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.

Note:

This Division does not apply to gains that are subject to exceptions under Subdivision 230-H .

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.

Note:

This Division does not apply to losses that are subject to exceptions under Subdivision 230-H .

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) .

Note:

This Division does not apply to losses that are subject to exceptions under Subdivision 230-H .

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.

Note 1:

Gains that you make under this Division may be ordinary or statutory income for the purposes of Division 6 .

Note 2:

For the effect of a change of residence during an income year, see sections 230-485 and 230-490 .


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