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Edited version of your written advice
Authorisation Number: 1012693200009
Ruling
Subject: Debt/Equity
Question 1
Will the Interest Bearing Loan Notes issued by subsidiary company (a member of the head company tax consolidated group), satisfy the debt test in section 974-20 of the Income Tax Assessment Act 1997 and therefore be a debt interest within the meaning of section 974-15(1) of the Income Tax Assessment Act 1997 and not an equity interest pursuant to section 974-70(1) of the Income Tax Assessment Act 1997?
Answer
Yes
Question 2
Will the Non-Interest Bearing Loan Notes issued by subsidiary company (a member of the head company tax consolidated group), satisfy the debt test in section 974-20 of the Income Tax Assessment Act 1997 and therefore be a debt interest within the meaning of section 974-15(1) of the Income Tax Assessment Act 1997 and not an equity interest pursuant to section 974-70(1) of the Income Tax Assessment Act 1997?
Answer
Yes
Question 3
Will the Interest Bearing Loan Notes and Non-Interest Bearing Loan Notes (together or on a stand-alone basis) be related to the ordinary shares in head company and therefore be related schemes as defined in section 974-155 of the Income Tax Assessment Act 1997?
Answer
Yes
Question 4
If the answer to question 3 is yes, will the Commissioner exercise his discretion in subsection 974- 150(1) of the Income Tax Assessment Act 1997 to determine that the schemes are to be taken for the purposes of Division 974 to not be related schemes?
Answer
No
Question 5
If the answer to question 3 is yes, will the Non-Interest Bearing Loan Notes and ordinary shares be taken together to give rise to a debt interest under subsection 974-15(2) of the Income Tax Assessment Act 1997 (disregarding subsection 974-15(4) of the Income Tax Assessment Act 1997)?
Answer
No
Question 6
If the answer to question 3 is yes, will the Interest Bearing Loan Notes and the ordinary shares be taken together to give rise to a debt interest under subsection 974-15(2) of the Income Tax Assessment Act 1997 (disregarding subsection 974-15(4) of the Income Tax Assessment Act 1997)?
Answer
No
Question 7
If the answer to question 3 is yes, will the Interest Bearing Loan Notes, Non-Interest Bearing Loan Notes and ordinary shares be taken together to give rise to a debt interest under subsection 974-15(2) of the Income Tax Assessment Act 1997 (disregarding subsection 974-15(4) of the Income Tax Assessment Act 1997)?
Answer
No
Question 8
If the answers to any of the question 5, 6 or 7 is yes, will the Commissioner determine under subsection 974-15(4) of the Income Tax Assessment Act 1997 that it would be unreasonable to apply section 974-15 to the Interest Bearing Loan Notes, Non-Interest Bearing Loan Notes and ordinary shares (in any combination)?
Answer
Opinion not required, given the answers to Questions 5, 6, and 7 are in the negative.
Question 9
If the answer to question 3 is yes, will the Non-Interest Bearing Loan Notes and ordinary shares be taken together to give rise to an equity interest under subsection 974-70(2) of the Income Tax Assessment Act 1997 (disregarding subsection 974-70(4))?
Answer
No
Question 10
If the answer to question 3 is yes, will the Interest Bearing Loan Notes and ordinary shares be taken together to give rise to an equity interest under subsection 974-70(2) of the Income Tax Assessment Act 1997 (disregarding subsection 974-70(4))?
Answer
No
Question 11
If the answer to question 3 is yes, will the Interest Bearing Loan Notes, Non-Interest Bearing Loan Notes and ordinary shares be taken together to give rise to an equity interest under subsection 974-70(2) of the Income Tax Assessment Act 1997 (disregarding subsection 974-70(4))?
Answer
No
Question 12
If the answers to any of the questions 9, 10 or 11 is yes, will the Commissioner determine under subsection 974-70(4) of the Income Tax Assessment Act 1997 that it would be unreasonable to apply section 974-70 to the Interest Bearing Loan Notes, Non-Interest Bearing Loan Notes and ordinary shares (in any combination)?
Answer
Opinion not required, given the answers to Questions 9, 10, and 11 are in the negative.
Question 13
Will the units in head trust and any combination of, or all of, the shares in head company, the Interest Bearing Loan Notes or Non-Interest Bearing Loan Notes be related schemes that, taken together as a notional scheme, give rise to an debt interest under subsection 974-15(2) of the Income Tax Assessment Act 1997?
Answer
No
Question 14
If the answer to question 13 is yes, will the Commissioner determine under subsection 974-15(4) of the Income Tax Assessment Act 1997 that it would be unreasonable to apply that section to the units in head trust and any or all of the shares in head company, the Interest Bearing Loan Notes or Non-Interest Bearing Loan Notes?
Answer
Opinion not required, given the answer to Question 13 is in the negative.
Question 15
Will the units in head trust and any combination of, or all of, the shares in head company, the Interest Bearing Loan Notes or Non-Interest Bearing Loan Notes be related schemes that, taken together as a notional scheme, give rise to an equity interest under subsection 974-70(2) of the Income Tax Assessment Act 1997?
Answer
No
Question 16
If the answer to question 15 is yes, will the Commissioner determine under subsection 974-70(4) of the Income Tax Assessment Act 1997 that it would be unreasonable to apply that section to the units in head trust and any or all of the shares in head company, the Interest Bearing Loan Notes or Non-Interest Bearing Loan Notes?
Answer
Opinion not required, given the answer to Question 15 is in the negative.
This ruling applies for the following periods:
The years ended 30 June 20xx to 20yy
The scheme commences on:
During the year ended 30 June 20xx
Relevant facts and circumstances
The taxpayer, the head company of a tax consolidated group, applied for a private ruling in relation to the funding arrangements for a construction project. A subsidiary member of the consolidated group will issue both interest bearing and non-interest bearing loan notes to the shareholders of the head company.
Relevant legislative provisions
Income Tax Assessment Act 1997
Division 974