Edited version of your written advice

Authorisation Number: 1012980358130

Date of advice: 18 March 2016

Ruling

Subject: Capital Raising

Question 1

Will the Instruments be characterised as 'non-share equity interests' for the purposes of the debt/equity rules in Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

Question 2

Will distributions payable in respect of the Instruments, constitute frankable distributions under section 202-40 of the ITAA 1997 and not be unfrankable under section 202-45 of the ITAA 1997?

Answer

Yes

Question 3

Will section 204-30 of the ITAA 1997 apply to the scheme?

Answer

No

Question 4

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

Answer

No

This ruling applies for the following periods:

A particular income year.

The scheme commences on:

A particular date.

Relevant facts and circumstances

The description of the scheme is based on information provided by the Company in the following documents, which are to be read in conjunction with the facts as set out below:

• Request for a Private Binding Ruling from the Applicant (the Application);

• the Company's Instruments' Terms (the Terms);

• the Company's Instruments' Deed Poll (the Deed Poll); and

• the Company's Instruments' Prospectus (the Prospectus).

The scheme involves the issuance of an Instrument by a Company in order to raise capital and is based on the following matters:

(i) the Instrument is convertible to ordinary shares in the Company and conversion is subject to certain conditions being satisfied;

(ii) the Instrument may be redeemed or resold at face value in certain circumstances;

(iii) distributions on the Instrument are payable subject to the Company's discretion and certain conditions being satisfied;

(iv) distributions on the Instrument will be franked;

(v) all holders of the Instrument will receive franked distributions irrespective of their tax attributes or their individual tax position;

(vi) distributions payable in respect of the Instrument will not be debited to the Company's share capital account or non-share capital account; and

(vii) the Instrument is being issued by the Company to satisfy its financing requirements.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 45

Income Tax Assessment Act 1936 Section 45C

Income Tax Assessment Act 1936 Section 177EA

Income Tax Assessment Act 1936 Subsection 177EA(3)

Income Tax Assessment Act 1936 Subsection 177EA(5)

Income Tax Assessment Act 1936 Subsection 177EA(12)

Income Tax Assessment Act 1936 Subsection 177EA(14)

Income Tax Assessment Act 1936 Subsection 177EA(17)

Income Tax Assessment Act 1997 Subdivision 202-C

Income Tax Assessment Act 1997 Section 202-30

Income Tax Assessment Act 1997 Section 202-40

Income Tax Assessment Act 1997 Section 202-45

Income Tax Assessment Act 1997 Section 204-30

Income Tax Assessment Act 1997 Subsection 204-30(1)

Income Tax Assessment Act 1997 Subsection 204-30(3)

Income Tax Assessment Act 1997 Subsection 204-30(6)

Income Tax Assessment Act 1997 Section 215-10

Income Tax Assessment Act 1997 Section 215-15

Income Tax Assessment Act 1997 Section 215-20

Income Tax Assessment Act 1997 Section 220-30

Income Tax Assessment Act 1997 Section 960-120

Income Tax Assessment Act 1997 Division 974

Income Tax Assessment Act 1997 Subdivision 974-B

Income Tax Assessment Act 1997 Section 974-15

Income Tax Assessment Act 1997 Section 974-15(1)

Income Tax Assessment Act 1997 Section 974-20

Income Tax Assessment Act 1997 Section 974-20(1)

Income Tax Assessment Act 1997 Subsection 974-30(1)

Income Tax Assessment Act 1997 Section 974-70

Income Tax Assessment Act 1997 Subsection 974-70(1)

Income Tax Assessment Act 1997 Section 974-75

Income Tax Assessment Act 1997 Subsection 974-75(1)

Income Tax Assessment Act 1997 Subsection 974-75(2)

Income Tax Assessment Act 1997 Section 974-115

Income Tax Assessment Act 1997 Section 974-120

Income Tax Assessment Act 1997 Section 974-130

Income Tax Assessment Act 1997 Subsection 974-130(1)

Income Tax Assessment Act 1997 Section 974-135

Income Tax Assessment Act 1997 Subsection 974-135(1)

Income Tax Assessment Act 1997 Subsection 974-135(3)

Income Tax Assessment Act 1997 Subsection 974-160(1)

Income Tax Assessment Act 1997 Section 974-165

Income Tax Assessment Act 1997 Section 975-300

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision

Question 1

Will the Instruments be characterised as 'non-share equity interests' for the purposes of the debt/equity rules in Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Summary

The Instruments will be characterised as 'non-share equity interests' for the purposes of the debt/equity rules in Division 974 of the ITAA 1997.

Detailed reasoning

In this question, unless otherwise stated, all legislative references are to the ITAA 1997.

1. For instruments issued on or after 1 July 2001, Division 974 provides rules that govern the classification of debt and equity interests for tax purposes.

2. Subsection 974-70(1) states that a scheme gives rise to an equity interest in a company if, when it comes into existence, it satisfies the equity test in subsection 974-75(1) and is not characterised as, and does not form part of a larger interest that is characterised as a debt interest under Subdivision 974-B.

Equity test

3. The equity test in subsection 974-75(1) is as follows:

A scheme satisfies the equity test in this subsection in relation to a company if it gives rise to an interest set out in the following table:

Equity interests
Item	Interest
1	An interest in the company as a member or stockholder of the company.
2	An interest that carries a right to a variable or fixed return from the company if either the right itself, or the amount of the return, is in substance or effect contingent on the economic performance (whether past, current or future) of: (a) the company; or (b) a part of the company's activities; or (c) a connected entity of the company or a part of the activities of a connected entity of the company. The return may be a return of an amount invested in the interest.
3	An interest that carries a right to a variable or fixed return from the company if either the right itself, or the amount of the return, is at the discretion of: (a) the company; or (b) a connected entity of the company. The return may be a return of an amount invested in the interest.
4	An interest issued by the company that: (a) gives its holder (or a connected entity of the holder) a right to be issued with an equity interest in the company or a connected entity of the company; or (b) is an interest that will, or may, convert into an equity interest in the company or a connected entity of the company.

4. Furthermore, subsection 974-75(2) provides:

A scheme that would otherwise give rise to an equity interest in a company because of an item in the table in subsection (1) (other than item 1) does not give rise to an equity interest in the company unless the scheme is a financing arrangement for the company.

Scheme

5. The first requirement in the equity test is that there must be a scheme. A 'scheme' is defined in subsection 995-1(1) to mean any arrangement, or any scheme, plan, proposal, action, course of action or conduct, whether unilateral or otherwise. The issue of Instruments by the Company constitutes a scheme.

The scheme gives rise to an interest set out in subsection 974-75(1)

6. Instruments will qualify as 'equity interests' under item 3 of the table in subsection 974-75(1) as they carry a right to a return which is subject to the Company's discretion.

7. Furthermore, an equity interest in a company arises if an interest issued by the company will, or may, convert into an equity interest in the company or a connected entity of the company (item 4(b) of the table in subsection 974-75(1)). The expression 'interest that will or may convert into another interest' has the meaning given in section 974-165:

An interest (the first interest) is an interest that will or may convert into another interest (the second interest) if:

(a) the first interest, or a part of the first interest, must be or may be converted into the second interest; or

(b) the first interest, or a part of the first interest, must be or may be redeemed, repaid or satisfied by:

(i) the issue or transfer of the second interest (whether to the holder of the first interest or to some other person); or

(ii) the acquisition of the second interest (whether by the holder of the first interest or by some other person); or

(iii) the application in or towards paying-up (in whole or in part) the balance unpaid on the second interest (whether the second interest is to be issued to the holder of the first interest or to some other person); or

(c) ….

8. Instruments can convert into ordinary shares in the capital of the Company (the Company's ordinary shares) in certain circumstances. On conversion, the following occurs:

(a) The Company allots and issues the Company's ordinary shares for each Instrument held by the holder; and

(b) each holder's rights in relation to each Instrument that is being converted are terminated for an amount equal to the face value and the Company applies the face value of each Instrument by way of payment for the subscription for the Company's ordinary shares to be allotted and issued using the conversion Number.

9. The conversion mechanism is therefore within the meaning of section 974-165. Furthermore, the Company's ordinary shares issued on conversion are equity interests in the Company (item 1 of the table in subsection 974-75(1)). Accordingly, Instruments constitute interests that may convert into equity interests in the Company and the scheme gives rise to an interest covered in item 4(b) of the table in subsection 974-75(1).

The scheme must be a financing arrangement

10. As the Company enters into the scheme to raise finance for itself, the scheme is a financing arrangement within the meaning of paragraph 974-130(1)(a). Paragraph 9 of the 'Relevant facts and circumstances' sets out how the funds will be used.

11. As the scheme satisfies paragraph 974-70(1)(a) it is necessary to consider whether the scheme satisfies the debt test.

Debt test

12. Subsection 974-15(1) provides that:

A scheme gives rise to a debt interest in an entity if the scheme, when it comes into existence, satisfies the debt test in subsection 974-20(1) in relation to the entity.

13. Subsection 974-20(1) provides that:

A scheme satisfies the debt test in this subsection in relation to an entity if:

(a) the scheme is a financing arrangement for the entity; and

(b) the entity, or a connected entity of the entity, receives, or will receive, a financial benefit or benefits under the scheme; and

(c) the entity has, or the entity and a connected entity of the entity each has, an effectively non-contingent obligation under the scheme to provide a financial benefit or benefits to one or more entities after the time when:

(i) the financial benefit referred to in paragraph (b) is received if there is only one; or

(ii) the first of the financial benefits referred to in paragraph (b) is received if there are more than one; and

(d) it is substantially more likely than not that the value provided (worked out under subsection (2)) will be at least equal to the value received (worked out under subsection (3)); and

(e) the value provided (worked out under subsection (2)) and the value received (worked out under subsection (3)) are not both nil.

The scheme does not need to satisfy paragraph (a) if the entity is a company and the interest arising from the scheme is an interest covered by item 1 of the table in subsection 974-75(1) (interest as a member or stockholder of the company).

(a) The scheme is a financing arrangement for the entity

14. As stated above the scheme is a financing arrangement.

(b) The entity, or connected entity of the entity, receives or will receive a financial benefit or benefits under the scheme

15. Paragraph 974-160(1)(a) states that a financial benefit includes 'anything of economic value'. Subsection 974-20(4) provides that a financial benefit provided under the scheme is taken into account only if it is one that the other entity has an effectively non-contingent obligation to provide.

16. An 'effectively non-contingent obligation' is defined in subsection 995-1(1) to have the meaning given by section 974-135. Subsection 974-135(1) states that there is an effectively non-contingent obligation to take action under a scheme if, having regard to the pricing, terms and conditions of the scheme, there is in substance or effect a non-contingent obligation to take that action. Subsection 974-135(3) further provides that an effectively non-contingent obligation is an obligation that is not contingent on any event, condition or situation other than the ability or willingness of that entity or a connected entity of the entity to meet the obligation.

17. Each Instrument is issued fully paid at an issue price of AUDXXX. The Company will therefore receive a financial benefit under the scheme, namely the issue price that the holders have an effectively non-contingent obligation to provide. Accordingly, this requirement of the debt test is satisfied.

(c) The entity has, or the entity and a connected entity of the entity each has, an effectively non-contingent obligation under the scheme to provide a financial benefit or benefits to one or more entities.

18. Whilst a financial benefit includes anything of economic value, subsection 974-30(1) provides that the issue of an equity interest in the entity or a connected entity of the entity or an amount that is to be applied in respect of the issue of an equity interest in the entity or a connected entity of the entity does not constitute the provision of a financial benefit. Thus, the financial benefits to be provided by the Company pursuant to the conversion mechanism will not constitute the provision of a financial benefit by the Company.

19. Consequently, in deciding whether the Company has an effectively non-contingent obligation under the scheme to provide a financial benefit, the relevant items of economic value (and therefore financial benefits) pursuant to section 974-135 are the obligations on the Company to pay distributions and return any amount of the face value.

Obligation to pay distributions

20. The Company does not have an effectively non-contingent obligation to provide a financial benefit by way of the distributions as:

(a) payments of distributions are within the absolute discretion of the Company and are non-cumulative in that if a distribution is not paid because of the conditions or because of any other reason, the Company has no liability to pay such Distribution to the holder and the holder has no claim or right in respect of such non-payment; and

(b) non-payment of a distribution because of the conditions or any other reason does not constitute an event of default.

21. The 'dividend stopper' restriction imposed such that no dividend can be paid on the Company ordinary shares if a distribution has not been paid in full to the holders of Instruments on the relevant distribution payment date does not alter this conclusion (subsection 974-135(7)).

22. Accordingly, it is considered that the Company does not have an effectively non-contingent obligation to provide a financial benefit by way of the distributions.

Obligation to return any amount of the face value - redemption

23. Whilst the Instruments are perpetual (and therefore the Company does not have an obligation to provide the face value), there are circumstances under which Instruments may be redeemed for their face value.

24. However, the circumstances in which redemption may occur do not suggest that the Company has an effectively non-contingent obligation to provide a financial benefit for the following reasons:

(a) redemption is at the Company's option and the pricing, terms and conditions do not suggest that the Company will definitely elect to redeem the Instruments;

(b) redemption is contingent on the occurrence of certain events, including a tax event or regulatory event and the pricing terms and conditions do not suggest that these trigger events are artificial or contrived or that the events will definitely occur during the time the Instruments are on issue; and

(c) redemption is contingent on APRA approval and the pricing, terms and conditions do not suggest that APRA approval will necessarily be granted.

25. As the occurrence of redemption is contingent on certain events occurring and APRA approval, the Company does not have an effectively non-contingent obligation to provide a financial benefit in the form of the repayment of the face value of the Instruments on redemption.

Obligation to return any amount of the face value - transfer

26. The transfer mechanism does not impose an effectively non-contingent obligation on the Company to provide a financial benefit by way of returning the face value upon transfer for the following reasons:

(a) the holders do not have a right to request transfer of their Instruments at any time;

(b) a transfer is at the Company's election and the pricing, terms and conditions of the Instruments do not suggest that the Company will definitely elect to transfer the Instruments; and

(c) a transfer, if it were to occur, transfers the rights and obligations under the Instruments from the holders to a nominated party. A transfer does not obligate the Company to provide to the holders the amount invested.

27. Accordingly, the Company does not have an effectively non-contingent obligation to provide a financial benefit by way of returning the face value upon transfer.

28. The above analysis demonstrates that the Company does not have an effectively non-contingent obligation to provide a financial benefit by way of a Distribution or return any part of the face value. The Company therefore does not have an effectively non-contingent obligation to provide any financial benefit under the scheme. As the requirements of paragraph 974-20(1)(c) are not satisfied, the issue of Instruments will not give rise to a debt interest in the Company.

Conclusion

29. As the issue of Instruments satisfies the equity test in subsection 974-75(1) and does not meet the requirements to be characterised as a debt interest under Subdivision 974-B, it is treated as an equity interest in the Company under Division 974. Each Instrument will constitute a 'non-share equity interest', as defined in subsection 995-1(1) as it is an equity interest in the Company that is not solely a share.

Question 2

Will distributions payable in respect of the Instruments, under a particular clause of the Terms, constitute frankable distributions under section 202-40 of the ITAA 1997 and not be unfrankable under section 202-45 of the ITAA 1997?

Summary

The distributions payable in respect of the Instruments, under a particular clause of the Terms, constitute frankable distributions under section 202-40 of the ITAA 1997 and will not be unfrankable under section 202-45 of the ITAA 1997.

Detailed reasoning

In this question, unless otherwise stated, all legislative references are to the ITAA 1997.

30. Subdivision 202-C details the circumstances in which a distribution can be franked. Section 202-40 provides that distributions and non-share dividends are frankable unless it is specified that they are unfrankable under section 202-45.

31. As stated above, each Instrument issued by the Company is a non-share equity interest as defined in subsection 995-1(1). A Distribution paid by the Company therefore constitutes a 'non-share distribution' under section 974-115.

32. Section 974-120 provides that all non-share distributions will be non-share dividends, except to the extent to which the company debits the distribution against the company's non-share capital account or the company's share capital account. As distributions payable will not be debited to the Company's share capital account or its non-share capital account section 974-120 will apply and the distributions will be frankable distributions to the extent that they are not unfrankable under section 202-45.

33. Section 202-45 sets out the circumstances under which an amount or distribution is taken to be unfrankable. In the present case, it is considered that none of those circumstances will apply to the non-share dividends paid by the Company on Instruments for the following reasons:

(a) paragraphs 202-45(b), (c), (d), (g), (i) and (j) are not applicable;

(b) paragraph 202-45(e) does not apply as distributions payable will not be sourced directly or indirectly from the Company's share capital account;

(c) paragraph 202-45(f) provides that a non-share dividend will be unfrankable if sections 215-10 or 215-15 apply. Section 215-10 will not apply as the funds from the issue of Instruments will not be raised or applied solely for one or more purposes permitted under subsection 215-10(2). Section 215-15 will not apply as it has been assumed that immediately before payment of a Distribution, the Company's available frankable profits (worked out under section 215-20) will exceed the amount of the Distribution; and

(d) paragraph 202-45(h) does not apply because the Distribution will not be taken to be an unfranked dividend under section 45 of the ITAA 1936 and the Commissioner will not make a determination under section 45C of the ITAA 1936.

Conclusion

34. Accordingly, distributions payable will constitute frankable distributions under section 202-40.

Question 3

Will section 204-30 of the ITAA 1997 apply to the scheme?

Summary

Section 204-30 of the ITAA 1997 will not apply to the scheme.

Detailed reasoning

In this question, unless otherwise stated, all legislative references are to the ITAA 1997.

35. Section 204-30 is a general anti-streaming measure that applies if an entity streams distributions (or distributions and other benefits) in such a way that:

(a) an imputation benefit is, or apart from [section 204-30] would be, received by a member of the entity as a result of the distribution or distributions; and

(b) the member would derive a greater benefit from franking credits than another member of the entity; and

(c) the other member of the entity will receive lesser imputation benefits, or will not receive any imputation benefits, whether or not the other member receives other benefits.

36. Where these conditions are met, subsection 204-30(1) empowers the Commissioner to make one or more of the following determinations listed in subsection 204-30(3):

(a) that a specified franking debit arises in the franking account of the entity, for a specified distribution or other benefit to a disadvantaged member;

(b) that a specified exempting debit arises in the exempting account of the entity, for a specified distribution or other benefit to a disadvantaged member;

(c) that no imputation benefit is to arise in respect of the relevant distribution that is made to a favoured member and specified in the determination.

37. Imputation benefit is defined in subsection 204-30(6) to include an entitlement to a tax offset under Division 207 as a result of the distribution. It is reasonable to expect that holders will receive an imputation benefit because the distributions are frankable distributions, which are expected to be fully franked.

38. The remaining issue is whether there will be a streaming of distributions in the way described in section 204-30. The expression 'streams' is not defined in the ITAA 1997. However, the Explanatory Memorandum (EM) to the New Business Tax System (Imputation) Bill 2002 (Cth), which introduced Subdivision 204-D states at paragraphs 3.28 to 3.29 that:

3.28 Streaming is selectively directing the flow of franked distributions to those members who can most benefit from imputation credits.

3.29 The law uses an essentially objective test for streaming, although purpose may be relevant where future conduct is a relevant consideration. It will normally be apparent on the face of an arrangement that a strategy for streaming is being implemented. The distinguishing of members on the basis of their ability to use franking benefits is a key element of streaming.

39. In the present case, the Company will not discriminate between members in terms of payments of distributions and the provision of other benefits. There will be no differential treatment afforded to holders according to their tax profiles. Holders will receive franked distributions irrespective of their tax attributes or their individual tax position. Distributions payable may or may not be fully franked although the Company intends to continue to fully frank all frankable distributions made by it. In addition, it is expected that the Company will frank distributions at the same franking percentage as the Company tax consolidated group benchmark for the franking period in which the payments are made.

Conclusion

40. In the circumstances described above, it is considered that section 204-30 will not apply to the scheme as the Company will not stream distributions in such a way that greater imputation benefits are received by members who derive a greater benefit from franking credits.

Question 4

Will section 177EA of the ITAA 1936 apply to the scheme?

Summary

Section 177EA of the ITAA 1936 will not apply to the scheme.

Detailed reasoning

In this question, unless otherwise stated, all legislative references are to the ITAA 1936.

41. Section 177EA is a general anti-avoidance provision that applies where a purpose (other than an incidental purpose) of a scheme is to enable a relevant taxpayer to obtain an imputation benefit. Where this purpose exists, subsection 177EA(5) empowers the Commissioner to make:

(a) if the corporate tax entity is a party to the scheme, a determination that a franking debit or exempting debit of the entity arises in respect of each distribution made to the relevant taxpayer or that flows indirectly to the relevant taxpayer; or

(b) a determination that no imputation benefit is to arise in respect of a distribution or a specified part of a distribution that is made, or that flows indirectly, to the relevant taxpayer.

42. Pursuant to subsection 177EA(3), the provision applies if the following conditions are satisfied:

(a) there is a scheme for a disposition of membership interests, or an interest in membership interests, in a corporate tax entity; and

(b) either:

(i) a frankable distribution has been paid, or is payable or expected to be payable, to a person in respect of the membership interests; or

(ii) a frankable distribution has flowed indirectly, or flows indirectly or is expected to flow indirectly, to a person in respect of the interest in membership interests, as the case may be; and

(c) the distribution was, or is expected to be, a franked distribution or a distribution franked with an exempting credit; and

(d) except for section 177EA, the person (the relevant taxpayer) would receive, or could reasonably be expected to receive, imputation benefits as a result of the distribution; and

(e) having regard to the relevant circumstances of the scheme, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for a purpose (whether or not the dominant purpose but not including an incidental purpose) of enabling the relevant taxpayer to obtain an imputation benefit.

43. It is considered that the conditions in paragraphs 177EA(3)(a) to (d) are satisfied in respect of the issue of Instruments because:

(a) the issue of Instruments constitutes a scheme for a disposition of membership interests: see paragraph 177EA(3)(a). Pursuant to paragraph 177EA(14)(a), 'a scheme for a disposition of membership interests or an interest in membership interests' includes a scheme that involves issuing membership interests. Paragraph 177EA(12)(a) provides that section 177EA applies to a 'non-share equity interest' in the same way as it applies to a 'membership interest'. The Instruments are non-share equity interests. Therefore, the Instruments will be treated as 'membership interests' issued by the Company for the purposes of paragraph 177EA(3)(a);

(b) frankable distributions are expected to be payable to the holders in respect of the membership interest: see paragraph 177EA(3)(b). The Commissioner accepts that distributions will be frankable distributions under section 202-40;

(c) franked distributions are expected to be paid to holders: see paragraph 177EA(3)(c). It is expected that the Company will continue its policy of fully franking all frankable distributions made by it. The Company also expects that it will pay more tax each year on its Australian taxable income than the franking credits it attaches to its dividends and other frankable distributions; and

(d) it is reasonable to expect that an imputation benefit will be received by the holders (that is, the relevant taxpayers) given that the Company expects to frank distributions: see paragraph 177EA(3)(d).

44. Accordingly, the issue is whether, having regard to the relevant circumstances of the scheme, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for a purpose (whether or not the dominant purpose but not including an incidental purpose) of enabling the relevant taxpayer (i.e. the holder) to obtain an imputation benefit (paragraph 177EA(3)(e)).

45. This is a test of objective purpose. Circumstances which are relevant in determining whether any person has the requisite purpose include, but are not limited to, the factors listed in subsection 177EA(17). The relevant circumstances listed encompass a range of circumstances which taken individually or collectively could indicate the requisite purpose. Due to the diverse nature of these circumstances, some may or may not be present at any one time in any one scheme.

46. The relevant circumstances under subsection 177EA(17) and their application to the scheme are considered below.

47. The Instruments are being issued by the Company for the purposes of maintaining its regulatory capital levels. The Company is seeking and expects approval from APRA to allow the Instruments to qualify as regulatory capital.

48. The terms and rights relating to the Instruments will be fixed from the date of issue and there is no indication of any changes in the risks and opportunities for investors from holding the Instruments. Furthermore, there is nothing in the terms of the Instruments to indicate that they will be only held briefly.

49. The Instruments will be listed on the Australian Securities Exchange and will be available for investment by different types of investors, with different tax profiles. The offer of the Instruments does not preclude non-residents. There is no suggestion that the Company is offering the Instruments to Australian investors only because they can benefit from the franking credits.

50. The Company will continue with its policy of fully franking all frankable distributions that are payable or deemed to be payable by it. In addition, all distributions will be franked at the same franking percentage as the benchmark for the franking period in which the payments are made.

51. Having regard to the factors listed in subsection 177EA(17) and other relevant circumstances of the scheme, the Commissioner is of the opinion that the Instruments are not issued for a more than incidental purpose of enabling relevant taxpayers to obtain an imputation benefit.

Conclusion

52. Accordingly, section 177EA will not apply.