Subdivision 230-H excludes TOFA from applying to gains and losses for certain financial arrangements.
Short-term arrangements with non-monetary amounts
Under section 230-450, TOFA will not apply to short-term financial arrangements where non-monetary amounts are involved – for example, short term trade credit.
This exception applies where all of the following are met:
- the arrangement is a financial arrangement under section 230-45
- the entity acquired (or provided) goods or other property or services and the financial benefits the entity is to provide (or receive) under the arrangement are consideration for those goods or other property or services
- the period between the payment and the provision of goods other property or services is not more than 12 months
- the arrangement is not a derivative financial arrangement for any income year
- the fair value election does not apply to the arrangement.
Entities falling below the thresholds
Under section 230-455, gains or losses from financial arrangements of individuals and those entities that fall below the relevant threshold tests will generally not be subject to TOFA (see Who the rules apply to).
Various rights and obligations
Under section 230-460, the following rights and obligations are excluded, in whole or in part, from the operation of TOFA:
- most leasing or property arrangements
- certain interests in partnerships and trusts
- certain insurance policies
- certain workers compensation arrangements
- certain guarantees and indemnities
- personal arrangements and personal injury payments
- superannuation or pension benefits
- interest in controlled foreign companies
- proceeds from certain business sales
- infrastructure borrowings
- farm management deposits
- rights or obligations to which section 121EK of the ITAA 1936 applies (for owners of an offshore banking unit)
- forestry managed investment scheme interests.
Forgiveness of commercial debts
Relevant gains made from the release, waiver or extinguishment of a debt under a financial arrangement continue to be subject to the commercial debt forgiveness provisions as set out in Division 245.
Section 230-470 provides that where a taxpayer makes a gain from a financial arrangement from the forgiveness of a debt in accordance with the commercial debt forgiveness provisions, that gain is decreased by certain amounts.
TOFA does not apply to gains to the extent they are gains in the form of a franked distribution or a right to receive a franked distribution (section 230-480).
Certain gains and losses relating to retirement villages and residential care arrangements are excluded from TOFA (section 230-475).