INCOME TAX ASSESSMENT ACT 1936

PART III - LIABILITY TO TAXATION  

Division 9A - Offshore banking units  

Subdivision B - Interpretation  

SECTION 121D   MEANING OF OB ACTIVITY  

121D(1)   Kinds of OB activity.  

Each of the following things done by an OBU is an OB activity (offshore banking activity) of the OBU (subject to sections 121EA and 121EAA):


(a) a borrowing or lending activity described in subsection (2); or


(b) a guarantee-type activity described in subsection (3); or


(c) a trading activity described in subsection (4) (subject to subsection (4A)) or


(d) an OB eligible contract activity (see section 121DB); or


(e) an investment activity described in subsection (6), (6A) or (6B); or


(f) an OB advisory activity (see section 121DC); or


(g) a hedging activity described in subsection (8); or


(ga) an OB leasing activity (see section 121DD); or


(h) any other activity involving an offshore person, being an activity declared by regulations for the purposes of this paragraph to be an OB activity.

121D(2)   Borrowing or lending activity.  

For the purposes of paragraph (1)(a), a borrowing or lending activity is:


(a) borrowing money from an offshore person where, if that person is a related person or a person to whom paragraph 121E(b) applies and is not an OBU, the money is not Australian currency; or


(b) lending money, or making commitments to lend money, to an offshore person where, if that person is a person to whom paragraph 121E(b) applies and is not an OBU, the money is not Australian currency; or


(c) borrowing gold from an offshore person; or


(d) lending gold to an offshore person; or


(e) acting as an arranger in a syndicated lending arrangement that includes a borrowing or lending activity to which paragraph (a), (b), (c) or (d) applies.

121D(3)   Guarantee-type activity.  

For the purposes of paragraph (1)(b), a guarantee-type activity is:


(a) providing a guarantee or letter of credit to an offshore person in relation to activities that are, or will be, conducted:


(i) wholly outside Australia; or

(ii) in Australia to an extent that is not material; or


(b) underwriting a risk for an offshore person in respect of:


(i) offshore property; or

(ii) an event, if the likelihood of the event happening in Australia is not material; or


(c) syndicating a loan for an offshore person; or


(d) issuing a performance bond to an offshore person in relation to activities that are, or will be, conducted:


(i) wholly outside Australia; or

(ii) in Australia to an extent that is not material;

where, if the offshore person is a related person, any money payable under the guarantee, letter, underwriting, loan or bond is not Australian currency.

121D(4)   Trading activity.  

For the purposes of paragraph (1)(c), a trading activity is:


(a) trading with an offshore person in:


(i) securities issued by non-residents; or

(ii) eligible contracts, under which any amounts payable are payable by non-residents; or


(aa) trading with any person in non-deliverable forward foreign currency contracts; or


(b) trading with an offshore person in:


(i) shares in non-resident companies; or

(ii) units in non-resident trusts; or


(c) trading with an offshore person in options or rights in respect of securities, eligible contracts, shares or units referred to in paragraph (a) or (b); or


(d) trading (including on behalf of an offshore person) on the Sydney Futures Exchange in futures contracts, or options contracts, under which any money payable is not Australian currency; or


(e) trading in currency, or options or rights in respect of currency, with any person, where the currency is not Australian currency; or


(ea) trading in currency, or options or rights in respect of currency, with an offshore person; or


(f) trading in gold bullion, or in options or rights in respect of such bullion:


(i) with an offshore person where the money or moneys payable or receivable is or are in any currency; or

(ii) a person other than an offshore person where the money or moneys payable or receivable is or are in a currency other than Australian currency; or


(g) trading with an offshore person in silver, platinum or palladium bullion, or in options or rights in respect of such bullion; or


(h) trading with an offshore person in base metals; or


(i) trading with an offshore person in commodities, or in options or rights in respect of commodities, if:


(i) the commodities, options or rights are not mentioned in another paragraph of this subsection; and

(ii) the trading is incidental to an OB eligible contract activity.

121D(4A)  


However, paragraph (1)(c) does not apply to a trading activity done by an OBU if:


(a) the thing traded in affected the OBU's total participation interest (within the meaning of the Income Tax Assessment Act 1997) in another entity; and


(b) just before the trading activity:


(i) the OBU's total participation interest in the other entity was at least 10%; or

(ii) any of the thing traded in was held by the OBU, and was not recorded in the OBU's accounting records as held for trading in accordance with accounting standards (within the meaning of that Act).

121D(4B)  


For the purposes of subsection (4A), disregard rights on winding-up.

121D(5)  
(Repealed by No 70 of 2015)

121D(6)   Investment activity.  

For the purposes of paragraph (1)(e), an investment activity is making (but not managing), as broker or agent for, or trustee for the benefit of, an offshore person to whom paragraph 121E(a) applies, an investment with an offshore person to whom that paragraph applies, where:


(a) the currency in which the investment is made is not Australian currency; and


(b) if the investment involves the purchase of any thing:


(i) if the thing is a share in a company - the company is a non-resident company; or

(ii) if the thing is a unit in a unit trust - the unit trust is a non-resident trust; or

(iii) if the thing is land or a building - the land or building is not in Australia; or

(iv) in any other case - the thing is located outside Australia.

121D(6A)   Investment activity - portfolio investment.  

For the purposes of paragraph (1)(e), an investment activity is also the managing by an OBU of a portfolio investment (see subsection 121DA(1)) for the whole or part (the investment management period ) of a year of income, where:


(a) the portfolio investment is managed as broker, agent or custodian for, or trustee for the benefit of, a non-resident; and


(b) the portfolio investment was made by the OBU or the non-resident; and


(c) the portfolio investment was made with a non-resident (except to the extent that making the investment consisted of making a loan or purchasing an Australian thing); and


(d) the currency in which the portfolio investment was made was not Australian currency; and


(e) if the portfolio investment consists of only a single thing - the thing is not an Australian thing (see subsection 121DA(5)).


(f) (Repealed by No 70 of 2015)

121D(6B)   Investment activity - portfolio investment for overseas charitable institutions.  

For the purposes of paragraph (1)(e), an investment activity is also the managing by an OBU of a portfolio investment (see subsection 121DA(1)) for the whole or part (the investment management period ) of a year of income, where:


(a) the portfolio investment is managed as broker, agent or custodian for, or trustee for the benefit of, an overseas charitable institution; and


(b) the portfolio investment was made by the OBU or the overseas charitable institution.

121D(7)  
(Repealed by No 70 of 2015)

121D(8)   Hedging activities.  

For the purposes of paragraph (1)(g), a hedging activity is entering into a financial arrangement (within the meaning of the Income Tax Assessment Act 1997) with an offshore person for the sole purpose of eliminating or reducing the risk of adverse financial consequences that might result to the OBU from:


(a) interest rate exposure of the OBU in respect of borrowing or lending activities (described in subsection (2)) of the OBU; or


(b) currency exposure of the OBU in respect of borrowing or lending activities (described in subsection (2)) of the OBU.

121D(9)   Effect of subsection (8).  

Subsection (8) does not limit the scope of any other OB activity of the OBU (for example the trading activity mentioned in paragraph (4)(e)).


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