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  

Financial arrangement concept

SECTION 230-55   Rights, obligations and arrangements (grouping and disaggregation rules)  

Single right or obligation or multiple rights or obligations?

230-55(1)  
If you have a right to receive 2 or more *financial benefits, you are taken, for the purposes of this Division, to have a separate right to receive each of those financial benefits.

230-55(2)  
If you have an obligation to provide 2 or more *financial benefits, you are taken, for the purposes of this Division, to have a separate obligation to provide each of those financial benefits.

230-55(3)  
Subsections (1) and (2) apply for the avoidance of doubt. Matters relevant to determining what rights and/or obligations constitute particular arrangements

230-55(4)  
For the purposes of this Division, whether a number of rights and/or obligations are themselves an *arrangement or are 2 or more separate arrangements is a question of fact and degree that you determine having regard to the following:


(a) the nature of the rights and/or obligations;


(b) their terms and conditions (including those relating to any payment or other consideration for them);


(c) the circumstances surrounding their creation and their proposed exercise or performance (including what can reasonably be seen as the purposes of one or more of the entities involved);


(d) whether they can be dealt with separately or must be dealt with together;


(e) normal commercial understandings and practices in relation to them (including whether they are regarded commercially as separate things or as a group or series that forms a whole);


(f) the objects of this Division.

In applying this subsection, have regard to the matters referred to in paragraphs (a) to (f) both in relation to the rights and/or obligations separately and in relation to the rights and/or obligations in combination with each other.

Example 1:

Your rights and obligations under a typical convertible note, including the right to convert the note into a share or shares, would constitute one arrangement.

Example 2:

Your rights and obligations under a typical price-linked or index-linked bond would constitute one arrangement.

Note 1:

If you raised funds by means of a contract that you would not have entered into without entering into another contract, and neither contract could be assigned to a third party without the other also being assigned, this would tend to indicate that your rights and obligations under the 2 contracts together constitute one arrangement.

Note 2:

If the commercial effect of your individual rights and/or obligations in a group or series cannot be understood without reference to the group or series as a whole, this would tend to indicate that all of your rights and/or obligations in the group or series together constitute one arrangement.


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