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  • Entered into or extended on or after 1 July 2007 but before 13 May 2008

    For capital protected products entered into on or after 1 July 2007, you calculate the amount that is reasonably attributable to capital protection using three steps.

    Step 1 is to calculate the total costs incurred by the borrower under, or in respect of, the capital protected product for the income year, ignoring amounts that are not in substance for capital protection or interest.

    Step 2 is to apply the RBA's indicator variable interest rate for personal unsecured loans to the same amount of borrowing. If the borrowing is at a:

    • fixed rate you would apply the indicator variable interest rate at the time the first of the amounts in Step 1 was incurred
    • variable rate, you would apply the average of the indicator rates during the term of the borrowing.

    Step 3 is applied if the amount under Step 1 exceeds the amount under Step 2. In this case, the excess is attributed to the capital protection for the income year. If the underlying securities you purchased under the capital protected borrowing are held on capital account, the excess would be a capital cost and would not be deductible.

    Capital protected products entered into or extended after 1 July 2007 but before 13 May 2008 and still in existence at 13 May 2008 may continue to use the RBA's indicator variable interest rate for personal unsecured loans until 30 June 2013 or the end of the life of the arrangement, whichever is sooner.

    See also:

      Last modified: 19 Aug 2016QC 17547