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Edited version of private advice
Authorisation Number: 1051843076932
Date of advice: 10 June 2021
Ruling
Subject: Debt interest
Question 1
Does the Agreement give rise to a 'debt interest' in Aus Co for the purposes of Subdivision 974-B of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
Question 2
Does the Agreement give rise to an 'equity interest' in Aus Co for the purposes of Subdivision 974-C of the ITAA 1997?
Answer
No.
Question 3
Do the rights and obligations under the Agreement constitute one [or a single] financial arrangement under section 230-45 and 230-55 of the ITAA 1997?
Answer
Yes.
Question 4
Does section 230-120 of the ITAA 1997 apply to the Agreement?
Answer
No.
Question 5
Will the accruals method in Subdivision 230-B of the ITAA 1997 apply to particular gains or losses that Aus Co will have from the Agreement?
Question 6
Will the Payment Amounts (PA) or any part of the PAs, that are defined as the return under the Agreement, constitute 'interest' within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) and thus Aus Co will be required to withhold tax pursuant to Section 12-245 of Schedule 1 to the Taxation Administration Act 1953 (TAA)?
Answer
Yes.
Question 7
Will the part of the PAs that meet the return as defined in the Agreement be a debt deduction in accordance with section 820-40 of the ITAA 1997?
Answer
Yes.
Question 8
Will the Commissioner make a determination under section 177F of the ITAA 1936 that Part IVA of the ITAA 1936 applies to cancel any tax benefit identified in relation to the Agreement?
Answer
No.
Question 9
Will section 177J of the ITAA 1936 apply to Aus Co in respect of the Agreement entered into by Aus Co?
Answer
No.