Income Tax Assessment Act 1997
A *scheme is a financing arrangement for an entity if it is entered into or undertaken:
(a) to raise finance for the entity (or a *connected entity of the entity); or
(b) to fund another scheme, or a part of another scheme, that is a *financing arrangement under paragraph (a); or
(c) to fund a return, or a part of a return, payable under or provided by or under another scheme, or a part of another scheme, that is a financing arrangement under paragraph (a). 974-130(2)
The following are examples of *schemes that are generally entered into or undertaken to raise finance:
(a) a bill of exchange;
(b) income securities;
(c) a *convertible interest that will convert into an *equity interest.
Paragraph (a) is likely to be relevant for debt interests, paragraph (b) for equity interests and paragraph (c) for both.974-130(3)
The following are examples of *schemes that are generally not entered into or undertaken to raise finance:
(a) a derivative that is used solely for managing financial risk;
(b) a contract for personal services entered into in the ordinary course of a business.
These may be relevant for both debt interests and equity interests.974-130(4)
For the purposes of subsection (1), the following *schemes are taken not to be entered into or undertaken to raise finance:
(a) a lease or bailment that satisfies all of the following:
(i) the property leased or bailed is not property to which Division 16D of Part III of the Income Tax Assessment Act 1936 (arrangements relating to the use of property) applies;
(ii) the lease or bailment is not a relevant agreement for the purposes of section 128AC of that Act (deemed interest in respect of hire-purchase and certain other arrangements);
(iii) the lease or bailment is not an *arrangement to which Division 240 of this Act (about arrangements treated as a sale and loan), or Division 242 of this Act (about luxury car leases), applies;
(iv) (Repealed by No 79 of 2010 )
(v) the lessee or bailee, or a *connected entity of the lessee or bailee, is not to, and does not have an obligation (whether contingent or not) or a right to, acquire the leased or bailed property;
(vi) Division 250 of this Act does not apply to a person and the property leased or bailed;
(b) a securities lending arrangement under section 26BC of the Income Tax Assessment Act 1936 ;
(c) a life insurance or general insurance contract undertaken as part of the issuer ' s ordinary course of business;
(d) a scheme for the payment of royalties (within the meaning of the Income Tax Assessment Act 1936 ) other than:
(i) a qualifying arrangement for the purposes of Division 16D of Part III of the Income Tax Assessment Act 1936 ; or
(ii) a relevant agreement for the purposes of section 128AC of that Act; or
(iii) a scheme or arrangement for the payment of royalties in relation to an asset if Division 250 of this Act applies to a person and the asset.
The regulations may:
(a) specify that particular *schemes are not financing arrangements ; and
(b) specify circumstances in which a scheme will not be a financing arrangement .
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