Tax Laws Amendment (2007 Measures No. 3) Act 2007 (79 of 2007)

Schedule 1   Distributions to entities connected with a private company and related issues

Part 1   Main amendments

Income Tax Assessment Act 1936

12   At the end of section 109R

Add:

(5) Subsection (2) does not apply to a payment if:

(a) the payment is made to refinance the loan mentioned in subsection (1) (the old loan ); and

(b) the entity to which the old loan was made has another loan (the primary loan) from another entity; and

(c) the old loan becomes subordinated to the primary loan; and

(d) the refinancing of the old loan mentioned in paragraph (a) took place in connection with that subordination; and

(e) that subordination arose as a result of circumstances beyond the control of the entity to which the old loan was made; and

(f) the entity to which the old loan was made and the other entity dealt with each other at arm’s length in relation to that subordination; and

(g) the private company and the other entity dealt with each other at arm’s length in relation to that subordination.

(6) Subsection (2) does not apply to a payment if:

(a) the payment is made to refinance the loan mentioned in subsection (1) (the old loan ); and

(b) the refinancing results in another loan (the new loan ); and

(c) the maximum term of the old loan under subsection 109N(3) was 7 years; and

(d) the maximum term of the new loan under subsection 109N(3) is 25 years (reduced in accordance with subsection 109N(3B)).

(7) Subsection (2) does not apply to a payment if:

(a) the payment is made to refinance the loan mentioned in subsection (1) (the old loan ); and

(b) the refinancing results in another loan (the new loan ); and

(c) the maximum term of the old loan under subsection 109N(3) was 25 years; and

(d) the maximum term of the new loan under subsection 109N(3) is:

(i) unless subparagraph (ii) applies - 7 years; or

(ii) if subsection 109N(3D) applies - 7 years reduced in accordance with that subsection.