Income Tax Assessment Act 1997



Division 974 - Debt and equity interests  

Subdivision 974-B - Debt interests  

SECTION 974-35   Valuation of financial benefits - general rules  

Value in nominal terms or present value terms

For the purposes of this Subdivision:

(a) the value of a *financial benefit received or provided under a *scheme is its value calculated:

(i) in nominal terms if the performance period (see subsection (3)) must end no later than 10 years after the interest arising from the scheme is issued; or

(ii) in present value terms (see section 974-50 ) if the performance period must or may end more than 10 years after the interest arising from the scheme is issued; and

(b) the regulations may make provisions relating to the valuation of a financial benefit. Assume scheme runs its full term

The value of a *financial benefit received or provided under a *scheme is calculated assuming that the interest arising from the scheme will continue to be held for the rest of its life.

Note 1:

Section 974-40 makes specific provision for cases in which there is a right or option to terminate the interest early.

Note 2:

Section 974-45 makes specific provision for cases involving convertible interests.

Performance period

The performance period is the period within which, under the terms on which the interest is issued, the *effectively non-contingent obligations of the issuer, and any *connected entity of the issuer, to provide a *financial benefit in relation to the interest have to be met.

An obligation is treated as having to be met within 10 years after the interest is issued if:

(a) the issuer; or

(b) the *connected entity of the issuer;

has an *effectively non-contingent obligation to terminate the interest within that 10 year period even if the terms on which the interest is issued formally allow the obligation to continue after the end of that 10 year period.

Benefit dependent on variable factor


(a) a *financial benefit received or provided in respect of an interest depends on a factor that may vary over time (such as a variable interest rate); and

(b) that factor is one commonly used in commercial arrangements; and

(c) it would be unreasonable to expect any of the parties to the *scheme to know, or to anticipate accurately, the future value of that factor; and

(d) that factor has a particular value (the starting value ) when the scheme is entered into;

the value of the financial benefit is calculated assuming that the factor ' s value will retain the starting value for the whole of the life of the scheme.


For example, the value of a return based on a floating interest rate is calculated on the basis that the interest rate remains the interest rate that is applicable when the scheme is entered into.

Scheme wholly in foreign currency etc.

If all the *financial benefits provided and received under a *scheme are denominated in a particular foreign currency or in terms of quantities of a particular commodity or other unit of account, they are not to be converted into Australian currency for the purpose of comparing their relative values for the purposes of this Subdivision.


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