Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 230 - Taxation of financial arrangements  

Subdivision 230-C - Fair value method  

SECTION 230-220   Financial arrangements to which fair value election applies  

230-220(1)  
A *fair value election applies in relation to *financial arrangements that:


(a) are *Division 230 financial arrangements; and


(b) are recognised in financial reports of the kind referred to in paragraph 230-210(2)(a) that are audited, or required to be audited, as referred to in paragraph 230-210(2)(b) ; and


(c) are assets or liabilities that you are required (whether or not as a result of a choice you make) by:


(i) the *accounting principles; or

(ii) if the accounting principles do not apply to the preparation of the financial report - comparable standards for accounting that apply to the preparation of the financial report under a *foreign law;
to classify, designate or (in whole or in part) otherwise treat, in the financial reports, as at fair value through profit or loss; and


(d) you start to have in the income year in which you make the election or in a later income year.

This subsection has effect subject to section 230-225 .

230-220(2)  
If, but for this subsection, paragraphs (1)(b) and (c) would not be satisfied in relation to a *financial arrangement because the arrangement is an intra-group transaction for the purposes of:


(a) *accounting standard AASB 127 (or another accounting standard prescribed by the regulations for the purposes of this paragraph); or


(b) if that standard does not apply to the preparation of the financial report - a comparable accounting standard that applies to the preparation of the financial report under a *foreign law;

paragraphs (1)(b) and (c) are taken to be satisfied in relation to the arrangement.

Note:

Financial arrangements between members of a consolidated group or MEC group are not covered by this subsection because the single entity rule in subsection 701-1(1) operates to treat them as not being financial arrangements for the purposes of this Division.

230-220(3)  
If:


(a) the *financial arrangement would not be a financial arrangement if the following provisions were disregarded:


(i) Division 9A of Part III of the Income Tax Assessment Act 1936 (which deals with offshore banking units);

(ii) Part IIIB of that Act (which deals with Australian branches of foreign banks etc); and


(b) paragraphs (1)(b) and (c) would be satisfied in relation to the financial arrangement if the arrangement had been between 2 separate entities; and


(c) the *fair value election is made by:


(i) if section 121EB of the Income Tax Assessment Act 1936 applies - the OBU mentioned in that section (disregarding the operation of that section); or

(ii) if section 160ZZW of that Act applies - the bank mentioned in that section (disregarding the operation of that section);

paragraphs (1)(b) and (c) are taken to be satisfied in relation to the arrangement.


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