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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private ruling

Authorisation Number: 1012007103359

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

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Ruling

Subject: Interest withholding obligation

    1. Will the Issuer of an instrument be required to withhold tax from the amounts it pays to an investor under a Deferred Purchase Agreement pursuant to section 12-245 of the Taxation Administration Act 1953?

No.

    2. Will section 26-25 apply to disallow the Issuer from deducting the amounts under the Income Tax Assessment Act 1997(ITAA 97)?

No

This ruling applies for the following period

5 years from date of issue

The scheme commenced on

Various dates set out in the Product Disclosure Statements

Relevant facts and circumstances

The following description of the scheme is based on information provided

The following documents and facts form part of the scheme under consideration:

    · private ruling application.

    · the Product disclosure statements.

    · the investors are non residents of Australia

    · they intend to invest in Australia through a Deferred Purchase Agreement (DPA).

    · they may derive income.

    · the amount of each payment will be computed per annum but only for each day where the Performance condition is satisfied.

    · for each day where this condition is satisfied the investor will be entitled to a payment.

    · upon maturity, the final value of the DPA will be the issue price, unless the At-Risk condition is satisfied.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 128A (1AB),

Income Tax Assessment Act 1936 subsection 128A (1AC),

Income Tax Assessment Act 1936 subsection 128A (1AD),

Taxation Administration Act 1953 section 12-245 and

Income Tax Assessment Act 1997 section 26-25.

Reasons for decision

Summary

The payments do not constitute interest for the purposes of the withholding tax provisions in Division 11A of the ITAA 1936.

Detailed reasoning

The investor will be regarded as contracting to purchase the assets at maturity and the facts indicate that this is a capital investment with no debt like characteristics. As the investment amount is not a loan, the payments paid by the Issuer cannot be deemed or treated as interest. It is therefore not subject to section 12-245 of the TAA 1953.


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