INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIAA - FRANKING OF DIVIDENDS  

Division 1A - Circumstances in which a taxpayer can qualify for a franking credit, a franking rebate or the intercorporate dividend rebate  

Subdivision A - Preliminary  

SECTION 160APHJ   POSITION IN RELATION TO SHARES OR INTERESTS ETC.  

160APHJ(1)   Regulations may prescribe what constitutes a position.  

The regulations may, either generally, or as otherwise provided in the regulations, prescribe:

(a) what is a position, a short position, a long position or a net position in relation to shares or an interest in shares; and

(b) when a position relates to particular shares or a particular interest in shares; and

(c) how the delta of a position is to be calculated;

and the following provisions of this section have effect subject to any such regulations.

160APHJ(2)   Meaning of position .  

A position , in relation to shares or an interest in shares, is anything that has a delta in relation to the shares or interest, and includes, without limiting the generality of the above:

(a) a short sale, or a future sale, of:

(i) the shares or interest; or

(ii) property that is substantially similar to, or related to, the shares or interest; and

(b) a purchase, or a future purchase, of property that is substantially similar to, or related to, the shares or interest; and

(c) an option to buy or sell the shares or interest; and

(d) an option to buy or sell:

(i) property that is substantially similar to, or related to, the shares or interest; or

(ii) an interest in such property; and

(e) an option in relation to the shares or interest that is embedded in other property; and

(f) a non-recourse loan made to acquire the shares or interest; and

(g) an indemnity or guarantee in respect of the shares or interest.

However, if a share, or an interest in a share, is an employee share scheme security, a condition attached to the share or interest, or a term of the document that created the interest, that prevents the holder of the share or interest from disposing of it or could result in the share or interest being forfeited is not a position in relation to the share or interest.

160APHJ(3)   Meaning of short position .  

A short position , in relation to shares or an interest in shares, is a position that has a negative delta in relation to the shares or interest. For example, a short sale, a sold future, a sold call option, a bought put option, and a sold share index future, are short positions.

160APHJ(4)   Meaning of long position .  

A long position , in relation to shares or an interest in shares, is a position that has a positive delta in relation to the shares or interest. For example, a share purchase, a bought future, a bought call option, a sold put option, and a bought share index future, are long positions. To avoid doubt, shares or interests in shares are to be treated as a long position (with a delta of +1) in relation to themselves.

160APHJ(5)   Meaning of net position .  

The net position of a taxpayer or fund in relation to shares, or in relation to an interest in shares, is calculated by adding the taxpayer's or fund's:

(a) long positions in the shares or interest (calculated on the basis of their deltas); and

(b) short positions in the shares or interest (calculated on the basis of their deltas).

For example, if a taxpayer sells 2 call options (each of which has a delta of -0.5) in respect of shares in a company and buys one share in the company (which has a delta of +1) in respect of those call options, the taxpayer has a net position of nil as a result of those transactions. In such a case, the taxpayer has materially diminished risks of loss and opportunities for gain in relation to the share.

160APHJ(6)   Certain short positions in companies that deal in commodities to be disregarded.  

If:

(a) a taxpayer holds shares, or an interest in shares, in a company; and

(b) the sole or dominant business of the company is producing, purchasing, consuming, trading in, or otherwise dealing in, any of the commodities mentioned in subsection (7); and

(c) the taxpayer is a controller of the company for the purposes of section 140-20 of the Income Tax Assessment Act 1997 ;

then, any of the taxpayer's short positions in the shares or interest that:

(d) relate to any of those commodities; and

(e) are taken in the ordinary course of the taxpayer's business;

are to be disregarded for the purposes of subsection (5).

160APHJ(7)   Commodities to which subsection (6) applies.  

The commodities referred to in subsection (6) are as follows:

(a) minerals;

(b) gold;

(c) ores of a metal included in the table of metals in the former subsection 330-60(1) of the Income Tax Assessment Act 1997 .

160APHJ(8)   Certain short positions of life assurance companies or trustees of eligible entities to be disregarded.  

If:

(a) a taxpayer that is a life assurance company or a trustee of an eligible entity (within the meaning of Part IX) holds shares or an interest in shares; and

(b) the company, or the relevant fund or unit trust, has a short position arising from the obligations of the company or trustee to pass on to holders of policies issued by the company or to beneficiaries in the fund or trust the risks of loss and opportunities for gain in relation to the shares or interest; and

(c) the full value of any franking rebate in respect of the shares or interest is passed on to the holders of those policies or to those beneficiaries; and

(d) the obligations referred to in paragraph (b) do not directly or indirectly reduce the taxable income of the company, or of the fund or trust, or increase any loss (for the purposes of this Act) incurred by the company, or by the fund or trust;

the short position referred to in paragraph (b) is to be disregarded for the purposes of subsection (5) only in so far as the net position of the company, or of the fund or trust, is relevant to section 160AQT , 160AQYA or 160AQZA .

160APHJ(9)   Short position of associate of taxpayer in shares or interest to be attributable to taxpayer.  

If, under an arrangement to which a taxpayer and an associate of the taxpayer are parties, the associate has a short position in shares, or in an interest in shares, held by the taxpayer, the associate's position is taken, for the purposes of subsection (5), to be a position that the taxpayer has.

160APHJ(10)   Deltas of positions to be taken not to have changed in certain circumstances.  

If:

(a) a taxpayer acquires shares or interests in shares; and

(b) on the day of the acquisition, or on a later day, the taxpayer enters into or has positions in relation to any of the shares or interests;

then, so long as the taxpayer continues to hold the shares or interests, continues to have those positions and does not enter into any further positions in relation to the shares or interests:

(c) in calculating the delta of a position held by the taxpayer in relation to the shares or interests:

(i) for the purposes of this Division other than paragraphs 106APHO(1)(b) and 160APHP(1)(b); or

(ii) for the purposes of either of those paragraphs in its application to a related payment under an arrangement entered into before the commencement of this subsection, other than an arrangement that has been varied, renewed or replaced after that commencement;

those positions are taken to continue to have the deltas that they had on the later of the following days:

(iii) the day on which the shares or interests were acquired;

(iv) a day on which any of the positions was entered into; or

(d) in calculating the delta of a position held by the taxpayer in relation to the shares or interests for the purposes of paragraph 160APHO(1)(b) or 160APHP (1)(b) in its application to a related payment under an arrangement:

(i) entered into after the commencement of this subsection (including an arrangement that renewed or replaced an arrangement entered into before that commencement); or

(ii) entered into before that commencement that was varied after that commencement;

those positions are taken to continue to have the deltas that they had on the latest of the following days:

(iii) the day on which the shares or interests were acquired by the taxpayer;

(iv) a day on which any of the positions that the taxpayer has in relation to the shares or interests was entered into;

(v) if the secondary qualification period in relation to the taxpayer in relation to the shares or interests is the second, or a subsequent, qualification period since the shares or interests were acquired by the taxpayer-the first day of the secondary qualification period.

160APHJ(11)   [Effect]  

This section has effect subject to sections 160APHK and 160APHL .