• Section 230-50 financial arrangements

    Under subsection 230-50(1), an entity has a financial arrangement where it has an equity interest. The equity interest constitutes the financial arrangement.

    For a company, equity interest is defined in Subdivision 974-C (debt and equity rules). For trusts and partnerships, equity interest is defined in section 820-930 (thin capitalisation rules).

    Where an arrangement satisfies the definition of a financial arrangement under both section 230-45 and subsection 230-50(1), section 230-50 will take precedence (refer to Taxation Determination TD 2011/12).

    Under subsection 230-50(2), an entity also has a financial arrangement if both of the following apply:

    • it has under an arrangement a legal or equitable right to receive or obligation to provide an equity interest or a combination of such rights and obligations
    • the right, obligation or combination of such rights and obligations does not constitute or form part of a financial arrangement under section 230-45.

    TOFA will only apply to a financial arrangement that satisfies the definition in section 230-50 where the entity has made one of the following elections, and the election applies to the financial arrangement:

    • a fair value election
    • a reliance on financial reports election
    • in limited circumstances, a hedging financial arrangements election.

    See also:

      Last modified: 10 Jun 2016QC 27222