INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 230 - Taxation of financial arrangements  

Subdivision 230-A - Core rules  

Tax treatment of gains and losses from financial arrangements

SECTION 230-15   Gains are assessable and losses deductible  

Gains

230-15(1)  
Your assessable income includes a gain you make from a *financial arrangement.

Losses

230-15(2)  
You can deduct a loss you make from a *financial arrangement, but only to the extent that:


(a) you make it in gaining or producing your assessable income; or


(b) you necessarily make it in carrying on a *business for the purpose of gaining or producing your assessable income.

230-15(3)  
You can also deduct a loss you make from a *financial arrangement if:


(a) you are an *Australian entity; and


(b) you make the loss in deriving income from a foreign source; and


(c) the income is *non-assessable non-exempt income under section 768-5, or section 23AI or 23AK of the Income Tax Assessment Act 1936; and


(d) the loss is, in whole or in part, a cost in relation to a *debt interest you issue that is covered by paragraph 820-40(1)(a).

You can deduct the loss only to the extent to which it is a cost in relation to a *debt interest you issue that is covered by paragraph 820-40(1)(a).

230-15(4)  
If the *financial arrangement is a *debt interest, the loss is not prevented from being deductible for an income year under subsection (2) merely because of either or both of the following:


(a) one or more of the *financial benefits that are taken into account in working out the amount of the loss are *contingent on aspects of the economic performance (whether past, current or future) of:


(i) you or a part of your activities; or

(ii) a *connected entity of yours or a part of the activities of a connected entity of yours;


(b) one or more of the financial benefits that are taken into account in working out the amount of the loss secure a permanent or enduring benefit for you or a connected entity of yours.

230-15(4A)  


A *dividend on a *debt interest is a loss you can deduct to the extent to which it would have been a deductible loss under subsection (2) if:


(a) the payment of the amount of the dividend were the incurring of a liability to pay the same amount as interest; and


(b) that interest were incurred in respect of the finance raised by you in respect of which the dividend was paid or provided; and


(c) the debt interest retained its character as a debt interest for the purposes of subsection (4).

230-15(5)  
Subject to subsection (6), subsection (4) does not apply to the loss to the extent to which the annually compounded internal rate of return on the *debt interest exceeds the *benchmark rate of return for the debt interest increased by 150 basis points.

230-15(6)  
If:


(a) regulations made for the purposes of subsection 25-85(6) provide that a specified number of basis points is to apply for the purposes of applying subsection 25-85(5) in particular circumstances; and


(b) those circumstances exist in relation to the *debt interest;

subsection (5) applies as if the reference in that subsection to 150 basis points were a reference to the number of basis points specified in the regulations.

Division does not affect foreign residence rules

230-15(7)  
Nothing in this Division affects the operation of the provisions of Division 6 that provide for the significance of foreign residence for the assessability of ordinary and statutory income.


View surrounding sectionsView surrounding sectionsBack to top


This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.