Income Tax Assessment (1997 Act) Regulations 2021

CHAPTER 6 - THE DICTIONARY  

PART 6-1 - CONCEPTS AND TOPICS  

Division 974 - Debt and equity interests  

Subdivision 974-F - Related concepts  

SECTION 974-135.05   TERM CUMULATIVE SUBORDINATED NOTE WITH NON-VIABILITY CONDITION  

974-135.05(1)    
This section applies to an obligation to pay the principal or interest on a relevant term subordinated note at a particular time on or after 12 December 2012.

974-135.05(2)    
For the purposes of paragraphs 974-135(8)(a) and (b) of the Act, the fact that the obligation is subject to a non-viability condition does not in itself prevent the obligation from being a non-contingent obligation.

Meaning of relevant

974-135.05(3)    
A term subordinated note is relevant if:

(a)    the note is issued by an entity regulated for prudential purposes by APRA or a subsidiary of an entity that is regulated for prudential purposes by APRA; and

(b)    when the note is issued:

(i) the note does not constitute or meet the requirements of a Tier 1 capital instrument; and

(ii) the note does not form part of the Tier 1 capital of the issuer of the note, and the reason for the note not doing so is not that the instrument is in excess of the Tier 1 capital required for the purposes of prudential standards that deal with capital adequacy; and

(c)    the note has a term of no more than 30 years, and the note does not include an unconditional right to extend the term of the note beyond a total term of 30 years; and

(d)    the note is subject to a condition that, unless a non-viability trigger event occurs, any payment of the principal or interest beyond the date on which it would otherwise be payable must accumulate (with or without compounding); and

(e)    the note does not give the issuer of the note an unconditional right to decline to provide a financial benefit that is equal in nominal value to the issue price of the note to settle the obligations under the note.

Note:

Whether the note constitutes or meets the requirements of a Tier 1 capital instrument, or forms part of the Tier 1 capital of the issuer, is determined under the prudential standards that apply to the issuer.

Meaning of non-viability condition

974-135.05(4)    
A condition applying to the obligation is a non-viability condition if the condition has the effect that, if a non-viability trigger event occurs, the note must be:

(a)    written off; or

(b)    converted into ordinary shares of the issuer of the note or of a parent entity of the issuer; or

(c)    converted into mutual equity interests of the issuer of the note or of a parent entity of the issuer.

Meaning of non-viability trigger event

974-135.05(5)    
A non-viability trigger event , in relation to a note, is any of the following:

(a)    APRA or a comparable foreign regulator issues a notice, in writing, to the issuer of the note stating that conversion or write-off of capital instruments issued by the issuer is necessary because, without it, APRA or the foreign regulator considers that the issuer will become non-viable;

(b)    APRA or a comparable foreign regulator determines, in writing given to the issuer of the note, that without an injection of capital, or equivalent support, from the public sector the issuer will become non-viable;

(c)    APRA or a comparable foreign regulator issues a notice, in writing, to a parent entity of the issuer of the note stating that conversion or write-off of capital instruments is necessary because, without it, APRA or the foreign regulator considers that the parent entity or the issuer will become non-viable;

(d)    APRA or a comparable foreign regulator determines, in writing given to a parent entity of the issuer of the note, that without an injection of capital, or equivalent support, from the public sector the parent entity or the issuer will become non-viable.

974-135.05(6)    
For the purposes of this section, mutual equity interests has the same meaning as in section 11CAA of the Banking Act 1959 .