Question 14

This question collects information about your loan arrangements with international related parties.

The question also collects information about how you have attributed your income and expenses to your branch operations as follows:

If you are an authorised deposit-taking institution (ADI) within the meaning of section 995-1 of the ITAA 1997 and are covered by TR 2005/11, include at this question any funds used in your Australian or offshore branch operations you have internally recorded as a 'loan' with the branch operations that records your attribution of your income and expenditure to the branch operations.

If you are not an ADI covered by TR 2005/11, include amounts that you have internally recorded as loans with your Australian or offshore branch operations for the purposes of attributing your interest expense on borrowings from third parties to the branch.

Note: Taxation Ruling TR 2005/11 does not apply to Australian branch operations carried on by a foreign bank (or other qualifying financial entity) to which Part IIIB of the ITAA 1936 applies. The foreign bank (or qualifying financial entity) should instead complete question 21 of this schedule (unless it has elected under section 160ZZVB of the ITAA 1936 that Part IIIB not apply).

A loan arrangement should be given its ordinary meaning within the context of commercial and accounting practices. In general terms, a loan arrangement is defined as a contract whereby the lender pays a sum of money in consideration of a promise by the borrower to repay the money at some time in the future (and this promise may/may not include the promise to repay interest on the money borrowed).

Those financing arrangements that are economically in substance a loan arrangement would be regarded as a loan for the purposes of this question. For example securities loan arrangements where the collateral is cash, sale and buyback arrangements to be settled in cash or repurchase agreements (repos) to be settled in cash.

Whether a financing arrangement economically constitutes a loan arrangement is a matter to be decided based on the facts and circumstances of each case/arrangement, for example, whether the arrangement involves revenue assets and/or constitutes an ordinary business activity undertaken by the taxpayer.

We recommend that you source appropriate guidance in light of the particular facts and circumstances of your case.

For the purposes of this question, for arrangements that are economically in substance loans:

• the cash collateral or cash settlement amount would be considered the loan amount
• any fees paid/received in respect of those arrangements would be considered interest.

If you borrowed or loaned any amounts from or to international related parties during the income year, answer yes to this question and complete the required fields.

The dollar amounts or values asked for in this question are all based on your accounting records.

To complete each part of this question you need to:

• identify all loan arrangements
  
• divide the loan arrangement into
• • interest bearing loans
  • interest free loans
   
• calculate the average balance of the loans, by
• • adding up the loan balance amount at the start of the year and the loan balance amounts at the end of each quarter
  • dividing the result by five
   
• in respect of interest bearing loans, determine the amount of interest expenditure or interest revenue in respect of these loans.

Internally recorded loans with your branch operations

In column 1:

• at C, provide the average balance of any internally recorded loans from your branch operations
• at F, provide the average balance of any internally recorded loans to your branch operations (excluding amounts to which question  21 of this schedule applies).

In column 2:

• at D, provide the total interest calculated for the internally recorded loans from your branch operations shown at C of this question
• at G, provide the total interest calculated for the internally recorded loans to your branch operations shown at F of this question.

In column 3:

• at E, provide the average balance of internally recorded interest free loans from your branch operations for the purpose of TR 2005/11
• at H, provide the average balance of internally recorded interest free loans to your branch operations for the purpose of TR 2005/11.

Loans between you and related entities

In column 1:

• at I, provide the average balance of interest bearing loans in relation to amounts borrowed from related entities
• at L, provide the average balance of interest bearing loans in relation to amounts loaned to related entities.

In column 2:

• at J, provide the total interest expenditure in respect of the interest bearing loans borrowed from related entities
• at M, provide the total interest revenue in respect of the interest bearing loans to related entities.

In column 3:

• at K, provide the average balance of interest free loans in relation to amounts borrowed from related entities
• at N, provide the average balance of interest free loans in relation to amounts loaned to related entities.

If part of this question does not apply to your related party loan amounts, leave blank.

Example

During the income year the Australian taxpayer (a 30 June balancer) borrowed and loaned the following amounts with international related parties.

The Australian taxpayer extracts the relevant data from the information above.

With this information the Australian taxpayer completes question 14 as follows.