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  • Question 14

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    This question collects information about your loan arrangements with international related parties.

    The question also collects information about how you have attributed your income and expenses to your branch operations as follows:

    If you are an authorised deposit-taking institution (ADI) within the meaning of section 995-1 of the ITAA 1997 and are covered by TR 2005/11, include at this question any funds used in your Australian or offshore branch operations you have internally recorded as a 'loan' with the branch operations that records your attribution of your income and expenditure to the branch operations.

    If you are not an ADI covered by TR 2005/11, include amounts that you have internally recorded as loans with your Australian or offshore branch operations for the purposes of attributing your interest expense on borrowings from third parties to the branch.

    Note: Taxation Ruling TR 2005/11 does not apply to Australian branch operations carried on by a foreign bank (or other qualifying financial entity) to which Part IIIB of the ITAA 1936 applies. The foreign bank (or qualifying financial entity) should instead complete question 21 of this schedule (unless it has elected under section 160ZZVB of the ITAA 1936 that Part IIIB not apply).

    A loan arrangement should be given its ordinary meaning within the context of commercial and accounting practices. In general terms, a loan arrangement is defined as a contract whereby the lender pays a sum of money in consideration of a promise by the borrower to repay the money at some time in the future (and this promise may/may not include the promise to repay interest on the money borrowed).

    Those financing arrangements that are economically in substance a loan arrangement would be regarded as a loan for the purposes of this question. For example securities loan arrangements where the collateral is cash, sale and buyback arrangements to be settled in cash or repurchase agreements (repos) to be settled in cash.

    Whether a financing arrangement economically constitutes a loan arrangement is a matter to be decided based on the facts and circumstances of each case/arrangement, for example, whether the arrangement involves revenue assets and/or constitutes an ordinary business activity undertaken by the taxpayer.

    We recommend that you source appropriate guidance in light of the particular facts and circumstances of your case.

    For the purposes of this question, for arrangements that are economically in substance loans:

    • the cash collateral or cash settlement amount would be considered the loan amount
    • any fees paid/received in respect of those arrangements would be considered interest.

    If you borrowed or loaned any amounts from or to international related parties during the income year, answer yes to this question and complete the required fields.

    The dollar amounts or values asked for in this question are all based on your accounting records.

    To complete each part of this question you need to:

    • identify all loan arrangements
    • divide the loan arrangement into
      • interest bearing loans
      • interest free loans
       
    • calculate the average balance of the loans, by
      • adding up the loan balance amount at the start of the year and the loan balance amounts at the end of each quarter
      • dividing the result by five
       
    • in respect of interest bearing loans, determine the amount of interest expenditure or interest revenue in respect of these loans.

    Internally recorded loans with your branch operations

    In column 1:

    • at C, provide the average balance of any internally recorded loans from your branch operations
    • at F, provide the average balance of any internally recorded loans to your branch operations (excluding amounts to which question  21 of this schedule applies).

    In column 2:

    • at D, provide the total interest calculated for the internally recorded loans from your branch operations shown at C of this question
    • at G, provide the total interest calculated for the internally recorded loans to your branch operations shown at F of this question.

    In column 3:

    • at E, provide the average balance of internally recorded interest free loans from your branch operations for the purpose of TR 2005/11
    • at H, provide the average balance of internally recorded interest free loans to your branch operations for the purpose of TR 2005/11.

    Loans between you and related entities

    In column 1:

    • at I, provide the average balance of interest bearing loans in relation to amounts borrowed from related entities
    • at L, provide the average balance of interest bearing loans in relation to amounts loaned to related entities.

    In column 2:

    • at J, provide the total interest expenditure in respect of the interest bearing loans borrowed from related entities
    • at M, provide the total interest revenue in respect of the interest bearing loans to related entities.

    In column 3:

    • at K, provide the average balance of interest free loans in relation to amounts borrowed from related entities
    • at N, provide the average balance of interest free loans in relation to amounts loaned to related entities.

    If part of this question does not apply to your related party loan amounts, leave blank.

    Example

    During the income year the Australian taxpayer (a 30 June balancer) borrowed and loaned the following amounts with international related parties.

    Country

    Related entity or branch

    Loan Type

    Balance date

    Interest bearing loans

    Interest free loans

    Loan balance

    Interest

    Loan balance

    Belize

    Branch

    Borrowed

    01/07

    1,700,000

    12,750

     

    United States

    Branch

    Loaned

    01/07

       

    1,700,000

    United States

    Entity

    Borrowed

    01/07

    4,200,000

    31,500

     

    Singapore

    Entity

    Loaned

    01/07

       

    1,800,000

    Belize

    Branch

    Borrowed

    30/09

    1,500,000

    11,250

     

    Singapore

    Entity

    Loaned

    30/09

    2,200,000

    16,500

    1,800,000

    United Kingdom

    Head office

    Borrowed

    30/09

       

    5,400,000

    United States

    Branch

    Loaned

    30/09

       

    1,700,000

    United States

    Entity

    Borrowed

    30/09

    3,200,000

    24,000

    4,000,000

    Belize

    Branch

    Borrowed

    31/12

    1,200,000

    9,000

    4,300,000

    Japan

    Entity

    Loaned

    31/12

       

    2,900,000

    United Kingdom

    Head office

    Borrowed

    31/12

       

    4,900,000

    United States

    Branch

    Loaned

    31/12

    3,700,000

    27,750

    2,800,000

    Belize

    Branch

    Borrowed

    31/03

    1,600,000

    12,000

    2,900,000

    Hong Kong

    Entity

    Borrowed

    31/03

    3,300,000

    24,750

     

    Singapore

    Branch

    Loaned

    31/03

    2,300,000

    17,250

     

    United Kingdom

    Head office

    Borrowed

    31/03

       

    3,600,000

    United States

    Entity

    Borrowed

    31/03

    2,800,000

    21,000

    3,500,000

    Vietnam

    Entity

    Loaned

    31/03

    1,650,000

    12,375

     

    Belize

    Branch

    Borrowed

    30/06

    1,100,000

    8,250

    900,000

    Hong Kong

    Entity

    Borrowed

    30/06

    2,800,000

    21,000

     

    India

    Branch

    Loaned

    30/06

       

    350,000

    Singapore

    Branch

    Loaned

    30/06

    1,300,000

    9,750

     

    Singapore

    Entity

    Borrowed

    30/06

       

    1,900,000

    United Kingdom

    Head office

    Borrowed

    30/06

       

    2,500,000

    United States

    Entity

    Borrowed

    30/06

    2,800,000

    21,000

     

    The Australian taxpayer extracts the relevant data from the information above.

    Related entity or branch

    Loan Type

    Balance date

    Interest bearing loans

    Interest free loans

    Total loan balances

    Total interest

    Total loan balances

    Branch

    Borrowed

    01/07

    1,700,000

    12,750

     

    Branch

    Borrowed

    30/09

    1,500,000

    11,250

    5,400,000

    Branch

    Borrowed

    31/12

    1,200,000

    9,000

    9,200,000

    Branch

    Borrowed

    31/03

    1,600,000

    12,000

    6,500,000

    Branch

    Borrowed

    30/06

    1,100,000

    8,250

    3,400,000

    Total

    7,100,000

    53,250

    24,500,000

    Average balances

    1,420,000

     

    4,900,000

    Branch

    Loaned

    01/07

       

    1,700,000

    Branch

    Loaned

    30/09

       

    1,700,000

    Branch

    Loaned

    31/12

    3,700,000

    27,750

    2,800,000

    Branch

    Loaned

    31/03

    2,300,000

    17,250

     

    Branch

    Loaned

    30/06

    1,300,000

    9,750

    350,000

    Total

    7,300,000

    54,750

    6,550,000

    Average balances

    1,460,000

     

    1,310,000

    Entity

    Borrowed

    01/07

    4,200,000

    31,500

     

    Entity

    Borrowed

    30/09

    3,200,000

    24,000

    4,000,000

    Entity

    Borrowed

    31/03

    6,100,000

    45,750

    3,500,000

    Entity

    Borrowed

    30/06

    5,600,000

    42,000

    1,900,000

    Total

    19,100,000

    143,250

    9,400,000

    Average balances

    3,820,000

     

    1,880,000

    Entity

    Loaned

    01/07

       

    1,800,000

    Entity

    Loaned

    30/09

    2,200,000

    16,500

    1,800,000

    Entity

    Loaned

    31/12

       

    2,900,000

    Entity

    Loaned

    31/03

    1,650,000

    12,375

     

    Total

    3,850,000

    28,875

    6,500,000

    Average balances

    770,000

     

    1,300,000

    With this information the Australian taxpayer completes question 14 as follows.

    Example of question 14 completed

    Last modified: 09 Nov 2011QC 24292