Income Tax Assessment Act 1997

Interest payments - distributions that flow indirectly to a partner in a partnership  
207-170(1)
For the purposes of this Subdivision, a *franked distribution is treated as an interest payment if:

(a) it *flows indirectly to an entity as partner in a *partnership; and

(b) the entity ' s interest in the partnership:

(i) was acquired, or was acquired for a period that was extended, at or after the commencing time; or

(ii) was acquired as part of a *financing arrangement for the entity (including an arrangement extending to an earlier arrangement) entered into at or after the commencing time; and

(c) having regard to the matters in subsection (2), the distribution could reasonably be regarded as equivalent to the payment of interest on a loan.

207-170(2)
A *distribution that *flows indirectly to a partner in a *partnership can reasonably be regarded as equivalent to the payment of interest on a loan if:

(a) either:

(i) a share of the *net income of the partnership is included in the partner ' s assessable income, for the income year in which the distribution is made, under subsection 92(1) of the Income Tax Assessment Act 1936 ; or

(ii) a share of the *partnership loss of the partnership is allowable as a deduction to the entity, for the income year in which the distribution is made, under subsection 92(2) of that Act; and

(b) the whole or a part of that share is attributable to the distribution; and

(c) having regard to the following matters, that amount could reasonably be regarded as equivalent to the payment of interest on a loan:

(i) the way in which the amount was calculated;

(ii) the conditions applying to the inclusion of the amount;

(iii) any other relevant matters.

207-170(3)
The commencing time , for the purposes of subsection (1), is 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997.