Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 247 - Capital protected borrowings  

Operative provisions  

SECTION 247-20   Treating capital protection as a put option  

247-20(1)    
This section applies to a borrower if:

(aa) the borrower has an excess using the method statement in subsection (3) for:

(i) a *capital protected borrowing entered into after 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 2008 (the 2008 Budget time ); or

(ii) an extension of the capital protected borrowing; or

(a) the borrower has an amount that is reasonably attributable to the *capital protection as mentioned in subsection (2) for a capital protected borrowing entered into or extended on or after 1 July 2007 and at or before the 2008 Budget time; or

(b) the borrower has an amount that is reasonably attributable to the capital protection as mentioned in subsection (2) for a capital protected borrowing entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007.

Note:

If a capital protected borrowing covered by paragraph (1)(a) or (b) is extended or otherwise changed after the 2008 Budget time, section 247-85 of the Income Tax (Transitional Provisions) Act 1997 applies to the capital protected borrowing.

247-20(2)    

For paragraphs (1)(a) and (b), the amount that is reasonably attributable to the *capital protection is worked out under Division 247 of the Income Tax (Transitional Provisions) Act 1997 .

247-20(3)    

This is the method statement. Method statement

Example:

Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax.

247-20(4)    

If:

(a) the *capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and

(b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year;

use the rate worked out under subsection (5) at the first time an amount covered by step 1 of the method statement in subsection (3) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term.

247-20(5)    

The rate (the adjusted loan rate ), at a particular time, is the sum of:

(a) the Reserve Bank of Australia ' s Indicator Lending Rate for Standard Variable Housing Loans at that time; and

(b) 100 basis points.

S 247-20(5) substituted by No 61 of 2011, s 3 and Sch 2 item 7, effective 29 June 2011. S 247-20(5) formerly read:

247-20(5)
If the *capital protected borrowing is at a variable rate for all or part of the term of the *borrowing, use the average of the benchmark rates published by the Reserve Bank of Australia during the term of the borrowing or the relevant part of the term.

247-20(5A)    

If:

(a) the *capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and

(b) a variable rate is applicable to the capital protected borrowing for all or part of the income year;

use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate.

247-20(6)    
If this section applies to a borrower, this Act applies as if:

(a) the borrower ' s excess from the method statement in subsection (3); or

(b) the amount that is reasonably attributable to *capital protection as mentioned in paragraph (1)(a) or (b);

(reduced by any amount the borrower incurred under or in respect of the *capital protected borrowing for an explicit put option) were incurred only for a put option granted by the lender or by another entity under the *arrangement.