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.
For information, refer to Press Release 054/2008External Link issued on 13 May 2008 by the former Deputy Prime Minister and Treasurer.
The Government will extend the debt/equity transitional arrangements to 1 July 2008 to ensure that the income tax law preceding the debt/equity tax rules continues to apply to Upper Tier 2 instruments. This measure has an ongoing unquantifiable revenue impact.