Draft Taxation Determination

TD 93/D30

Income tax: Offshore Banking Units - what is the meaning of 'guarantee-type activity' under subsection 121B(3)?

  • Please note that the PDF version is the authorised version of this draft ruling.
    This document has been finalised by TD 93/129.

FOI status:

draft only - for comment

Preamble

Draft Taxation Determinations (TDs) present the preliminary, though considered, views of the ATO. Draft TDs may not be relied on; only final TDs are authoritative statements of the ATO.

1. 'Guarantee-type activities' are defined in subsection 121B(3) Income Tax Assessment Act 1936 as activities involving fee income for

•
the provision of guarantees of letters of credit
•
the syndication of loans
•
the issue of performance bonds.

2. The meaning of guarantee-type activities is to be interpreted widely. All of the activities listed guarantee performance of a contract. In Lord Halsbury's Laws of England, 'guarantee' is defined as 'an accessory contract whereby the promisor undertakes to be answerable to the promisee for the debt, default or miscarriage of another person whose primary liability to the promisee must exist or be contemplated'. Activities which fall within this broad definition, but are not listed in subsection 121B(3), are to be treated as 'guarantee-type activities'. For example, as pointed out in the explanatory memorandum bid bonds would be covered by 'guarantee-type activity'.

Commissioner of Taxation
18 February 1993

References


BO 92/9494-5

ISSN 1038 - 8982

Subject References:
Offshore Banking Units

Legislative References:
ITAA 121B

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