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  • Covered by a product ruling

    You can search our legal database for a product ruling on your particular capital protected product or borrowing.

    The issue and withdrawal dates of the rulings affect the way they are applied to your arrangement. Some rulings have been withdrawn but are still relevant to arrangements that were entered into before they were withdrawn.

    If you have invested in a product that is covered by a product ruling, refer to that ruling to determine the tax treatment that applies.

    The fact that you hold a product covered by a product ruling does not conclusively determine that the ruling applies to you. Read the ruling to confirm that the:

    • product you hold and the circumstances in which you hold it are in fact covered by the ruling
    • date you entered into the arrangement makes the ruling relevant to your circumstances.

    Read the ruling to confirm whether it is subject to, or has been subject to, amendment to give effect to changes to the benchmark interest rate applicable to your capital protected borrowing.

    Find out about:

    Example

    Product Ruling PR 2008/50 was published on 21 May 2008. It provides the Commissioner's opinion on, among other things, the amount that may be deducted for a capital protected borrowing arrangement to be entered into after 13 May 2008.

    As this product ruling was published after the announcement of the new benchmark rate, the ATO took the approach that a legally binding ruling could not be given that enforced the new benchmark rate.

    It was therefore the investors' choice to either self assess using the proposed benchmark interest rate, or use the existing benchmark interest rate and amend their tax returns once Royal Assent was received.

    Jon, an investor, decided to use the old benchmark interest rate, as addressed in the product ruling, and paid interest on the investment at 12%, which equaled $100 for the period. At that time, the RBA's variable interest rate for personal unsecured loans was 14%, so the interest paid was entirely below the benchmark interest rate and the full $100 interest payment was deductible.

    However, once the change to the benchmark interest rate received royal assent, the product ruling PR 2008/50 was amended and as Jon self assessed using the old benchmark interest rate, he was required to amend his tax returns.

    For the period in question, the RBA's variable housing rate plus 100 points was 10%. Therefore, the investment interest rate of 12% was now above the benchmark interest rate. This means that 2% was no longer deductible. Jon had to amend his tax returns by 29 June 2013 to disallow approximately $14 interest.

    End of example
      Last modified: 19 Aug 2016QC 17547