Debt/equity measures: Upper Tier 2 regulations and extension of transitional period

The Government will proceed with measures that clarify the tax treatment of certain Upper Tier 2 and similar capital instruments.

Specifically, regulations will be made to facilitate debt tax treatment for certain Upper Tier 2 and similar capital instruments issued by:

  • authorised deposit-taking institutions (ADIs) that are banks and their Australian Prudential Regulations Authority (APRA) regulated subsidiaries
  • ADIs that are non-mutual building societies and their APRA regulated subsidiaries
  • any entity that has undertaken to comply with APRA's prudential standards dealing with capital adequacy and any of its subsidiaries covered by the undertaking, and
  • a foreign ADI that is a bank and is regulated for prudential purposes by a foreign prudential regulator that has a regulatory role comparable to that of APRA, and under ADI capital requirements comparable to those of APRA.

The Government will extend the debt/equity transitional arrangements under the income tax law to 1 July 2008 to ensure that the law preceding the debt/equity tax rules continues to apply for Upper Tier 2 instruments.

Consultation on the draft regulations, which will have effect for returns made on or after 1 July 2001, will be undertaken prior to their finalisation.

Media release

For information, refer to Press Release 054/2008External Link issued on 13 May 2008 by the former Deputy Prime Minister and Treasurer.

    Last modified: 27 Aug 2014QC 20606