Income Tax Assessment Act 1997
View history note
Hide history noteDivision 974 inserted by No 163 of 2001, s 3 and Sch 1 item 34.
Act
No 136 of 2010
, s 3 and Sch 3 item 135, contains the following provision, effective 7 December 2010:
CGT amendments
debt and equity test amendments
In applying subparagraph (b)(i), disregard:
Extension of debt and equity transitional arrangements for Upper Tier 2 capital instruments
Definitions
(1)
In this item:
has the same meaning as in item 118 of Schedule 1 to the
New Business Tax System (Debt and Equity) Act 2001
.
means the amendments made by Schedule 1 to the
New Business Tax System (Debt and Equity) Act 2001
(other than the CGT amendments), as amended from time to time.
Upper Tier 2 capital instruments
(2)
This item applies to an interest:
(a)
that is issued before 1 July 2001; and
(b)
that is an instrument known as an Upper Tier 2 capital instrument; and
(c)
to which an election under paragraph 118(6)(b) of the
New Business Tax System (Debt and Equity) Act 2001
does not apply.
(3)
For the purposes of subitem (2), an interest is taken to be issued on or after 1 July 2001 if:
(a)
the interest is issued on or after that date; or
(b)
the interest is issued before that date, and:
(i)
the terms of the interest are altered on or after that date; or
(ii)
the interest is rolled over on or after that date; or
(iii)
the original term of the interest is extended on or after that date.
(c)
minor alterations that do not affect rights and obligations in relation to the interest; and
(d)
alterations that permit or require any deferred payments under the interest to accumulate.
Application of debt and equity test amendments
(4)
Despite paragraph 118(6)(a) of the
New Business Tax System (Debt and Equity) Act 2001
, the debt and equity test amendments apply only to transactions that take place in relation to the interest on or after 1 July 2010 if the issuer of the interest does not make an election under paragraph 118(6)(b) of that Act.
(5)
If subitem (4) applies to an interest:
(a)
the interest is disregarded for the purposes of paragraph
164-10(1)(b)
and subsection
164-15(3)
of the
Income Tax Assessment Act 1997
; and
(b)
section
164-15
of the
Income Tax Assessment Act 1997
applies to the interest as if references in paragraph
164-15(3)(b)
and subsection
164-15(4)
to 1 July 2001 were references to 1 July 2010.
(6)
A reference in this item to a
transaction
includes a reference to:
(a)
making a return; and
(b)
paying a dividend or unit trust dividend; and
(c)
making a distribution in relation to a unit trust; and
(d)
paying, crediting or lending an amount; and
(e)
making a non-share distribution; and
(f)
forgiving a debt; and
(g)
redeeming, cancelling or buying back an interest; and
(h)
converting an interest.
Act No 163 of 2001, s 3 and Sch 1 item 118 (as amended by No 162 of 2005, s 3 and Sch 6 items 26 and 27), contained the following application provisions:
(1) Definitions.In this item:
CGT amendments
means the amendments made by items 7 to 32 of this Schedule.debt and equity test amendments
means the amendments made by this Schedule (other than the CGT amendments).
(2) Application of debt and equity test amendments.The debt and equity test amendments apply to transactions that take place on or after 1 July 2001. This is so whether the interest in relation to which the transaction takes place was issued before, or is issued on or after, that date. This subitem has effect subject to subitem (6).
HistorySubitem 118(2) amended by No 162 of 2005.
(3) Application of the CGT amendments.The amendments made by items 7 to 11 of this Schedule apply to:
(a) equity interests issued or allotted; and
(b) options granted;on or after 1 July 2001.
(4)
The amendments made by items 12 to 32 of this Schedule apply to the conversion of a convertible interest, or the exercise of a right, on or after 1 July 2001.
(5)
Section 130-40 of the Income Tax Assessment Act 1997 applies to all convertible notes acquired before 20 September 1985 as if they were convertible interests.
(6) Application of debt and equity test amendments to interests issued before 1 July 2001.If an interest was issued before 1 July 2001, the debt and equity test amendments:
(a) apply only to transactions that take place in relation to the interest on or after 1 July 2004 if the issuer of the interest does not make an election under paragraph (b); and
(b) apply to transactions that take place in relation to the interest on or after 1 July 2001 if the issuer elects to have this paragraph apply to the interest.
(7)
For the purposes of subitem (6), an interest is taken to be issued on or after 1 July 2001 if:
(a) the interest is issued on or after that date; or
(b) the interest is issued before that date; and:
(i) the terms of the interest are altered on or after that date; or
(ii) the interest is rolled over on or after that date; or
(iii) the original term of the interest is extended on or after that date.In applying subparagraph (b)(i), disregard minor alterations that do not affect rights and obligations in relation to the interest.
(9)
If paragraph (6)(a) applies to an interest:
(a) paragraph 164-10(1)(b) of the Income Tax Assessment Act 1997 applies to the interest as if the second reference in that paragraph to " 1 July 2001 " were instead a reference to " 1 July 2004 " ; and
(b) section 164-15 of the Income Tax Assessment Act 1997 applies to the interest as if the following references were instead references to " 1 July 2004 " :
(i) the first reference in subsection 164-15(3) to " 1 July 2001 " ;
(ii) the reference in subsection 164-15(3) to " that day " ;
(iii) the references in paragraph 164-15(3)(b) and subsection 164-15(4) to " 1 July 2001 " .HistorySubitem 118(9) substituted by No 162 of 2005.
(10)
An election in relation to an interest is effective for the purposes of paragraph (6)(b) only if:
(a) the election is lodged with the Commissioner within:
(i) 90 days after the day on which this Act receives the Royal Assent; or
(ii) such further time as the Commissioner allows; and
(b) an election under paragraph (6)(b) is made in relation to all other interests that:
(i) were issued by the issuer before 1 July 2001; and
(ii) are substantially similar to that interest and in relation to which an election under that subitem can be made; and
(c) the election contains the following information:
(i) the name of the issuer;
(ii) the tax file number of the issuer;
(iii) the legal form of the interest;
(iv) ASX code or other stock exchange listing code allotted to the issue (if applicable);
(v) the date of the issue;
(vi) the face value of the issue;
(vii) the number of interests of that kind on issue when the election is made;
(viii) coupon/dividend rates and terms including contingencies;
(ix) maturity details;
(x) redemption details and terms including contingencies;
(xi) conversion/exercise details.An election under paragraph (6)(b) cannot be revoked.
(11)
The Commissioner may allow further time under subparagraph (10)(a)(ii) if he or she:
(a) is satisfied that the issuer would otherwise not have sufficient opportunity to make the election; or
(b) otherwise considers it reasonable to do so.
(12)
If:
(a) paragraph (6)(a) applies to an interest; and
(b) on or after 1 July 2001 and before 1 July 2004:
(i) the terms of the interest are altered; or
(ii) the interest is rolled over; or
(iii) the original term of the interest is extended;then:
(c) the debt and equity test amendments apply to the transactions in relation to the interest that take place after the event referred to in paragraph (b) occurs; and
(d) subitem (9) applies to the interest as if references in that subitem to 1 July 2004 were references to the time when that event occurs.In applying subparagraph (b)(i), disregard minor alterations that do not affect rights and obligations in relation to the interest.
(13)
A reference in this item to a transaction includes a reference to:
(a) making a return; and
(b) paying a dividend or unit trust dividend; and
(c) making a distribution in relation to a unit trust; and
(d) paying, crediting or lending an amount; and
(e) making a non-share distribution; and
(f) forgiving a debt; and
(g) redeeming, cancelling or buying back an interest; and
(h) converting an interest.
Subdivision 974-A inserted by No 163 of 2001. For application provisions, see note under Div 974 heading.
This Division tells you whether an interest is a debt interest, or an equity interest, for tax purposes. An interest that could be characterised as both a debt interest and an equity interest will be treated as a debt interest for tax purposes (except for certain interests that fund returns on equity interests).
Whether an interest is a debt interest or an equity interest matters because returns on debt interests are not frankable but may be deductible while returns on equity interests are not deductible but may be frankable.
This Division extends beyond shares the range of interests that are recognised as equity in a company. An interest that is an equity interest in a company but is not a share will be treated in the same way as a share for some tax purposes (particularly in relation to the determination of the tax treatment of returns on the interest).
This Division also tells you how to work out which distributions made in respect of a non-share equity interest in a company will be non-share dividends and which will be non-share capital returns. Those that are non-share dividends will be treated, for most tax purposes, in the same way as dividends.
S 974-1 inserted by No 163 of 2001. For application provisions, see note under Div 974 heading.
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