Income Tax Assessment Act 1997



Division 974 - Debt and equity interests  

Subdivision 974-D - Common provisions  

SECTION 974-105   Effect of action taken in relation to interest arising from related schemes  


(a) a *scheme, or schemes, give rise to a *debt interest in an entity or an *equity interest in a company; and

(b) the entity or company pays a return, or undertakes any other transaction, in respect of any of the following (the component element ):

(i) the scheme; or

(ii) a part of the scheme; or

(iii) one of those schemes; or

(iv) a part of one of those schemes;

then, for the purposes of the provisions that subsection (2) covers, the return is taken to be paid, or the transaction to have been undertaken, in respect of the debt interest or equity interest and not in respect of the component element.


Company A issues a convertible note to Company B. Company C, a connected entity of Company B, provides a binding collateral undertaking to Company A that Company B will exercise the option to convert the note into shares in Company A. The convertible note and the undertaking are related schemes that may give rise to an equity interest in Company A if their combined effect satisfies section 974-70 . If so, the returns on the note are taken to be returns in respect of the equity interest.

This subsection covers:

(a) the provisions of this Division (other than this section); and

(b) any other provision of this Act whose operation depends on an expression whose meaning is given by this Division.

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