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This edited version has been archived due to the length of time since original publication.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 your written advice

Authorisation Number: 1012675137258

Ruling

Subject: Capital Raising

The ruling concerned the following:

    1. Will each Interest satisfy the definition of 'non-share equity interest' in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

    2. Will each Distribution paid by the Issuer in respect of each Interest be a 'frankable distribution' as defined in section 202-40 of the ITAA 1997?

    3. Will section 204-15 of the ITAA 1997 apply to the Transaction?

    4. Will section 204-30 of the ITAA 1997 apply to the Transaction?

    5. Will section 177EA of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the Transaction?

    6. Will the Commissioner make a determination under subsection 45C(3) of the ITAA 1936 in relation to the Transaction?

    7. Will the Interests constitute a 'commercial debt' under section 245-10 of the ITAA 1997?

    8.1 Will the issue of the Interests or the issue of Ordinary Shares on Exchange or Redemption be ordinary income to the Issuer under section 6-5 of the ITAA 1997?

    8.2 Will CGT event D1 happen for the Issuer on the issue of the Interests or the issue of Ordinary Shares on Exchange or Redemption under section 104-35 of the ITAA 1997?

    9.1 Will the Interests be considered a financial arrangement under subsection 230-50(1) of the ITAA 1997?

    9.2 If the answer to question 9.1 is yes, will paragraph 230-40(4)(e) of the ITAA 1997 apply such that the default accruals and realisation method outlined in Subdivision 230-B of the ITAA 1997 will not apply to a gain or loss made in relation to the Interests?

    9.3 If the answer to question 9.1 is yes, will subsection 230-440(1) of the ITAA 1997 apply such that the balancing adjustment provisions in Subdivision 230-G of the ITAA 1997 will not apply to the Interests?

    10. Will section 197-5 of the ITAA 1997 apply to the issue of the Interests or Ordinary Shares on Conversion?

    11. Will the benchmark rule in section 203-25 of the ITAA 1997 be satisfied if all of the Distributions made on the Interests and Dividends paid on Ordinary Shares within a particular franking period are franked to the same franking percentage?

Decision

The Commissioner ruled that:

    1. Yes. Each Interest satisfies the definition of 'non-share equity interest' in subsection 995-1(1) ITAA 1997.

    2. Yes. Each Distribution paid by the Issuer in respect of each Interest will be a 'frankable distribution' as defined in section 202-40 of the ITAA 1997.

    3. No. Section 204-15 of the ITAA 1997 will not apply to the Transaction.

    4. No. Section 204-30 of the ITAA 1997 will not apply to the Transaction.

    5. No. Section 177EA of the ITAA 1936 will not apply to the Transaction.

    6. No. The Commissioner will not make a determination under subsection 45C(3) of the ITAA 1936 in relation to the Transaction.

    7. No. The Interests will not constitute a 'commercial debt' under section 245-10 of the ITAA 1997.

    8.1 No. The issue of the Interests or the issue of Ordinary Shares on Exchange or Redemption will not be ordinary income to the Issuer under section 6-5 of the ITAA 1997.

    8.2 No. CGT event D1 will not happen for the Issuer on the issue of the Interests or the issue of Ordinary Shares on Exchange or Redemption under section 104-35 of the ITAA 1997.

    9.1 Yes. The Interests will be considered a financial arrangement under subsection 230-50(1) of the ITAA 1997.

    9.2 Yes. Paragraph 230-40(4)(e) of the ITAA 1997 will apply such that the default accruals and realisation method outlined in Subdivision 230-B of the ITAA 1997 will not apply to a gain or loss made in relation to the Interests.

    9.3 Yes. Subsection 230-440(1) of the ITAA 1997 will apply such that the balancing adjustment provisions in Subdivision 230-G of the ITAA 1997 will not apply to the Interests?

    10. No. Section 197-5 of the ITAA 1997 will not apply to the issue of the Interests or Ordinary Shares on Conversion?

    11. Yes. The benchmark rule in section 203-25 of the ITAA 1997 will be satisfied if all of the Distributions made on the Interests and Dividends paid on Ordinary Shares within a particular franking period are franked to the same franking percentage?


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