DEVELOPMENT ALLOWANCE AUTHORITY ACT 1992 (REPEALED)

CHAPTER 3 - INFRASTRUCTURE BORROWINGS  

PART 1 - PRELIMINARY  

SECTION 93C   EXAMPLE OF HOW THIS CHAPTER WORKS  

93C(1)   Typical example - borrowing to finance a tollway.  

This section sets out an example of how this Chapter works in a typical case involving a borrowing to construct a tollway.

93C(2)   Step 1 - proposal.  

By December 1994, a non-exempt public company has developed a proposal to construct a tollway in Australia that it intends to operate for at least 25 years after it becomes income-producing. The estimated cost of the tollway is $600 million, of which the company intends to borrow $400 million by a public bond issue at 8% per annum over 10 years. The company intends to build the tollway in 2 stages:

• stage 1, commencing in November 1995 and continuing until November 1998, involving the major earthworks

• stage 2, commencing in February 1999 and ending at the end of 2001, involving construction of bridges, road pavement, stabilisation of embankments and construction of related facilities for toll collection and other staff.

93C(3)   Step 2 - application to DAA.  

In January 1995, the company applies to the DAA for the issue of a certificate in relation to the borrowing. The application sets out details of the proposed borrowing and expenditure and other relevant matters.

93C(4)   Step 3 - action by DAA.  

The DAA considers the application and determines that the criteria in the Chapter for the issue of a certificate are met. (The criteria relate to such things as the nature of the borrower and the facility, and the proposed public use and charging regime.)

93C(5)   Step 4 - issue of certificate.  

In March 1995, the applicant gives the DAA an undertaking that it will comply with its obligations if the certificate is issued, and the DAA issues the certificate.

93C(6)   Step 5 - the bond issue.  

The bond issue takes place in May 1995. Interest paid to bond holders is exempt from income tax or rebatable. The interest is not an allowable deduction for the company.

93C(7)   Completion and operation of tollway.  

The borrowing, construction and use of the tollway all go ahead as planned.