Tax Laws Amendment (2012 Measures No. 6) Act 2013 (84 of 2013)
Schedule 6 Limited recourse debt
Income Tax Assessment Act 1997
1 Subsection 243-20(2)
Repeal the subsection, substitute:
(2) An obligation imposed by law on an entity (the debtor ) to pay an amount to another entity (the creditor ) is also a limited recourse debt if it is reasonable to conclude that the rights of the creditor as against the debtor in the event of default in payment of the debt or of interest:
(a) are capable of being limited in the way mentioned in subsection (1); or
(b) are in substance or effect limited wholly or predominantly to rights (including the right to money payable) in relation to any or all of the following:
(i) the *debt property or the use of the debt property;
(ii) goods produced, supplied, carried, transmitted or delivered, or services provided, by means of the debt property;
(iii) the loss or disposal of the whole or a part of the debt property or of the debtor's interest in the debt property.
Note: Paragraph (b) could apply to a special purpose entity. For example, an entity's only significant asset is one that it financed by way of a bank loan. The bank's rights to recover the debt (if the entity defaults) are not contractually limited, however they are in effect limited to rights in relation to the asset.