Income Tax Assessment Act 1997

CHAPTER 6 - THE DICTIONARY  

PART 6-1 - CONCEPTS AND TOPICS  

Division 974 - Debt and equity interests  

Subdivision 974-F - Related concepts  

SECTION 974-135   Effectively non-contingent obligation  

974-135(1)  
There is an effectively non-contingent obligation to take an action under a *scheme if, having regard to the pricing, terms and conditions of the scheme, there is in substance or effect a non-contingent obligation (see subsections (3), (4) and (6)) to take that action.

974-135(2)  
Without limiting subsection (1), that subsection applies to:


(a) providing a *financial benefit under the *scheme; or


(b) terminating the scheme.

974-135(3)  
An obligation is non-contingent if it is not contingent on any event, condition or situation (including the economic performance of the entity having the obligation or a *connected entity of that entity), other than the ability or willingness of that entity or connected entity to meet the obligation.

974-135(4)  
The existence of the right of the holder of an *interest that will or may convert into an *equity interest in a company to convert the interest does not of itself make the issuer's obligation to repay the investment not non-contingent.

974-135(5)  
An obligation to redeem a preference share is not contingent merely because there is a legislative requirement for the redemption amount to be met out of profits or a fresh issue of *equity interests.

974-135(6)  
In determining whether there is in substance or effect a non-contingent obligation to take the action, have regard to the artificiality, or the contrived nature, of any contingency on which the obligation to take the action depends.

Note:

The artificiality, or the contrived nature, of a contingency would tend to indicate that there is, in substance or effect, a non-contingent obligation to take that action.

974-135(7)  
An obligation of yours is not effectively non-contingent merely because you will suffer some detrimental practical or commercial consequences if you do not fulfil the obligation.

Note:

For example, a contingent obligation to make payments in respect of an income security issued by an approved deposit-taking institution (ADI) is not effectively non-contingent merely because of the detrimental effect non-payment would have on the ADI's business.

974-135(8)  
The regulations may make further provisions relating to the following:


(a) what constitutes a non-contingent obligation;


(b) what does not constitute a non-contingent obligation;


(c) what constitutes an *effectively non-contingent obligation;


(d) what does not constitute an effectively non-contingent obligation.


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