TOFA provides a principles-based framework for the taxation of gains and losses from financial arrangements based on their economic substance rather than legal form. Gains and losses from financial arrangements are generally included in assessable income or allowed as a deduction on revenue account.
TOFA aims to:
- minimise the extent to which the tax treatment of gains and losses from financial arrangements distorts trading, financing and investment decisions, risk taking and management
- more closely align the tax and commercial recognition of gains and losses
- minimise compliance costs.