(1) The object of this section is to better align, in particular circumstances, the tax classification of a gain or loss you make from a * hedging financial arrangement with the tax classification of the * hedged item.
(a) you make a gain or loss from a * hedging financial arrangement for an income year; and
(b) a * hedging financial arrangement election applies to the arrangement.
(3) Subject to subsection (4):
(a) if you make a gain from the arrangement--your assessable income includes the gain in accordance with subsection 230 - 15(1); and
(b) if you make a loss from the arrangement--you may deduct the loss in accordance with subsections 230 - 15(2) and (3).
Note: Section 230 - 300 tells you how to allocate the gain or loss to an income year or years.
(4) A gain or loss you make from a * hedging financial arrangement, to the extent to which it is reasonably attributable to a * hedged item referred to in the following table, is dealt with in the way indicated in that item:
Special tax classification for gains and losses | |||
Item | For a hedged item that is or produces ... | the gain ... | the loss ... |
1 | a * CGT asset any * net capital gain in relation to which would be assessable under Parts 3 - 1 and 3 - 3 in relation to which a * CGT event (the hedged item CGT event ) occurs | is treated as a * capital gain from a CGT event (but only to the extent to which the gain is reasonably attributable to the hedged item CGT event) | is treated as a * capital loss from a CGT event (but only to the extent to which the loss is reasonably attributable to the hedged item CGT event) |
2 | a * CGT asset that is * taxable Australian property | is treated as a * capital gain from a * CGT event for a CGT asset that is taxable Australian property | is treated as a * capital loss from a CGT event for a CGT asset that is taxable Australian property |
3 | a * CGT asset your capital gains and losses in relation to which are disregarded, or reduced by a particular percentage, under Division 855 | is disregarded or reduced by the same percentage | is disregarded or reduced by the same percentage |
4 | * exempt income | is treated as exempt income | is not deductible |
5 | * non - assessable non - exempt income of an Australian resident | is treated as non - assessable non - exempt income | is not deductible |
6 | a share in a company that is a foreign resident if the capital gain or loss you make from a * CGT event that happens to the share is reduced by a particular percentage under Subdivision 768 - G | is treated as a * capital gain from a CGT event that is reduced by the same percentage | is treated as a * capital loss from a CGT event that is reduced by the same percentage |
7 | * ordinary income or * statutory income from an * Australian source | is treated as ordinary income or statutory income from an Australian source | is treated as a loss incurred in gaining or producing ordinary income or statutory income from an Australian source |
8 | * ordinary income or * statutory income from a source out of Australia | is treated as ordinary income or statutory income from a source out of Australia | is treated as a loss incurred in gaining or producing ordinary income or statutory income from a source out of Australia |
9 | a loss or outgoing incurred in gaining or producing * ordinary income or * statutory income from a source out of Australia | is treated as ordinary income or statutory income from a source out of Australia | is treated as a loss incurred in gaining or producing ordinary income or statutory income from a source out of Australia |
10 | a loss or outgoing incurred in gaining or producing * ordinary income or * statutory income from an * Australian source | is treated as ordinary income or statutory income from an Australian source | is treated as a loss incurred in gaining or producing ordinary income or statutory income from an Australian source |
11 | a loss or outgoing that is not allowed as a deduction | is treated as * non - assessable non - exempt income | is treated as a loss that is not allowed as a deduction |
12 | a net investment in a foreign operation (within the meaning of the * accounting principles) that is not carried on through: (a) a company in which you hold shares; or (b) a company that is a subsidiary of yours (within the meaning of the Corporations Act 2001 ). | (a) to the extent that the net investment would give rise to income that is * non - assessable non - exempt income under section 23AH of the Income Tax Assessment Act 1936 --is treated as non - assessable non - exempt income; and (b) otherwise--is treated in accordance with the item or items in this table that are applicable to the gain. | (a) to the extent that the net investment would give rise to income that is non - assessable non - exempt income under section 23AH of the Income Tax Assessment Act 1936 --is not deductible; and (b) otherwise--is treated in accordance with the item or items in this table that are applicable to the loss.
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(5) Subsection (6) applies if:
(a) a * hedged item is your net investment in a foreign operation (within the meaning of the * accounting principles); and
(b) the foreign operation is carried on through:
(i) a company in which you hold * shares; or
(ii) a company that is a subsidiary of yours (within the meaning of the Corporations Act 2001 ).
(6) The table in subsection (4) has effect as if:
(a) to the extent that the * hedging financial arrangement hedges a risk or risks in relation to * shares you hold in the company--the reference in that table to the * hedged item were a reference to your interest in those shares; and
(b) to the extent that the hedging financial arrangement hedges
a risk or risks in relation to another interest you have in the company--the
reference in that table to the hedged item were a reference to that interest.