Taxation of capital protected borrowing products

A capital protected borrowing is essentially an arrangement where the borrower is protected from a decrease in the market value of an asset. Under the tax law, the capital protection feature of the product is treated as a put option.

In order to calculate the amount deductible for a capital protected borrowing a benchmark/adjusted loan rate is used. This rate is currently equal to the Reserve Bank's standard housing rate, plus 100 basis points (see table F5).

Further information on capital protected borrowings, and how to calculate the deductions arising from such arrangements, are contained in the following links:

• About capital protected products and borrowings
• How to calculate deductions for a capital protected borrowing