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  • The effect of zero or negative LIBOR on the application of section 160ZZZA of the Income Tax Assessment Act 1936 (ITAA 1936)

    The Commissioner's view of the effect of an applicable London Interbank Offered Rate (LIBOR) at or below zero on section 160ZZZA of Part IIIB of ITAA 1936, is that:

    • the notional amount of interest is capped at zero; and
    • a deduction is denied for interest on intra-bank borrowings.

    Section 160ZZZA does not result in assessable income being derived by the Australian branch of a foreign bank when there is a negative applicable LIBOR for intra-bank borrowings.

    If no amount of interest is taken under section 160ZZZA to be paid by an Australian branch, paragraph 160ZZZJ(1)(a) is not satisfied.

    No withholding tax is payable where no interest was paid or taken to be paid.

      Last modified: 16 Dec 2016QC 50753