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Edited version of your written advice
Authorisation Number: 1051502534428
Date of advice: 16 April 2019
Ruling
Subject: Debt note
Question 1
Will the debt note be a financial arrangement under section 230-45 of the Income Tax Assessment Act 1997?
Answer
Yes
Question 2
If the answer to Question 1 is yes, will Company X be permitted to apply the accruals method or the realisation method provided for in Subdivision 230-B of the Income Tax Assessment Act 1997 to gains or losses from the debt note?
Answer
Yes
Question 3
Will the interest adjustment payment under the debt note be deductible to Company X under subsection 230-15(2) of the Income Tax Assessment Act 1997, or be allowed as a deduction under the balancing adjustment method statement in subsection 230-445(1) of the Income Tax Assessment Act 1997?
Answer
Yes
Question 4
In the event that there is an adjustment to the purchase price under the sale agreement and Company X has to provide an additional amount, will this additional amount be capital in nature such that it forms part of the cost base of the shares under section 110-25 of the Income Tax Assessment Act 1997?
Answer
Yes
Relevant facts and circumstances
The taxpayer (Company X) applied for a private ruling on the tax consequences, pursuant to Division 230 of the Income Tax Assessment Act 1997 and Division 110 of the Income Tax Assessment Act 1997, arising from a debt note and a sale agreement for shares.