable legal or equitable rights and/or obligations to receive or provide a financial benefit.
(2) This Division does not apply to all financial arrangements. The main exceptions are if:
(a) you are:
(i) an individual; or
(ii) a superannuation entity, managed investment scheme or an entity substantially similar to a managed investment scheme under foreign law with assets of less than $100 million; or
(iii) an ADI, securitisation vehicle or other financial sector entity with an aggregated turnover of less than $20 million; or
(iv) another entity with an aggregated turnover of less than $100 million, financial assets of less than $100 million and assets of less than $300 million;
and either:
(iv) the arrangement is to end not more than 12 months after you start to have it; or
(v) the arrangement is not a qualifying security; or
(b) the arrangement is a financial arrangement under section 230‑50 (equity interests etc.) and neither a fair value election, a hedging financial arrangement election nor an election to rely on financial reports applies to the arrangement.
Note: Section 230‑455 provides for the exceptions referred to in paragraph (a).
Objects 230‑10 Objects of this Division
Tax treatment of gains and losses from financial arrangements 230‑15 Gains are assessable and losses deductible
230‑20 Gain or loss to be taken into account only once under this Act
230‑25 Associated financial benefits to be taken into account only once under this Act
230‑30 Treatment of gains and losses related to exempt income and non‑assessable non‑exempt income
230‑35 Treatment of gains and losses of private or domestic nature
Method to be applied to take account of gain or loss 230‑40 Methods for taking gain or loss into account
Financial arrangement concept 230‑45 Financial arrangement
230‑50 Financial arrangement (equity interest or right or obligation in relation to equity interest)
230‑55 Rights, obligations and arrangements (grouping and disaggregation rules)
General rules 230‑60 When financial benefit provided or received under financial arrangement
230‑65 Amount of financial benefit relating to more than one financial arrangement etc.
230‑70 Apportionment when financial benefit received or right ceases
230‑75 Apportionment when financial benefit provided or obligation ceases
230‑80 Consistency in working out gains or losses (integrity measure)
230‑85 Rights and obligations include contingent rights and obligations
The objects of this Division are:
(a) to minimise the extent to which the tax treatment of gains and losses from your *financial arrangements distorts, by providing inappropriate impediments and stimulation, your trading, financing and investment decisions and your risk taking and risk management; and
(b) to do so by aligning more closely the tax and commercial recognition of gains and losses from your financial arrangements in the following ways:
(i) by allocating the gains and losses to income years throughout the life of your financial arrangements on a reasonable basis;
(ii) by generally recognising gains and losses on revenue rather than capital account; and
(c) to appropriately take account of, and minimise, your compliance costs.
Gains
(1) Your assessable income includes a gain you make from a *financial arrangement.
Note: This Division does not apply to gains that are subject to exceptions under Subdivision 230‑H.
Losses
(2) You can deduct a loss you make from a *financial arrangement, but only to the extent that:
(a) you make it in gaining or producing your assessable income; or
(b) you necessarily make it in carrying on a *business for the purpose of gaining or producing your assessable income.
Note: This Division does not apply to losses that are subject to exceptions under Subdivision 230‑H.
(3) You can also deduct a loss you make from a *financial arrangement if:
(a) you are an *Australian entity; and
(b) you make the loss in deriving income from a foreign source; and
(c) the income is *non‑assessable non‑exempt income under section 23AI, 23AJ or 23AK of the
Income Tax Assessment Act 1936 ; and(d) the loss is, in whole or in part, a cost in relation to a *debt interest you issue that is covered by paragraph 820‑40(1)(a).
You can deduct the loss only to the extent to which it is a cost in relation to a *debt interest you issue that is covered by paragraph 820‑40(1)(a).
Note: This Division does not apply to losses that are subject to exceptions under Subdivision 230‑H.
(4) If the *financial arrangement is a *debt interest, the loss is not prevented from being deductible for an income year under subsection (2) merely because of either or both of the following:
(a) one or more of the *financial benefits that are taken into account in working out the amount of the loss are *contingent on the economic performance (whether past, current or future) of:
(i) you or a part of your activities; or
(ii) a *connected entity of yours or a part of the activities of a connected entity of yours;
(b) one or more of the financial benefits that are taken into account in working out the amount of the loss secure a permanent or enduring benefit for you or a connected entity of yours.
(5) Subject to subsection (6), subsection (4) does not apply to the loss to the extent to which the annually compounded internal rate of return on the *debt interest exceeds the *benchmark rate of return for the debt interest increased by 150 basis points.
(6) If:
(a) regulations made for the purposes of subsection 25‑85(6) provide that a specified number of basis points is to apply for the purposes of applying subsection 25‑85(5) in particular circumstances; and
(b) those circumstances exist in relation to the *debt interest;
subsection (5) applies as if the reference in that subsection to 150 basis points were a reference to the number of basis points specified in the regulations.
Division does not affect foreign residence rules
(7) Nothing in this Division affects the operation of the provisions of Division 6 that provide for the significance of foreign residence for the assessability of ordinary and statutory income.
Note 1: Gains that you make under this Division may be ordinary or statutory income for the purposes of Division 6.
Note 2: For the effect of a change of residence during an income year, see sections 230‑485 and 230‑490.
Application of section
(1) This section applies to the following:
(a) a gain that is included in your assessable income for an income year under this Division;
(b) a loss that is allowable as a deduction to you for an income year under this Division;
(c) a gain or a loss that is dealt with in accordance with subsection 230‑310(4) in relation to an income year.
Purpose of this section
(2) The purpose of this section is to ensure that your gains and losses, and *financial benefits, to which this section applies are taken into account only once under this Act in working out your taxable income.
Gain or loss to be taken into account only once
(3) A gain or loss to which this section applies is not to be (to any extent):
(a) included in your assessable income; or
(b) allowable as a deduction to you; or
(c) dealt with in accordance with subsection 230‑310(4);
again under this Division for the same or any other income year.
(4) A gain or loss to which this section applies is not to be (to any extent):
(a) included in your assessable income; or
(b) allowable as a deduction to you;
under any provisions of this Act outside this Division for the same or any other income year.
Section does not give rise to exempt income
(5) A gain is not to be treated as *exempt income merely because it is not included in your assessable income under this section.
Application of section
(1) This section applies to a *financial benefit whose amount or value is taken into account in working out whether you make, or the amount of, a gain or loss to which paragraph 230‑20(1)(a), (b) or (c) applies.
Associated financial benefit to be taken into account only once
(2) A *financial benefit to which this section applies is not to be (to any extent):
(a) included in your assessable income; or
(b) allowable as a deduction to you;
under any provision of this Act outside this Division for the same or any other income year.
Exception for certain bad debts
(3) If:
(a) a *financial benefit has been included in your assessable income under a provision of this Act outside this Division; and
(b) a bad debt deduction would have been allowed under section 25‑35 in relation to the financial benefit;
subsection (2) does not prevent that bad debt deduction from being allowed under section 25‑35 in relation to the financial benefit as if the debt were still outstanding.
Section does not give rise to exempt income
(4) A *financial benefit is not to be treated as *exempt income merely because it is not included in your assessable income under this section.
(1) Despite section 230‑15, a gain that you make from a *financial arrangement:
(a) to the extent that it reflects an amount that would be treated, or would reasonably expected to be treated, as *exempt income under a provision of this Act if this Division were disregarded—is exempt income; and
(b) to the extent that it reflects an amount that would be treated or would reasonably expected to be treated, as *non‑assessable non‑exempt income under a provision of this Act if this Division were disregarded—is not assessable income and is not exempt income.
(2) Despite section 230‑15, a gain that you make from a *financial arrangement:
(a) to the extent that, if it had been a loss, you would have made it in gaining or producing *exempt income—is exempt income; and
(b) to the extent to which, if it had been a loss, you would have made it in gaining or producing *non‑assessable non‑exempt income—is not assessable income and is not exempt income.
(3) A loss you make from a *financial arrangement is
not allowable as a deduction to you under any provision of this Act (other than subsection 230‑15(3)) to the extent that you make it in gaining or producing your:
(a) *exempt income; or
(b) *non‑assessable non‑exempt income.
Borrowings etc. used for private or domestic purpose
(1) Subsections (2) and (3) apply if:
(a) a *borrowing is made by you, or credit is provided to you, under a *financial arrangement; and
(b) you use some or all of the funds borrowed or the credit provided for a private or domestic purpose.
(2) This Division does not apply to a gain you make from the arrangement to the extent that you use the funds raised or the credit provided for a private or domestic purpose.
(3) A loss you make from the arrangement is
not allowable as a deduction to you under any provision of this Act to the extent that you use the funds raised or the credit provided for a private or domestic purpose.
Derivative financial arrangement held for private or domestic purpose
(4) Subsections (5) and (6) apply if:
(a) you are an individual; and
(b) you make a gain or loss from a *derivative financial arrangement; and
(c) the arrangement is held, wholly or in part, for a private or domestic purpose.
(5) This Division does not apply to a gain you make from the arrangement to the extent that the arrangement is held or used for a private or domestic purpose.
(6) A loss you make from the arrangement is
not allowable as a deduction to you under any provision of this Act to the extent that the arrangement is held or used for a private or domestic purpose.
Methods available
(1) The methods that can be applied to take account of a gain or loss you make from a *financial arrangement are:
(a) the accruals and realisation methods provided for in Subdivision 230‑B; or
(b) the fair value method provided for in Subdivision 230‑C; or
(c) the foreign exchange retranslation method provided for in Subdivision 230‑D; or
(d) the hedging financial arrangement method provided for in Subdivision 230‑E; or
(e) the method of relying on your financial reports provided for in Subdivision 230‑F; or
(f) a balancing adjustment provided for in Subdivision 230‑G.
Note: The methods referred to in paragraphs (b) to (e) only apply if you make an election under the relevant Subdivision and you must meet certain requirements before you can make such an election.
(2) A gain or loss is not taken into account under any of the methods referred to in paragraphs (1)(a), (b), (c) and (e) to the extent to which it is taken into account under the method referred to in paragraph (1)(f) (balancing adjustment).
(3) A gain or loss is not taken into account under the method referred to in paragraph (1)(f) (balancing adjustment) to the extent to which it is taken into account under the method referred to in paragraph (1)(d) (hedging financial arrangement method).
Note: The hedging financial arrangement method may take some account of the gain or loss by reference to the balancing adjustment method (see subsection 230‑300(5)).
Elections override accruals and realisation methods
(4) Subdivision 230‑B (accruals and realisation method) does not apply to a gain or loss you make from a *financial arrangement:
(a) if Subdivision 230‑C (fair value method) applies to the arrangement; or
(b) to the extent that Subdivision 230‑D (foreign exchange retranslation method) applies to the gain or loss; or
(c) to the extent that Subdivision 230‑E (hedging financial arrangements method) applies to the arrangement; or
(d) if Subdivision 230‑F (method of relying on financial reports) applies to the arrangement; or
(e) if the arrangement is a financial arrangement under section 230‑50 (equity interests etc.).
Priorities among election methods
(5) Subdivision 230‑C (fair value method) does not apply to a gain or loss you make from a *financial arrangement:
(a) to the extent that Subdivision 230‑E (hedging financial arrangements method) applies to the arrangement; or
(b) if Subdivision 230‑F (method of relying on financial reports) applies to the arrangement.
(6) Subdivision 230‑D (foreign exchange retranslation method) does not apply to a gain or loss you make from a *financial arrangement:
(a) if Subdivision 230‑C (fair value method) applies to the arrangement; or
(b) to the extent that Subdivision 230‑E (hedging financial arrangements method) applies to the arrangement; or
(c) if Subdivision 230‑F (method of relying on financial reports) applies to the arrangement.
(7) Subdivision 230‑F (method of relying on financial reports) does not apply to a gain or loss you make from a *financial arrangement to the extent that Subdivision 230‑E (hedging financial arrangements method) applies to the arrangement.
(1) You have a
financial arrangement if you have, under an *arrangement:
(a) a *cash settlable legal or equitable right to receive a *financial benefit; or
(b) a cash settlable legal or equitable obligation to provide a financial benefit; or
(c) a combination of one or more such rights and/or one or more such obligations;
unless:
(d) you also have under the arrangement one or more legal or equitable rights to receive something and/or one or more legal or equitable obligations to provide something; and
(e) for one or more of the rights and/or obligations covered by paragraph (d):
(i) the thing that you have the right to receive, or the obligation to provide, is not a financial benefit; or
(ii) the right or obligation is not cash settlable; and
(f) the one or more rights and/or obligations covered by paragraph (e) are not insignificant in comparison with the right, obligation or combination covered by paragraph (a), (b) or (c).
The right, obligation or combination covered by paragraph (a), (b) or (c) constitutes the financial arrangement.
Note 1: Whether your rights and/or obligations under an arrangement constitute a financial arrangement can change over time depending on changes either to the terms of the arrangement or external circumstances (such as particular rights or obligations under the arrangement being satisfied by the parties). For example, a contract may provide for the transfer of a boat in 6 months time and payment of the contract price at the end of 2 years. Until the boat is delivered, there is no financial arrangement because of the operation of paragraphs (d), (e) and (f) above. Once the boat is delivered, there is a financial arrangement because those paragraphs are no longer applicable.
Note 2: The operative provisions of this Division do not apply to all financial arrangements, and only apply partially to some: see the exceptions in Subdivision 230‑H.
Note 3: There are some rules in this Division that tell you what happens if an arrangement ceases to be a financial arrangement (see Subdivision 230‑G and section 230‑505).
(2) A right you have to receive, or an obligation you have to provide, a *financial benefit is
cash settlable if, and only if:
(a) the benefit is money or a *money equivalent; or
(b) in the case of a right—you intend to satisfy or settle it by receiving money or a money equivalent or by starting to have, or ceasing to have, another *financial arrangement; or
(c) in the case of an obligation—you intend to satisfy or settle it by providing money or a money equivalent or by starting to have, or ceasing to have, another financial arrangement; or
(d) you have a practice of satisfying or settling similar rights or obligations as mentioned in paragraph (b) or (c) (whether or not you intend to satisfy or settle the right or obligation in that way); or
(e) you deal with the right or obligation, or with similar rights or obligations, in order to generate a profit from short‑term fluctuations in price, from a dealer’s margin, or from both; or
(f) none of paragraphs (a) to (e) applies but you satisfy subsection (3); or
(g) you are able to settle the right or obligation as mentioned in paragraph (b) or (c) (whether or not you intend to satisfy or settle the right or obligation in that way) and you do not have, as your sole or dominant purpose for entering into the arrangement under which you are to receive or provide the financial benefit, the purpose of receiving or delivering the financial benefit as part of your expected purchase, sale or usage requirements.
A reference in paragraph (b) or (c) to a financial arrangement does not include a reference to something that is a financial arrangement under section 230‑50.
Note: Examples of dealing of the kind covered by paragraph (e) are:
(a) dealing with the right or obligation, or similar rights or obligations, on a frequent basis, a short‑term basis or on a frequent and short‑term basis; and
(b) acquiring the right or obligation, or similar rights or obligations, and managing the resulting risk by entering into offsetting arrangements that provide a profit margin.
(3) You satisfy this subsection if:
(a) the *financial benefit is readily convertible into money or a *money equivalent; and
(b) there is a market for the financial benefit that has a high degree of liquidity; and
(c) either:
(i) the amount of the money or money equivalent referred to in paragraph (a) is not subject to a substantial risk of change in value; or
(ii) your purpose, or one of your purposes, for entering into the arrangement under which you are to receive or provide the financial benefit, is to receive or deliver the financial benefit so that it may be converted or liquidated into money or a money equivalent (other than in the ordinary course of business).
(1) You also have a
financial arrangement if you have an *equity interest. The equity interest constitutes the financial arrangement.(2) You also have a
financial arrangement if:
(a) you have, under an *arrangement:
(i) a legal or equitable right to receive something that is a financial arrangement under this section; or
(ii) a legal or equitable obligation to provide something that is a financial arrangement under this section; or
(iii) a combination of one or more such rights and/or obligations; and
(b) the right, obligation or combination does not constitute, or form part of, a financial arrangement under subsection 230‑45(1).
The right, obligation or combination referred to in paragraph (a) constitutes the financial arrangement.
Note 1: Paragraph 230‑40(4)(e) prevents the accruals method or the realisation method being applied to something that is a financial arrangement under this section.
Note 2: Subsection 230‑270(1) prevents the retranslation method being applied to something that is a financial arrangement under this section.
Note 3: Subsection 230‑330(1) prevents the hedging method being applied to something that is a financial arrangement under this section.
Single right or obligation or multiple rights or obligations?
(1) If you have a right to receive 2 or more *financial benefits, you are taken, for the purposes of this Division, to have a separate right to receive each of those financial benefits.
(2) If you have an obligation to provide 2 or more *financial benefits, you are taken, for the purposes of this Division, to have a separate obligation to provide each of those financial benefits.
(3) Subsections (1) and (2) apply for the avoidance of doubt.
Matters relevant to determining what rights and/or obligations constitute particular arrangements
(4) For the purposes of this Division, whether a number of rights and/or obligations are themselves an *arrangement or are 2 or more separate arrangements is a question of fact and degree that you determine having regard to the following:
(a) the nature of the rights and/or obligations;
(b) their terms and conditions (including those relating to any payment or other consideration for them);
(c) the circumstances surrounding their creation and their proposed exercise or performance (including what can reasonably be seen as the purposes of one or more of the entities involved);
(d) whether they can be dealt with separately or must be dealt with together;
(e) normal commercial understandings and practices in relation to them (including whether they are regarded commercially as separate things or as a group or series that forms a whole);
(f) the objects of this Division.
In applying this subsection, have regard to the matters referred to in paragraphs (a) to (f) both in relation to the rights and/or obligations separately and in relation to the rights and/or obligations in combination with each other.
Example 1: Your rights and obligations under a typical convertible note, including the right to convert the note into a share or shares, would constitute one arrangement.
Example 2: Your rights and obligations under a typical price‑linked or index‑linked bond would constitute one arrangement.
Note 1: If you raised funds by means of a contract that you would not have entered into without entering into another contract, and neither contract could be assigned to a third party without the other also being assigned, this would tend to indicate that your rights and obligations under the 2 contracts together constitute one arrangement.
Note 2: If the commercial effect of your individual rights and/or obligations in a group or series cannot be understood without reference to the group or series as a whole, this would tend toindicate that all of your rights and/or obligations in the group or series together constitute one arrangement.
Financial benefit provided under financial arrangement
(1) You are taken, for the purposes of this Division, to have (or to have had) an obligation to provide a *financial benefit under a *financial arrangement if:
(a) you have (or had) an obligation to provide the financial benefit in relation to the arrangement; and
(b) the financial benefit would not otherwise be treated as one that you have (or had) an obligation to provide under the arrangement; and
(c) the financial benefit plays an integral role in determining:
(i) whether you make a gain or loss from the arrangement; or
(ii) the amount of such a gain or loss.
Paragraph (a) applies even if the entity to which you provide the financial benefit is not a party to the arrangement.
Note: This means that the financial benefits you provide to acquire the financial arrangement (whether to the issuer, a previous holder or a third party) are taken to be financial benefits you provide under the arrangement. The financial benefits you provide may include, for example, fees paid or the forgoing of rights to receive a financial benefit.
Financial benefit received under financial arrangement
(2) You are taken, for the purposes of this Division, to have (or to have had) a right to receive a *financial benefit under a *financial arrangement if:
(a) you have (or had) a right to receive the financial benefit in relation to the arrangement; and
(b) the financial benefit would not otherwise be treated as one that you have (or had) a right to receive under the arrangement; and
(c) the financial benefit plays an integral role in determining:
(i) whether you make a gain or loss from the arrangement; or
(ii) the amount of such a gain or loss.
Paragraph (a) applies even if the entity that provides the financial benefit is not a party to the arrangement.
Note: The financial benefits you receive may include, for example, the waiving of an obligation you have to provide a financial benefit.
(1) This section applies if:
(a) a *financial benefit plays the integral role mentioned in paragraph 230‑60(1)(c) or (2)(c) in relation to a *financial arrangement; and
(b) either or both of the following apply:
(i) the financial benefit plays that role in relation to one or more other financial arrangements;
(ii) the financial benefit is provided or received for one or more other things that are not financial arrangements.
(2) For the purposes of this Division, determine the amount of the *financial benefit that plays that role in relation to a particular *financial arrangement by apportioning the actual amount of the financial benefit, on a reasonable basis, between:
(a) that financial arrangement; and
(b) each other financial arrangement (if any) in relation to which the benefit plays that role; and
(c) each other thing (if any) mentioned in subparagraph (1)(b)(ii).
(1) Apply subsection (2) in working out whether you make, or will make, a gain or loss (and the amount of the gain or loss) at a time when:
(a) you receive a particular *financial benefit under a *financial arrangement; or
(b) one of your rights under a financial arrangement *ceases.
The gain or loss is to be calculated in nominal (and not *present value) terms.
(2) You must have regard to the extent to which the *financial benefits that you have provided, or are to provide, under the *financial arrangement are reasonably attributable, at the time mentioned in subsection (1), to the benefit or right referred to in paragraph (1)(a) or (b).
(3) Any attribution made under subsection (2) must reflect appropriate and commercially accepted valuation principles that properly take into account:
(a) the nature of the rights and obligations under the *financial arrangement; and
(b) the risks associated with each *financial benefit, right and obligation under the arrangement; and
(c) the time value of money.
(4) Despite subsection (2), no *financial benefit that you have provided, or are to provide, under the *financial arrangement is to be attributed to the benefit or right referred to in paragraph (1)(a) or (b) if:
(a) you are working out the amount of a gain or loss for the purposes of Subdivision 230‑B; and
(b) the gain or loss is not an overall gain or loss from the arrangement (within the meaning of that Subdivision) at the time when you start to have the arrangement; and
(c) the benefit or right referred to in paragraph (1)(a) or (b) is an amount that represents, or is a right to an amount that represents:
(i) interest; or
(ii) a *return paid or provided on a *debt interest; or
(iii) something that is in the nature of interest; or
(iv) something that could reasonably be regarded as being a substitute for interest; or
(v) something prescribed by the regulations for the purposes of this paragraph.
Note 1: An example of something in the nature of interest is a discount on a security.
Note 2: An example of something that could reasonably be regarded as being a substitute for interest is a lump sum payment received instead of payments of interest.
(1) Apply subsection (2) in working out whether you make, or will make, a gain or loss (and the amount of the gain or loss) at a time when:
(a) you provide a particular *financial benefit under the *financial arrangement; or
(b) one of your obligations under a financial arrangement *ceases.
The gain or loss is to be calculated in nominal (and not *present value) terms.
(2) You must have regard to the extent to which the *financial benefits that you have received, or are to receive, under the *financial arrangement are reasonably attributable, at the time mentioned in subsection (1), to the benefit or obligation referred to in paragraph (1)(a) or (b).
(3) Any attribution made under subsection (2) must reflect appropriate and commercially accepted valuation principles that properly take into account:
(a) the nature of the rights and obligations under the *financial arrangement; and
(b) the risks associated with each *financial benefit, right and obligation under the arrangement; and
(c) the time value of money.
(4) Despite subsection (2), no *financial benefit that you have received, or are to receive, under the *financial arrangement is to be attributed to the benefit or obligation referred to in paragraph (1)(a) or (b) if:
(a) you are working out the amount of a gain or loss for the purposes of Subdivision 230‑B; and
(b) the gain or loss is not an overall gain or loss from the arrangement (within the meaning of that Subdivision) at the time when you start to have the arrangement; and
(c) the benefit or obligation referred to in paragraph (1)(a) or (b) is an amount that represents, or is an obligation to provide an amount that represents:
(i) interest; or
(ii) a *return paid or provided on a *debt interest; or
(iii) something that is in the nature of interest; or
(iv) something that could reasonably be regarded as being a substitute for interest; or
(v) something prescribed by the regulations for the purposes of this paragraph.
Note 1: An example of something in the nature of interest is a discount on a security.
Note 2: An example of something that could reasonably be regarded as being a substitute for interest is a lump sum payment made instead of payments of interest.
Object of section
(1) The object of this section is to stop you obtaining an inappropriate tax benefit from not working out your gains and losses in a consistent manner.
Consistent treatment for particular financial arrangement
(2) If:
(a) this Division provides that a particular method applies to gains or losses you make from a *financial arrangement; and
(b) that method allows you to choose the particular manner in which you apply that method;
you must use that manner consistently for the arrangement for all income years.
Consistent treatment for financial arrangements of essentially the same nature
(3) If:
(a) this Division provides that a particular method applies to gains or losses you make from 2 or more *financial arrangements; and
(b) that method allows you to choose the particular manner in which you apply that method;
you must use that same manner consistently for all of those financial arrangements that are essentially of the same nature.
To avoid doubt:
(a) a right is treated as a right for the purposes of this Division even it is subject to a contingency; and
(b) an obligation is treated as an obligation for the purposes of this Division even if it is subject to a contingency.
Guide to Subdivision 230‑B 230‑90 What this Subdivision is about
Objects of Subdivision 230‑95 Objects of this Subdivision
When accruals method or realisation method applies 230‑100 When accruals method or realisation method applies
230‑105 Sufficiently certain overall gain or loss
230‑110 Sufficiently certain gain or loss from particular event
230‑115 Sufficiently certain financial benefits
230‑120 Financial arrangements with notional principal
The accruals method 230‑125 Overview of the accruals method
230‑130 Applying accruals method to work out period over which gain or loss is to be spread
230‑135 How gain or loss is spread
230‑140 Method of spreading gain or loss—effective interest method
230‑145 Application of effective interest method where differing income and accounting years
230‑150 Election for portfolio treatment of fees
230‑155 Election for portfolio treatment of fees where differing income and accounting years
230‑160 Portfolio treatment of fees
230‑165 Portfolio treatment of premiums and discounts for acquiring portfolio
230‑170 Allocating gain or loss to income years
230‑175 Running balancing adjustments
Realisation method 230‑180 Realisation method
Reassessment and re‑estimation 230‑185 Reassessment
230‑190 Re‑estimation
230‑195 Balancing adjustment if rate of return maintained on re‑estimation
230‑200 Re‑estimation if balancing adjustment on partial disposal
This Subdivision applies the accruals method to determine the amount and timing of gains and losses from a financial arrangement if they are sufficiently certain for such accrual to be done.
This Subdivision applies the realisation method to determine the amount and timing of gains and losses if they are not sufficiently certain to be dealt with under the accruals method.
If the accruals method is applied to a gain or loss on the basis of an estimate of a financial benefit and the benefit when received or provided is more or less than the estimate, a balancing adjustment is made to correct for the underestimate or overestimate.
If the accruals method is being applied to gains and losses from the arrangement and there is a material change to the arrangement, or the circumstances in which it operates, a reassessment is made of whether the accruals method or the realisation method should apply to gains and losses from the arrangement.
A change in circumstances may also cause a re‑estimation of gains and losses that the accruals method is being applied to.
The objects of this Subdivision are:
(a) to properly recognise gains and losses from *financial arrangements by allocating them to appropriate periods of time; and
(b) to reduce compliance costs by reflecting commercial accounting concepts where appropriate; and
(c) to minimise tax deferral.
When accruals method applies and when realisation method applies
(1) This section tells you when to apply the accruals method and when to apply the realisation method if this Subdivision applies to gains and losses from a *financial arrangement.
Accruals method—sufficiently certain overall gain or loss at start time
(2) The accruals method provided for in this Subdivision applies to a gain or loss you make from a *financial arrangement if:
(a) the gain or loss is an overall gain or loss from the arrangement; and
(b) the gain or loss is sufficiently certain at the time when you start to have the arrangement.
Note: Subsection 230‑105(1) tells you when you have a sufficiently certain overall gain or loss.
Accruals method—sufficiently certain particular gain or loss
(3) The accruals method provided for in this Subdivision also applies to a gain or loss you make from a *financial arrangement if:
(a) the gain or loss arises from a *financial benefit that you are to receive or are to provide under the arrangement; and
(b) the gain or loss:
(i) is sufficiently certain at the time when you start to have the arrangement and before you are to receive or provide the benefit; or
(ii) becomes sufficiently certain after the time when you start to have the arrangement and before you are to receive or provide the benefit; and
(c) the benefit has not already been taken into account in applying:
(i) the accruals method provided for in this Subdivision; or
(ii) the realisation method provided for in this Subdivision;
to another gain or loss from the arrangement.
This subsection has effect subject to subsection (4).
Note: Subsection 230‑110(1) tells you when you have a sufficiently certain gain or loss at a particular time.
(4) Subsection (3) does not apply to a gain or loss that you make from a *financial arrangement if:
(a) you are:
(i) an individual; or
(ii) an entity (other than an individual) that satisfies subsection 230‑455(2), (3) or (4) for the income year in which you start to have the arrangement; and
(b) the arrangement is a *qualifying security; and
(c) you have not made an election under subsection 230‑455(7).
Realisation method—gain or loss not sufficiently certain
(5) The realisation method provided for in this Subdivision applies to a gain or loss that you make from a *financial arrangement if the accruals method provided for in this Subdivision does not apply to that gain or loss.
Note: Section 230‑180 tells you how to apply the realisation method to the gain or loss.
(1) You have a sufficiently certain overall gain or loss from a *financial arrangement at the time when you start to have the arrangement only if it is sufficiently certain at that time that you will make an overall gain or loss from the arrangement of:
(a) a particular amount; or
(b) at least a particular amount.
The amount of the gain or loss is the amount referred to in paragraph (a) or (b).
Note: Sections 230‑70 and 230‑75 (about apportionment of financial benefits) only apply in working out whether you make, or will make, a gain or loss (and the amount of the gain or loss) when particular events happen. They do not apply in working out, at the time when you start to have a financial arrangement, whether it is sufficiently certain that you will make an overall gain or loss from the arrangement.
(2) In applying subsection (1), you must:
(a) assume that you will continue to have the *financial arrangement for the rest of its life; and
(b) have regard to the extent of the risk that a *financial benefit that you are not sufficiently certain to provide or receive under the arrangement may reduce the amount of the gain or loss.
(1) You have a sufficiently certain gain or loss from a *financial arrangement at a particular time if it is sufficiently certain at that time that you will make a gain or loss from the arrangement of:
(a) a particular amount; or
(b) at least a particular amount;
when one of the following occurs:
(c) you receive a particular *financial benefit under the arrangement or one of your rights under the arrangement *ceases;
(d) you provide a particular financial benefit under the arrangement or one of your obligations under the arrangement ceases.
The amount of the gain or loss is the amount referred to in paragraph (a) or (b).
(2) In applying subsection (1) to work out whether you have a sufficiently certain gain or loss at a particular time:
(a) have regard to the extent of the risk that a *financial benefit that you are not sufficiently certain to provide or receive under the arrangement may reduce the amount of the gain or loss; and
(b) disregard any financial benefit that has already been taken into account in working out the amount of a sufficiently certain overall gain or loss from the *financial arrangement under subsection 230‑105(1) at the time when you started to have the arrangement; and
(c) disregard any financial benefit (or that part of any financial benefit) that has already been taken into account in working out the amount of a sufficiently certain gain or loss from the *financial arrangement under subsection (1).
Note: Sections 230‑70 and 230‑75 allow you to apportion financial benefits provided and financial benefits received in working out the amount of a gain or loss.
(1) In deciding for the purposes of this Subdivision whether it is sufficiently certain at a particular time that you will make a gain or loss from a *financial arrangement, have regard only to:
(a) *financial benefits that you are sufficiently certain to receive; and
(b) financial benefits that you are sufficiently certain to provide.
Note: The particular time may be the time at which you start to have the arrangement.
(2) A *financial benefit that you are to receive or provide is to be treated as one that you are sufficiently certain to receive or to provide only if:
(a) it is reasonably expected that you will receive or provide the financial benefit (assuming that you will continue to have the *financial arrangement for the rest of its life); and
(b) at least some of the amount or value of the benefit is, at that time, fixed or determinable with reasonable accuracy.
(3) In applying subsection (2) to the *financial benefit:
(a) you must have regard to:
(i) the terms and conditions of the *financial arrangement; and
(ii) accepted pricing and valuation techniques; and
(iii) the economic or commercial substance and effect of the arrangement; and
(iv) the contingencies that attach to the other financial benefits that are to be provided or received under the arrangement; and
(b) you must treat the financial benefit as if it were not contingent if it is appropriate to do so having regard to the contingencies that attach to the other financial benefits that are to be received or provided under the arrangement.
(4) In applying paragraph (2)(b) at a particular time (the
reference time ) to a *financial benefit that depends on a variable that is based on:
(a) an interest rate; or
(b) a rate that solely or primarily reflects the time value of money; or
(c) a rate that solely or primarily reflects a consumer price index; or
(d) a rate that solely or primarily reflects an index prescribed by the regulations for the purposes of this paragraph;
you must assume that that variable will continue to have the value it has at the reference time.
(5) Despite subsection (4), in applying paragraph (2)(b) at a particular time to a *financial benefit that depends on a rate of change to a variable that is based on:
(a) a rate that solely or primarily reflects a consumer price index; or
(b) a rate that solely or primarily reflects an index prescribed by the regulations for the purposes of this paragraph;
you must assume that the rate of change to that variable will continue to be the rate of change that is current at that time.
(6) If subsection (4) or (5) applies to a gain or loss and you are determining the amount of the gain or loss at a particular time, you must also assume that that variable will continue to have the value that it has at that time.
(7) Subsections (4) and (5) do not limit paragraph (2)(b).
(8) If all of the *financial benefits provided and received under the *financial arrangement are denominated in a particular foreign currency, those financial benefits are not to be translated into your *applicable functional currency for the purposes of applying subsection (2) to the arrangement.
(9) To avoid doubt:
(a) a *financial benefit that you have already provided at a particular time is taken to be one that it is, at that time, a financial benefit that you are sufficiently certain to provide; and
(b) a financial benefit that you have already received at a particular time is taken to be one that it is, at that time, a financial benefit that you are sufficiently certain to receive.
(1) This section applies to a *financial arrangement that you have if, in substance or effect, and having regard to the pricing, terms and conditions of the arrangement:
(a) the arrangement consists of these things:
(i) a leg, the *financial benefits to be provided or received in respect of which are calculated by reference to, or are reasonably related to, a notional principal;
(ii) another leg, the financial benefits to be provided or received in respect of which also are calculated by reference to, or are reasonably related to, a notional principal;
(iii) if the arrangement includes one or more other things—those things; and
(b) when you start to have the arrangement, the value of the notional principal in relation to one leg is equal to the value of the notional principal in relation to the other leg; and
(c) all or part of the notional principal in relation to each leg is provided or received at a time, regardless of whether that time is different in relation to each leg.
Example: A swap contract.
(2) To avoid doubt, the *financial benefits mentioned in subparagraphs (1)(a)(i) and (ii), and the notional principal in relation to each leg, need not actually be provided or received.
(3) In applying this Subdivision to the *financial arrangement:
(a) work out the *financial benefits from the arrangement as follows:
(i) work out the financial benefits from each thing of which the arrangement consists separately from the financial benefits from each other thing of which the arrangement consists;
(ii) ensure that results under subparagraph (i) are consistent with the timing and amount of financial benefits to be actually provided or received under the arrangement; and
(b) work out your gains and losses from the arrangement as follows:
(i) work out the gains and losses from each thing of which the arrangement consists separately from the gains and losses from each other thing of which the arrangement consists;
(ii) treat the gains and losses mentioned in subparagraph (i) for all of those things as your gains and losses from the arrangement; and
(c) in working out a gain or loss from a thing for the purposes of subparagraph (b)(i), and, if the accruals method applies to the gain or loss, how it is to be spread and allocated:
(i) if the thing is a leg—take into account the amount of the notional principal at a time and in a manner that properly reflects the way in which the financial benefits in respect of that leg are calculated; and
(ii) if the thing is
not a leg—take into account an amount relevant to the thing at a time and in a manner that properly reflects the way in which the financial benefits in respect of that thing are calculated.
If the accruals method applies to a gain or loss you make from a *financial arrangement:
(a) you use section 230‑130 to work out the period over which the gain or loss is to be spread; and
(b) you use section 230‑135 to work out how to allocate the gain or loss to particular intervals within the period over which the gain or loss is to be spread; and
(c) if an interval to which part of the gain or loss is allocated straddles 2 income years, you use section 230‑170 to work out how to allocate that part of the gain or loss allocated between those 2 income years.
Period over which overall gain or loss is to be spread
(1) If you have a sufficiently certain overall gain or loss from a *financial arrangement under subsection 230‑105(1), the period over which the gain or loss is to be spread is the period that:
(a) starts when you start to have the arrangement; and
(b) ends when you will cease to have the arrangement.
In applying paragraph (b), you must assume that you will continue to have the arrangement for the rest of its life.
(2) However, if you have sufficiently certain gains or losses from the arrangement that:
(a) can be spread under subsection (3); and
(b) when considered together, represent adequately the overall gain or loss mentioned in subsection (1);
you may spread those gains or losses in accordance with subsection (3) instead of spreading the overall gain or loss in accordance with subsection (1).
Period over which particular gain or loss is to be spread
(3) If you have a sufficiently certain gain or loss from a *financial arrangement under subsection 230‑110(1), the period over which the gain or loss is to be spread is the period to which the gain or loss relates. Have regard to the pricing, terms and conditions of the arrangement in working out the period to which the gain or loss relates. This subsection has effect subject to subsections (4) and (5).
(4) The start of the period over which a gain or loss to which subsection (3) applies is to be spread must:
(a) not start earlier than the time when you start to have the *financial arrangement; and
(b) not start earlier than the start of the income year during which it becomes sufficiently certain that you will make the gain or loss.
(5) The end of the period over which a gain or loss to which subsection (3) applies is to be spread must:
(a) not end later than the time when you will cease to have the *financial arrangement; and
(b) not end later than the end of the income year during which:
(i) the *financial benefit that gives rise to the gain or loss is to be received or provided; or
(ii) the right or obligation whose *ceasing gives rise to the gain or loss is to cease.
How to spread gain or loss
(1) This section tells you how to spread a gain or loss to which the accruals method applies.
Compounding accruals or approximation
(2) The gain or loss is to be spread using:
(a) compounding accruals; or
(b) a method whose results approximate those obtained using the method referred to in paragraph (a) (having regard to the length of the period over which the gain or loss is to be spread).
(3) The following subsections of this section clarify the way in which the gain or loss is to be spread in accordance with paragraph (2)(a).
Intervals to which parts of gain or loss allocated
(4) The intervals to which parts of the gain or loss are allocated must:
(a) not exceed 12 months; and
(b) all be of the same length.
Paragraph (b) does not apply to the first and last intervals. These may be shorter than the other intervals.
Fixing of amount and rate for interval
(5) For each interval:
(a) determine a rate of return; and
(b) determine an amount to which you apply the rate of return.
(6) For the purposes of paragraph (5)(b), in determining the amount to which you apply the rate of return for an interval, have regard to:
(a) the amount or value; and
(b) the timing;
of *financial benefits that are to be taken into account in working out the amount of the gain or loss, and were provided or received by you during the interval.
Assumption of continuing to hold arrangement for rest of its life
(7) The gain or loss is to be spread assuming that you will continue to have the *financial arrangement for the rest of its life.
Regard to be had to financial benefits provided or received in interval
(8) In allocating the gain or loss to intervals, have regard to the *financial benefits to be provided or received in each of those intervals.
(1) This section clarifies that the method mentioned in subsection (2) of spreading gains and losses is a method covered by paragraph 230‑135(2)(b) (methods approximating compounding accruals).
(2) The method is the effective interest method mentioned in *accounting standard AASB 139 (or another accounting standard prescribed by the regulations for the purposes of this subsection).
(3) However, this section applies to a particular *financial arrangement you have only if:
(a) in a case where there is a discount or premium under the arrangement—when you start to have the arrangement, the annually compounded rate of return applicable to the discount or premium does not exceed 1%; and
(b) when you start to have the arrangement, neither the maximum life of the arrangement (as determined under the terms and conditions of the arrangement) nor the expected life of the arrangement exceeds:
(i) unless subparagraph (ii) applies—30 years; or
(ii) if the regulations prescribe a different period for the purposes of this subparagraph—that period; and
(c) each *financial benefit that you have an obligation to provide or a right to receive under the arrangement, and that gives rise to a gain or loss from the arrangement (other than a gain or loss that is attributable to any discount or premium):
(i) relates to a period not exceeding 12 months; and
(ii) will be provided or received in the period to which it relates; and
Note: Different financial benefits may relate to different periods.
(d) you prepare a financial report for the year in which you start to have the arrangement; and
(e) that financial report is:
(i) prepared in accordance with paragraph 230‑210(2)(a); and
(ii) audited in accordance with paragraph 230‑210(2)(b); and
(f) all gains and losses from the arrangement to which the accrual method applies are spread in a way that is consistent with that financial report.
(4) For the purposes of paragraph (3)(a), assume that you will continue to have the arrangement for the rest of its expected life.
(1) This section applies if:
(a) you prepare a financial report for a year (the
first year ); and(b) you prepare a financial report for the subsequent year (the
second year ); and(c) your income year starts in the first year and ends in the second year; and
(d) both the financial report for the first year and the financial report for the second year are:
(i) prepared in accordance with paragraph 230‑210(2)(a); and
(ii) audited in accordance with paragraph 230‑210(2)(b); and
(e) the auditor’s reports are unqualified for both the financial report for the first year and the financial report for the second year.
(2) For the purposes of paragraph 230‑140(3)(d), treat yourself as having prepared a financial report for the income year in which you start to have the arrangement.
(3) Work out the gain or loss you make from the arrangement for the income year as follows:
(a) firstly, work out the gain or loss you make from the arrangement for the first year in accordance with paragraph 230‑140(3)(f) (treating the first year as an income year);
(b) next, work out how much of the gain or loss mentioned in paragraph (a) is attributable to the income year in accordance with subsection (4);
(c) next, work out the gain or loss you make from the arrangement for the second year in accordance with paragraph 230‑140(3)(f) (treating the second year as an income year);
(d) next, work out how much of the gain or loss mentioned in paragraph (c) is attributable to the income year in accordance with subsection (4);
(e) next:
(i) if the amounts worked out under paragraphs (b) and (d) are both gains—add them together to work out the gain from the arrangement for the income year; or
(ii) if the amounts worked out under paragraphs (b) and (d) are both losses—add them together to work out the loss from the arrangement for the income year; or
(iii) if one of the amounts worked out under paragraphs (b) and (d) is a loss and the other is a gain—subtract the loss from the gain. If the result is positive, this is the gain from the arrangement for the income year. If the result is negative, this is the loss from the arrangement for the income year.
(4) For the purposes of paragraphs (3)(b) and (d), work out how much of the gain or loss is attributable to the income year by:
(a) using a methodology that is reasonable; and
(b) using the same methodology for the first and second years.
(5) For the purposes of paragraph (4)(a), treat a methodology that attributes the gain or loss on a pro‑rata basis as
not being reasonable.
(1) You may make an election for an income year under this section if:
(a) you prepare a financial report for the income year in accordance with:
(i) the *accounting standards; or
(ii) if those standards do not apply to the preparation of the financial report—comparable accounting standards made under a *foreign law that apply to the preparation of the financial report under a foreign law; and
(b) the financial report is audited in accordance with:
(i) the *auditing standards; or
(ii) if the auditing standards do not apply to the auditing of the financial report—comparable auditing standards made under a foreign law.
(2) An election under this section is irrevocable.
(1) This section applies if:
(a) you prepare a financial report for a year (the
first year ); and(b) you prepare a financial report for the subsequent year (the
second year ); and(c) your income year starts in the first year and ends in the second year; and
(d) both the financial report for the first year and the financial report for the second year are:
(i) prepared in accordance with paragraph 230‑150(1)(a); and
(ii) audited in accordance with paragraph 230‑150(1)(b); and
(e) the auditor’s reports are unqualified for both the financial report for the first year and the financial report for the second year.
(2) Treat yourself as eligible to make an election for the income year under subsection 230‑150(1).
(3) Work out the gain or loss you make from the arrangement for the income year as follows:
(a) firstly, work out the gain or loss you make from the arrangement for the first year in accordance with subsections 230‑160(3) and (4) or 230‑165(3) and (4) (treating the first year as an income year);
(b) next, work out how much of the gain or loss mentioned in paragraph (a) is attributable to the income year in accordance with subsection (4);
(c) next, work out the gain or loss you make from the arrangement for the second year in accordance with subsections 230‑160(3) and (4) or 230‑165(3) and (4) (treating the second year as an income year);
(d) next, work out how much of the gain or loss mentioned in paragraph (c) is attributable to the income year in accordance with subsection (4);
(e) next:
(i) if the amounts worked out under paragraphs (b) and (d) are both gains—add them together to work out the gain from the arrangement for the income year; or
(ii) if the amounts worked out under paragraphs (b) and (d) are both losses—add them together to work out the loss from the arrangement for the income year; or
(iii) if one of the amounts worked out under paragraphs (b) and (d) is a loss and the other is a gain—subtract the loss from the gain. If the result is positive, this is the gain from the arrangement for the income year. If the result is negative, this is the loss from the arrangement for the income year.
(4) For the purposes of paragraphs (3)(b) and (d), work out how much of the gain or loss is attributable to the income year by:
(a) using a methodology that is reasonable; and
(b) using the same methodology for the first and second years.
(5) For the purposes of paragraph (4)(a), treat a methodology that attributes the gain or loss on a pro‑rata basis as
not being reasonable.
(1) This section applies in relation to a *financial arrangement if:
(a) you have made an election under section 230‑150 in an income year; and
(b) you start to have the financial arrangement in that income year or a later income year; and
(c) the financial arrangement is part of a portfolio of similar financial arrangements; and
(d) a gain or loss to which subsection 230‑130(3) applies arises in part from fees in respect of the *financial arrangement; and
(e) the fees play an integral role in determining the amount of the gain or loss; and
(f) the net amount of the fees is
not expected to be significant relative to an overall gain or loss from the arrangement.(2) For the purposes of this Division, split the gain or loss mentioned in paragraph (1)(d) as follows:
(a) to the extent that it arises from the fees, treat it as a gain or loss from the *financial arrangement (the
fees gain or loss ) to which subsection 230‑130(3) applies;(b) to the extent that it does not arise from the fees, treat it as a separate gain or loss from the financial arrangement to which subsection 230‑130(3) applies.
Note: The separate gain or loss mentioned in paragraph (b) may itself be split under subsection 230‑165(2) (premium/discount gain or loss).
Determination of period for fees gain or loss
(3) The period over which the fees gain or loss is to be spread is the period that you determine to be the expected life of the portfolio, if:
(a) the basis on which you determine the period accords with the spreading of the fees gain or loss for the purposes of the profit or loss statement of the financial report mentioned in paragraph 230‑150(1)(a); and
(b) the basis on which you determine the period is set and recorded before any fees in respect of the *financial arrangement fall due; and
(c) the period can be justified objectively; and
(d) the period is reasonable in the circumstances.
Spreading the fees gain or loss
(4) The method by which the fees gain or loss is to be spread is the method that you determine, if:
(a) the basis on which you determine the method accords with the spreading of the fees gain or loss for the purposes of the profit or loss statement of the financial report mentioned in paragraph 230‑150(1)(a); and
(b) the method is determined before any fees in respect of the *financial arrangement fall due; and
(c) the method can be justified objectively; and
(d) the method is reasonable in the circumstances.
(5) To avoid doubt, subsections (3) and (4) apply despite sections 230‑130 and 230‑135.
(1) This section applies in relation to a *financial arrangement if:
(a) you have made an election under section 230‑150 in an income year; and
(b) you start to have the financial arrangement in that income year or a later income year; and
(c) the financial arrangement is part of a portfolio of similar financial arrangements; and
(d) a gain or loss to which subsection 230‑130(3) applies arises in part from a premium or discount in starting to have the portfolio; and
(e) the gain or loss is
not expected to be significant relative to the amount of the gain or loss on the portfolio.(2) For the purposes of this Division, split the gain or loss mentioned in paragraph (1)(d) as follows:
(a) to the extent that it arises from the premium or discount, treat it as a gain or loss from the *financial arrangement (the
premium/discount gain or loss ) to which subsection 230‑130(3) applies;(b) to the extent that it does not arise from the premium or discount, treat it as a separate gain or loss from the financial arrangement to which subsection 230‑130(3) applies.
Note: The separate gain or loss mentioned in paragraph (b) may itself be split under subsection 230‑160(2) (portfolio fees gain or loss).
Determination of period for premium/discount gain or loss
(3) The period over which the premium/discount gain or loss is to be spread is the period that you determine to be the expected life of the portfolio, if:
(a) the basis on which you determine the period accords with the spreading of the premium/discount gain or loss for the purposes of the profit or loss statement of the financial report mentioned in paragraph 230‑150(1)(a); and
(b) the basis on which you determine the period is set and recorded before you start to have the *financial arrangement; and
(c) the period can be justified objectively; and
(d) the period is reasonable in the circumstances.
Spreading the premium/discount gain or loss
(4) The method by which the premium/discount gain or loss is to be spread is the method that you determine, if:
(a) the basis on which you determine the method accords with the spreading of the premium/discount gain or loss for the purposes of the profit or loss statement of the financial report mentioned in paragraph 230‑150(1)(a); and
(b) the method is determined before you start to have the *financial arrangement; and
(c) the method can be justified objectively; and
(d) the method is reasonable in the circumstances.
(5) To avoid doubt, subsections (3) and (4) apply despite sections 230‑130 and 230‑135.
(1) You are taken, for the purposes of section 230‑15, to make, for an income year, a gain or loss equal to a part of a gain or loss if:
(a) that part of the gain or loss is allocated to an interval under section 230‑135; and
(b) that interval falls wholly within that income year.
(2) If:
(a) a part of a gain or loss is allocated to an interval under section 230‑135; and
(b) that interval straddles 2 income years;
you are taken, for purposes of section 230‑15, to make a gain or loss equal to so much of that part of the gain or loss as is allocated between those income years on a reasonable basis.
(3) If:
(a) a *head company of a *consolidated group or *MEC group has a *financial arrangement; and
(b) a subsidiary member of the group ceases to be a member of the group at a particular time (the
leaving time ); and(c) immediately after the leaving time, the head company no longer has the arrangement because the subsidiary member ceased to be a member of the group;
an income year of the group is taken, for the purposes of applying this section to the group and the arrangement, to end at the leaving time.
Overestimate of financial benefit to be received
(1) You are taken for the purposes of this Division to make a loss from a *financial arrangement if:
(a) a provision of this Subdivision has applied on the basis that you were sufficiently certain, at a particular time, to receive a *financial benefit of, or of at least, a particular amount under the arrangement; and
(b) when you receive the benefit (or the time comes for you to receive the benefit), the amount you receive (or are to receive) is nil or is less than the amount estimated.
The amount of the loss is equal to the difference between the amount estimated and the amount you receive (or are to receive). You are taken to have made the loss for the income year in which you receive the benefit (or in which the time comes for you to receive the benefit).
Underestimate of financial benefit to be received
(2) You are taken for the purposes of this Division to make a gain from a *financial arrangement if:
(a) a provision of this Subdivision has applied on the basis that you were sufficiently certain at a particular time to receive a *financial benefit of, or of at least, a particular amount under the arrangement; and
(b) when you receive the benefit, or the time comes for you to receive the benefit, the amount you receive, or are to receive, is more than the amount estimated.
The amount of the gain is equal to the difference between the amount estimated and the amount you receive or are to receive. You are taken to have made that gain in the income year in which you receive the benefit or in which the time comes for you to receive the benefit.
Overestimate of financial benefit to be provided
(3) You are taken for the purposes of this Division to make a gain from a *financial arrangement if:
(a) a provision of this Subdivision has applied on the basis that you were sufficiently certain at a particular time to provide a *financial benefit of, or of at least, a particular amount under the arrangement; and
(b) when you provide the benefit, or the time comes for you to provide the benefit, the amount you provide, or are to provide, is nil or is less than the amount estimated.
The amount of the gain is equal to the difference between the amount estimated and the amount you provide or are to provide. You are taken to have made that gain in the income year in which you provide the benefit or in which the time comes for you to provide the benefit.
Underestimate of financial benefit to be provided
(4) You are taken for the purposes of this Division to make a loss from a *financial arrangement if:
(a) a provision of this Subdivision has applied on the basis that you were sufficiently certain at a particular time to provide a *financial benefit of, or of at least, a particular amount under the arrangement; and
(b) when you provide the benefit, or the time comes for you to provide the benefit, the amount you are to provide is more than the estimated amount referred to in paragraph (a).
The amount of the loss is equal to the difference between the amount estimated and the amount you are to provide. You are taken to have made that loss in the income year in which you provide the benefit or in which the time comes for you to provide the benefit.
(1) If a gain or loss is to be taken into account using the realisation method, you are taken, for the purposes of section 230‑15, to make the gain or loss for the income year in which the gain or loss occurs.
Note: Sections 230‑70 and 230‑75 allow you to apportion financial benefits provided and financial benefits received in working out the amount of the gain or loss.
(2) For the purposes of subsection (1), a gain or loss from a *financial arrangement is taken to occur at the time at which the last of the *financial benefits taken into account in determining the amount of the gain or loss:
(a) is provided; or
(b) if the financial benefit is not provided at the time when it is due to be provided under the arrangement and it is reasonable to expect that the financial benefit will be provided—is due to be provided.
This subsection has effect subject to subsection (3).
(3) For the purposes of subsection (1), you make a loss from a *financial arrangement from writing off, as a bad debt, a right to a *financial benefit (or a part of a financial benefit) if:
(a) the financial benefit was taken into account in working out the amount of a gain from the arrangement and the gain has been included in your assessable income under this Division; or
(b) the right is one in respect of money that you lent in the ordinary course of your *business of lending money; or
(c) the right is one that you bought in the ordinary course of your business of lending money.
(4) The loss referred to in subsection (3) occurs when you write off the right to the *financial benefit (or the part of the financial benefit) as a bad debt.
(5) The amount of the loss referred to in subsection (3) is:
(a) if paragraph (3)(a) applies—so much of the gain referred to in that paragraph as is reasonably attributable to the *financial benefit (or the part of the financial benefit); or
(b) if paragraph (3)(b) applies—the amount of the financial benefit (or the part of the financial benefit); or
(c) if paragraph (3)(c) applies—the amount of the financial benefit (or the part of the financial benefit) but only up to the value of the financial benefit you provided to acquire the right to the financial benefit (or the part of the financial benefit).
(6) For the purposes of this Act, a deduction for the loss referred to in subsection (3) is to be treated as a deduction of a bad debt.
Note: Various provisions in this Act and the
Income Tax Assessment Act 1936 restrict the availability of deductions for bad debts and make provision in relation to the recoupment of amounts in relation to bad debts that have been written off. These provisions are set out in subsection 25‑35(5).
(1) You must make a fresh assessment of which gains and losses from a *financial arrangement the accruals method should apply to, and which gains and losses from that arrangement the realisation method should apply to, if:
(a) the accruals method, or the realisation method, provided for in this Subdivision applies to gains and losses from the arrangement; and
(b) there is a material change to:
(i) the terms and conditions of the arrangement; or
(ii) circumstances that affect the arrangement.
(2) Without limiting subsection (1), the following changes are material changes to the terms and conditions of, or circumstances that affect, the *financial arrangement:
(a) a change to the terms or conditions of the arrangement in a way that alters the essential nature of the arrangement (for example, by altering it from a *debt interest to an *equity interest or from an equity interest to a debt interest);
(b) a change to the terms or conditions of the arrangement in a way that materially affects the contingencies on which significant obligations and rights under the arrangement are dependent (for example, by introducing such a contingency or removing such a contingency);
(c) a change in circumstances that makes something that:
(i) materially affects significant obligations and rights under the arrangement; and
(ii) was previously dependent on a contingency;
no longer dependent on a contingency (because, for example, only one of a number of previously possible contingencies is realised);
(d) a change to:
(i) the terms on which credit is to be provided to an entity that is not a party to the arrangement; or
(ii) the credit rating of an entity that is not a party to the arrangement;
if a significant obligation or right under the arrangement is dependent on that credit being provided or that rating being maintained;
(e) if the arrangement is, or includes, a financial asset or financial liability and you prepare your financial reports in accordance with:
(i) the *accounting standards; or
(ii) if those standards do not apply to the preparation of the financial report—comparable accounting standards made under a *foreign law that apply to the preparation of the financial report under a foreign law;
a change to the terms or conditions of, or circumstances that affect, the arrangement that are sufficient for the financial asset or financial liability to be treated as impaired for the purposes of those standards.
(3) You do not need to make a reassessment under this section merely because of a change in the fair value of the *financial arrangement.
When re‑estimation necessary
(1) You re‑estimate a gain or loss from a *financial arrangement under subsection (5) if:
(a) the accruals method applies to the gain or loss; and
(b) circumstances arise that materially affect:
(i) the amount or value; or
(ii) the timing;
of *financial benefits that were taken into account in working out the amount of the gain or loss; and
(c) the circumstances do not give rise to a re‑estimation under section 230‑200; and
(d) in a case where the gain or loss is spread using the method referred to in paragraph 230‑135(2)(b) in accordance with section 230‑140 (effective interest method)—the maximum life of the arrangement (as determined under the terms and conditions of the arrangement) is more than 12 months.
(2) If subsection (1) applies, you must re‑estimate the gain or loss:
(a) unless paragraph (b) applies—as soon as reasonably practicable after you become aware of the circumstances referred to in paragraph (1)(b); or
(b) if paragraph (1)(d) is satisfied and the terms and conditions of the *financial arrangement provide for reset dates to occur no more than 12 months apart—at the relevant reset date.
(3) Without limiting subsection (1), the following are circumstances of the kind referred to in paragraph (1)(b):
(a) a material change in market conditions that are relevant to the amount or value of the *financial benefits to be received or provided under the *financial arrangement;
(b) cash flows that were previously estimated becoming known and the difference between the cash flows that become known and the cash flows that were previously estimates is not insignificant;
Repeal the subsection (including the heading), substitute:
Net gains under Division 230 included in instalment income
(2B) Your
instalment income for a period also includes the difference between:
(a) a gain (or gains) you make from a *financial arrangement to the extent to which it is (or they are):
(i) assessable under Division 230 of the
Income Tax Assessment Act 1997 ; and(ii) reasonably attributable to that period; and
(b) a loss (or losses) you make from a financial arrangement to the extent to which it is (or they are):
(i) allowable to you as a deduction under Division 230 of the
Income Tax Assessment Act 1997 ; and(ii) reasonably attributable to that period.
This is so only if the gain (or gains) referred to in paragraph (a) exceeds the loss (or losses) referred to in paragraph (b).
In this Part:
financial arrangement amendments means the amendments made by Parts 1 and 2 of this Schedule.
first applicable income year means the first income year for which the financial arrangement amendments apply to you under item 103.
lodgment date means the due date for you to lodge an income tax return.
103
Application of financial arrangement amendments (income years)
(1) Subject to subitem (2), the financial arrangement amendments apply to you for income years commencing on or after 1 July 2010.
(2) The financial arrangement amendments apply to you for income years commencing on or after 1 July 2009 if you elect to have this subitem apply to you.
Note: For a consolidated group, it is the head entity that would make the election.
(3) An election under subitem (2) must be made on or before the first lodgment date that occurs on or after the start of your first income year commencing on or after 1 July 2009.
104
Application of financial arrangement amendments (financial arrangements)
Future financial arrangements (1) The financial arrangement amendments apply to financial arrangements that you start to have in the first applicable income year or a later income year.
Existing financial arrangements (2) The financial arrangement amendments apply to all financial arrangements that:
(a) you started to have before the start of the first applicable income year; and
(b) you have at the start of that income year;
only if you elect to have this subitem apply to you.
(3) The financial arrangement amendments do not apply under subitem (2) to a financial arrangement that arose from a disposal of property (including a disposal of a capital asset, a revenue asset, a depreciating asset or trading stock).
(4) The financial arrangement amendments do not apply under subitem (2) to a financial arrangement if:
(a) the election is made by the head company of a consolidated group or MEC group; and
(b) the election specifies that the election is not to apply to financial arrangements in relation to life insurance business carried on by a member of the consolidated group or MEC group; and
(c) the arrangement is one that relates to the life insurance business carried on by a member of the consolidated group or MEC group.
(5) An election under subitem (2) must:
(a) be made on or before the first lodgment date that occurs on or after the start of the first applicable income year; and
(b) be notified to the Commissioner on or before the lodgment date referred to in paragraph (a).
Note: The Commissioner may, in limited circumstances, extend the time on or before which the election must be notified to the Commissioner. See item 104A.
(6) If you make an election under subitem (2), treat subsection 230‑455(7) of the
Income Tax Assessment Act 1997 as allowing you to make an election under that subsection that applies to:
(a) in any case—all of the financial arrangements that you start to have in the income year in which the election is made or a later income year; or
(b) if you make the election at the same time as you make the election under subitem (2)—all of your financial arrangements to which the financial arrangements amendments apply.
(7) If you make an election under subitem (2), treat section 230‑150 of the
Income Tax Assessment Act 1997 as allowing you to make an election under that section that, despite paragraphs 230‑160(1)(b) and 230‑165(1)(b), applies to a financial arrangement that:
(a) you started to have before the start of the first applicable income year; and
(b) you have at the start of that income year.
(7A) An election that you make under section 230‑150 of the
Income Tax Assessment Act 1997 extends to a financial arrangement referred to in subitem (2) only if:
(a) that election is made on or before the first lodgment date that occurs after the start of the first applicable income year; and
(b) for financial arrangements to which section 230‑160 of that Act applies:
(i) at the time you make the election, you made determinations that satisfy the requirements of subsections 230‑160(3) and (4) (other than paragraphs 230‑160(3)(b) and (4)(b)); and
(ii) at, or soon after, the time you make the election, you have in place records in relation to the arrangement that satisfy the requirements of paragraphs 230‑160(3)(b) and (4)(b); and
(c) for financial arrangements to which section 230‑165 of that Act applies:
(i) at the time you make the election, you made determinations that satisfy the requirements of subsections 230‑165(3) and (4) (other than paragraphs 230‑165(3)(b) and (4)(b)); and
(ii) at, or soon after, the time you make the election, you have in place records in relation to the arrangement that satisfy the requirements of paragraphs 230‑165(3)(b) and (4)(b).
(8) An election that you make under Subdivision 230‑C, 230‑D or 230‑F of the
Income Tax Assessment Act 1997 extends to financial arrangements referred to in subitem (2) only if that election is made on or before the first lodgment date that occurs after the start of the first applicable income year.(9) An election that you make under Subdivision 230‑E of the
Income Tax Assessment Act 1997 extends to a financial arrangement referred to in subitem (2) only if:
(a) that election is made on or before the first lodgment date that occurs after the start of the first applicable income year; and
(b) the requirements of section 230‑335 were satisfied in relation to the arrangement at the time the arrangement was created, acquired or applied; and
(c) at, or soon after, the time you make the election, you have in place records in relation to the arrangement that satisfy the requirements of section 230‑355 and section 230‑360 (other than subparagraph 230‑360(2)(c)(ii)); and
(d) the requirements of section 230‑365 have been satisfied at all times since the arrangement was created, acquired or applied for the purpose of hedging a risk in relation to a hedged item.
(10) To avoid doubt, subsection 230‑310(4) does not apply to a financial arrangement that you started to have before the start of the first applicable income year and that you have at the start of that income year.
(11) To avoid doubt, the election referred to in subitem (8) or (9) applies to the financial arrangements referred to in subitem (2) even though you started to have the arrangements before the election is made.
(12) If you make an election under subitem (2), balancing adjustments must be made under subitem (13).
(13) Use the following method statement to make the balancing adjustments under this subitem:
Balancing adjustment method statement Step 1. Work out the total of all the amounts that relate to the financial arrangements and that would have been included in your assessable income if Division 230 of the
Income Tax Assessment Act 1997 had applied to gains and losses from the arrangements from the time when you started to have them: the result is thenotional assessable amount .Step 2. Work out the total of all the amounts that relate to the financial arrangements and that would have been allowable to you as deductions if that Division had applied to gains and losses from the arrangements from the time when you started to have them: the result is the
notional deductible amount .Step 3. Work out the total of all the amounts that relate to the financial arrangements and have been included in your assessable income from the time when you started to have them: the result is the
actual assessed amount .Step 4. Work out the total of all the amounts that relate to the financial arrangements and that have been allowable as deductions for you from the time when you started to have them: the result is the
actual deducted amount .Step 5. Add the notional assessable amount to the actual deducted amount: the result is the
step 5 amount .Step 6. Add the actual assessed amount to the notional deductible amount: the result is the
step 6 amount .Step 7. Compare the step 5 amount with the step 6 amount. If the step 5 amount exceeds the step 6 amount, the excess is included in your assessable income as a balancing adjustment. If the step 6 amount exceeds the step 5 amount, the excess is allowable as a deduction as a balancing adjustment. If the step 5 amount and the step 6 amount are equal there is no balancing adjustment.
(14) If:
(a) an amount is recorded in a deferred tax asset account in accordance with:
(i) accounting standard AASB 112 (or another accounting standard prescribed by the regulations for the purposes of this paragraph); or
(ii) if that standard does not apply to the preparation of your financial reports—a comparable accounting standard that applies to the preparation of your financial reports under a foreign law;
immediately before the start of the first applicable income year; and
(b) the whole or a part of that amount (the
attributable assessable amount ) is attributable to a financial arrangement referred to in subitem (2); and(c) the method of relying on financial reports provided for in Subdivision 230‑F applies to take account of a gain or loss you make from the financial arrangement; and
(ca) the attributable assessable amount represents the whole of the deferred tax effect of a gain or loss from the financial arrangement that has been recognised in profit or loss in accordance with the accounting principles mentioned in paragraph 230‑395(2)(a) of the
Income Tax Assessment Act 1997 ;the following provisions have effect:
(d) the financial arrangement is to be disregarded for the purposes of steps 1 to 4 of the method statement in subitem (13); and
(e) the attributable assessable amount is to be reduced to the extent to which it represents unused tax credits and then grossed up under subitem (16); and
(f) the step 6 amount is to be increased by the amount obtained under paragraph (e).
Note: The deferred tax effect to be taken into account for the purposes of paragraph (ca) might be affected by a later assessment, the amendment of an assessment or a law that applies retrospectively.
(15) If:
(a) an amount is recorded in a deferred tax liability account in accordance with:
(i) accounting standard AASB 112 (or another accounting standard prescribed by the regulations for the purposes of this paragraph); or
(ii) if that standard does not apply to the preparation of your financial reports—a comparable accounting standard that applies to the preparation of your financial reports under a foreign law;
immediately before the start of the first applicable income year; and
(b) the whole or a part of that amount (the
attributable deductible amount ) is attributable to a financial arrangement referred to in subitem (2); and(c) the method of relying on financial reports provided for in Subdivision 230‑F applies to take account of a gain or loss you make from the financial arrangement; and
(ca) the attributable deductible amount represents the whole of the deferred tax effect of a gain or loss from the financial arrangement that has been recognised in profit or loss in accordance with the accounting principles mentioned in paragraph 230‑395(2)(a) of the
Income Tax Assessment Act 1997 ;the following provisions have effect:
(d) the financial arrangement is to be disregarded for the purposes of steps 1 to 4 of the method statement in subitem (13);
(e) the attributable deductible amount is to be reduced to the extent to which it represents unused tax credits and then grossed up under subitem (16);
(f) the step 5 amount is to be increased by the amount obtained under paragraph (e).
Note: The deferred tax effect to be taken into account for the purposes of paragraph (ca) might be affected by a later assessment, the amendment of an assessment or a law that applies retrospectively.
(16) An amount is to be grossed up for the purposes of subitems (14) and (15) by multiplying the amount by:
(17) A balancing adjustment under subitem (13) is to be spread evenly over the first applicable income year and the next 3 income years.
(18) In applying steps 1 and 2 in the method statement in subitem (13) to financial arrangements, assume that any election that extends to the arrangements under subitem (6) had applied to those financial arrangements from the time when you started to have them.
(19) In applying section 121EH of the
Income Tax Assessment Act 1936 , disregard any balancing adjustment under subitem (13).
104A
Application of financial arrangement amendments (financial arrangements)—late notices (1) A reference in paragraph 104(5)(b) to the lodgment date is to be treated, in relation to an election under subitem 104(2), as being a reference to a later date specified in a notice the Commissioner gives to you under this item, if the Commissioner gives you such a notice in relation to the election.
(2) The Commissioner may give you a notice in relation to the election if:
(a) the Commissioner is satisfied that the election was not notified to the Commissioner on or before the lodgment date because of:
(i) an honest mistake of yours; or
(ii) an inadvertence of yours; or
(b) the Commissioner is satisfied that:
(i) the election was not notified to the Commissioner on or before the lodgment date because of circumstances outside of your control; and
(ii) you took all reasonable steps to notify the Commissioner of the election on or before the lodgment date, or there were no such steps you could have taken.
(3) The later date specified in the notice must be a date that occurred no later than 3 months after the lodgment date mentioned in paragraph 104(5)(b) (disregarding this item).
104B
Asset or liability of entity joining pre‑TOFA consolidated group etc. (1) This item applies in relation to an asset or liability if:
(a) an entity (the
joining entity ) becomes a subsidiary member of a consolidated group or MEC group at a time (thejoining time ); and(b) the asset or liability becomes that of the head company of the group because subsection 701‑1(1) of the
Income Tax Assessment Act 1997 (the single entity rule) applies when the joining entity becomes a subsidiary member of the group; and(c) the asset or liability is, or is part of, a financial arrangement at the start of the head company’s first applicable income year; and
(d) the head company’s first applicable income year starts after the joining time; and
(e) the head company has the asset or liability (whether or not because of subsection 701‑1(1) of the
Income Tax Assessment Act 1997 (the single entity rule)) throughout the period:
(i) starting at the joining time; and
(ii) ending at the start of the head company’s first applicable income year; and
(f) the head company elects to have subitem 104(2) apply to itself; and
(g) the joining entity is
not a chosen transitional entity (within the meaning of Division 701 of theIncome Tax (Transitional Provisions) Act 1997 ).Note: Item 104C prevents the application of this item in relation to certain assets and liabilities.
(2) For the purposes of subitem 104(13) and Division 230 of the
Income Tax Assessment Act 1997 :
(a) in the case of an asset—assume that subsection 701‑55(5A) of that Act applies in relation to the asset at the joining time; and
(b) in the case of a liability—assume that section 715‑375 of that Act applies as if the liability is, or is part of, a Division 230 financial arrangement at the joining time.
(3) Subitems 104(14) and (15) do not apply in relation to the asset or liability.
(4) In the case of an asset, subitems (5), (6) and (7) apply if, on the assumption that subsection 701‑55(5A) of the
Income Tax Assessment Act 1997 applies in relation to the asset at the joining time, paragraph 701‑55(5A)(b) of that Act would apply in relation to the asset.(5) Work out if the Division 230 starting value for the asset at the joining time exceeds or falls short of its tax cost setting amount.
(6) If there is an excess, an amount equal to 25% of that excess is included in the head company’s assessable income for:
(a) the head company’s first applicable income year; and
(b) each of the 3 subsequent income years.
(7) If there is a shortfall, the head company is entitled to a deduction equal to 25% of that shortfall for:
(a) the head company’s first applicable income year; and
(b) each of the 3 subsequent income years.
(8) In the case of a liability, subitem (9) applies if Subdivision 705‑B of the
Income Tax Assessment Act 1997 (group formation) has effect in relation to the joining entity becoming a subsidiary member of the group.(9) Treat the amount of the payment mentioned in subsection 715‑375(2) of that Act as being the amount of consideration that the joining entity would need to provide, if it were to cease holding the liability just before the joining time, without an amount being assessable income of, or deductible to, the joining entity.
(1) Subitem (2) applies if:
(a) assuming that item 51 of Schedule 3 to the
Tax Laws Amendment (2012 Measures No. 2) Act 2012 commenced at the same time as this item, that item would apply in relation to a ruling or advice; and(b) to the extent that the ruling or advice has effect in relation to the application of subsection 701‑55(5C) or (6) of the original 2010 law (within the meaning of that Schedule) in respect of the joining entity mentioned in item 50 of that Schedule, that ruling or advice is in relation to an asset of an entity for an income year; and
(c) the asset is, or is part of, a financial arrangement at the start of the income year; and
(d) the requirements in subitem 104B(1) are satisfied in relation to the asset; and
(e) the entity is the head company mentioned in subitem 104B(1); and
(f) the income year is the head company’s first applicable income year mentioned in subitem 104B(1).
(2) Item 104B does not apply in relation to the asset.
(3) Subitem (4) applies if:
(a) subitem (2) applies; and
(b) a liability is, or is part of, a financial arrangement at the start of the income year mentioned in subitem (1); and
(c) the financial arrangement is of the same kind as the financial arrangement mentioned in paragraph (1)(c); and
(d) the requirements in subitem 104B(1) are satisfied in relation to the liability; and
(e) the head company mentioned in subitem 104B(1) is the same entity as the head company mentioned in paragraph (1)(e) of this item.
(4) Item 104B does not apply in relation to the liability.
105
Application of financial arrangement amendments (arrangements that are not financial arrangements) (1) Subject to this item, items 104 and 104A apply to arrangements that are not financial arrangements in the same way that those items apply to financial arrangements.
(2) However, the method statement in subitem 104(13) applies to arrangements that are not financial arrangements in accordance with subitem (1) of this item as if:
(a) the reference in step 1 of that method statement to “Division 230 of the
Income Tax Assessment Act 1997 ” were a reference to “Subdivision 775‑F of theIncome Tax Assessment Act 1997 ”; and(b) the reference in step 2 of that method statement to “Division” were a reference to “Subdivision”.
Before “This”, insert “(1)”.
Add:
(2) This Division does not apply to a *forex realisation gain or a *forex realisation loss made by:
(a) a *securitisation vehicle; or
(b) an entity that satisfies the requirements of subsection 820‑39(3).
Add:
(9) The following are not entitled to make a choice under this section:
(a) a *securitisation vehicle;
(b) an entity that satisfies the requirements of subsection 820‑39(3).
Repeal the paragraph, substitute:
(a) either:
(i) you make a choice within 30 days after the commencement of the
New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003 ; or(ii) you make a choice within 90 days after the commencement of Part 1 of Schedule 1 to the
Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 ; and
Add:
(4) Despite subsection (1), section 960‑50 does not apply for the purposes of working out the assessable income, deductions or tax offsets of:
(a) a *securitisation vehicle; or
(b) an entity that satisfies the requirements of subsection 820‑39(3).
Add:
(6) The following are not entitled to make a choice under this section:
(a) a *securitisation vehicle;
(b) an entity that satisfies the requirements of subsection 820‑39(3).
112
Subsection 995‑1(1) (paragraph (b) of the definition of qualifying forex account ) Repeal the paragraph.
Repeal the paragraph, substitute:
(b) for the purposes of working out the assessable income or allowable deductions of:
(i) an ADI or a non‑ADI financial institution (within the meaning of the
Income Tax Assessment Act 1997 ); or(ii) a securitisation vehicle (within the meaning of that Act); or
(iii) an entity that satisfies the requirements of subsection 820‑39(3) of that Act;
The amendments made by this Part apply on and after 17 December 2003.
The endnotes provide details of the history of this compilation and its provisions. The following endnotes are included in each compilation:
Endnote 1—About the endnotes
Endnote 2—Abbreviation key
Endnote 3—Legislation history
Endnote 4—Amendment history
Endnote 5—Uncommenced amendments
Endnote 6—Modifications
Endnote 7—Misdescribed amendments
Endnote 8—Miscellaneous
If there is no information under a particular endnote, the word “none” will appear in square brackets after the endnote heading.
The abbreviation key in this endnote sets out abbreviations that may be used in the endnotes.
Amending laws are annotated in the legislation history and amendment history.
The legislation history in endnote 3 provides information about each law that has amended the compiled law. The information includes commencement information for amending laws and details of application, saving or transitional provisions that are not included in this compilation.
The amendment history in endnote 4 provides information about amendments at the provision level. It also includes information about any provisions that have expired or otherwise ceased to have effect in accordance with a provision of the compiled law.
The effect of uncommenced amendments is not reflected in the text of the compiled law, but the text of the amendments is included in endnote 5.
If the compiled law is affected by a modification that is in force, details of the modification are included in endnote 6.
An amendment is a misdescribed amendment if the effect of the amendment cannot be incorporated into the text of the compilation. Any misdescribed amendment is included in endnote 7.
Endnote 8 includes any additional information that may be helpful for a reader of the compilation.
ad = added or inserted | pres = present |
am = amended | prev = previous |
c = clause(s) | (prev) = previously |
Ch = Chapter(s) | Pt = Part(s) |
def = definition(s) | r = regulation(s)/rule(s) |
Dict = Dictionary | Reg = Regulation/Regulations |
disallowed = disallowed by Parliament | reloc = relocated |
Div = Division(s) | renum = renumbered |
exp = expired or ceased to have effect | rep = repealed |
hdg = heading(s) | rs = repealed and substituted |
LI = Legislative Instrument | s = section(s) |
LIA = | Sch = Schedule(s) |
mod = modified/modification | Sdiv = Subdivision(s) |
No. = Number(s) | SLI = Select Legislative Instrument |
o = order(s) | SR = Statutory Rules |
Ord = Ordinance | Sub‑Ch = Sub‑Chapter(s) |
orig = original | SubPt = Subpart(s) |
par = paragraph(s)/subparagraph(s) | |
/sub subparagraph(s) |
Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 | 15, 2009 | 26 Mar 2009 | ||
Tax Laws Amendment (2010 Measures No. 4) Act 2010 | 136, 2010 | 7 Dec 2010 | Schedule 3 (items 133, 134): | — |
Tax Laws Amendment (2011 Measures No. 7) Act 2011 | 147, 2011 | 29 Nov 2011 | Schedule 4: 30 Nov 2011 | Sch. 4 (item 4) |
Tax Laws Amendment (2012 Measures No. 2) Act 2012 | 99, 2012 | 29 June 2012 | S. 4: Royal Assent
Schedule 2 (item 5): | S. 4 |
Tax and Superannuation Laws Amendment (2013 Measures No. 2) Act 2013 | 85, 2013 | 28 June 2013 | Schedule 8 (items 49–54): | — |
(a) Subsection 2(1) (item 8) of theTax Laws Amendment (2010 Measures No. 4) Act 2010 provides as follows:
(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.
Schedule 3, items 133 and 134 | Immediately
after the commencement of Part 1 of Schedule 1 to the | 26 March 2009 |
(b) Subsection 2(1) (item 6) of theTax Laws Amendment (2012 Measures No. 2) Act 2012 provides as follows:
(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.
Schedule 2 | Immediately
after the commencement of Parts 1, 2 and 3 of Schedule 1 to the | 26 March 2009 |
(c) Subsection 2(1) (item 11) of theTax and Superannuation Laws Amendment (2013 Measures No. 2) Act 2013 provides as follows:
(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.
Schedule 8 | Immediately
after the commencement of item 1 of Schedule 3 to the | 26 March 2009 |
Item 104............................. | am. No. 136, 2010; No.85, 2013 |
Note to item 104(5).............. | ad. No. 147, 2011 |
Note to item 104(14)............ | ad. No.85, 2013 |
Note to item 104(15)............ | ad. No.85, 2013 |
Item 104A.......................................... .......................................... | ad. No. 147, 2011 |
Item 104B........................... | ad. No. 99, 2012 |
Item 104C........................... | ad. No. 99, 2012 |
Item 105............................. | am. No. 147, 2011 |
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