INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 230 - Taxation of financial arrangements  

Subdivision 230-B - The accruals/realisation methods  

The accruals method

SECTION 230-135   How gain or loss is spread  

How to spread gain or loss

230-135(1)  
This section tells you how to spread a gain or loss to which the accruals method applies. Compounding accruals or approximation

230-135(2)  
The gain or loss is to be spread using:


(a) compounding accruals; or


(b) a method whose results approximate those obtained using the method referred to in paragraph (a) (having regard to the length of the period over which the gain or loss is to be spread).

230-135(3)  
The following subsections of this section clarify the way in which the gain or loss is to be spread in accordance with paragraph (2)(a). Intervals to which parts of gain or loss allocated

230-135(4)  
The intervals to which parts of the gain or loss are allocated must:


(a) not exceed 12 months; and


(b) all be of the same length.

Paragraph (b) does not apply to the first and last intervals. These may be shorter than the other intervals.

Fixing of amount and rate for interval

230-135(5)  
For each interval:


(a) determine a rate of return; and


(b) determine an amount to which you apply the rate of return.

230-135(6)  
For the purposes of paragraph (5)(b), in determining the amount to which you apply the rate of return for an interval, have regard to:


(a) the amount or value; and


(b) the timing;

of *financial benefits that are to be taken into account in working out the amount of the gain or loss, and were provided or received by you during the interval.

230-135(6A)  


However, if there is only one *financial benefit that is to be taken into account in working out the amount of the gain or loss, then, for the purposes of paragraph (5)(b), in determining the amount to which you apply the rate of return, have regard to a notional principal:


(a) by reference to which the financial benefit is calculated; or


(b) which is reasonably related to the financial benefit.

Assumption of continuing to hold arrangement for rest of its life

230-135(7)  
The gain or loss is to be spread assuming that you will continue to have the *financial arrangement for the rest of its life. Regard to be had to financial benefits provided or received in interval

230-135(8)  
In allocating the gain or loss to intervals, have regard to the *financial benefits to be provided or received in each of those intervals.


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