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INCOME TAX ASSESSMENT ACT 1997 - SECT 974.130

Financing arrangement

  (1)   A * scheme is a financing arrangement for an entity if it is entered into or undertaken:

  (a)   to raise finance for the entity (or a * connected entity of the entity); or

  (b)   to fund another scheme, or a part of another scheme, that is a * financing arrangement under paragraph   (a); or

  (c)   to fund a return, or a part of a return, payable under or provided by or under another scheme, or a part of another scheme, that is a financing arrangement under paragraph   (a).

  (2)   The following are examples of * schemes that are generally entered into or undertaken to raise finance:

  (a)   a bill of exchange;

  (b)   income securities;

  (c)   a * convertible interest that will convert into an * equity interest.

Note:   Paragraph   (a) is likely to be relevant for debt interests, paragraph   (b) for equity interests and paragraph   (c) for both.

  (3)   The following are examples of * schemes that are generally not entered into or undertaken to raise finance:

  (a)   a derivative that is used solely for managing financial risk;

  (b)   a contract for personal services entered into in the ordinary course of a business.

Note:   These may be relevant for both debt interests and equity interests.

  (4)   For the purposes of subsection   (1), the following * schemes are taken not to be entered into or undertaken to raise finance:

  (a)   a lease or bailment that satisfies all of the following:

  (i)   the property leased or bailed is not property to which Division   16D of Part   III of the Income Tax Assessment Act 1936 (arrangements relating to the use of property) applies;

  (ii)   the lease or bailment is not a relevant agreement for the purposes of section   128AC of that Act (deemed interest in respect of hire - purchase and certain other arrangements);

  (iii)   the lease or bailment is not an * arrangement to which Division   240 of this Act (about arrangements treated as a sale and loan), or Division   242 of this Act (about luxury car leases), applies;

  (v)   the lessee or bailee, or a * connected entity of the lessee or bailee, is not to, and does not have an obligation (whether contingent or not) or a right to, acquire the leased or bailed property;

  (vi)   Division   250 of this Act does not apply to a person and the property leased or bailed;

  (b)   a securities lending arrangement under section   26BC of the Income Tax Assessment Act 1936 ;

  (c)   a life insurance or general insurance contract undertaken as part of the issuer's ordinary course of business;

  (d)   a scheme for the payment of royalties (within the meaning of the Income Tax Assessment Act 1936 ) other than:

  (i)   a qualifying arrangement for the purposes of Division   16D of Part   III of the Income Tax Assessment Act 1936 ; or

  (ii)   a relevant agreement for the purposes of section   128AC of that Act; or

  (iii)   a scheme or arrangement for the payment of royalties in relation to an asset if Division   250 of this Act applies to a person and the asset.

  (5)   The regulations may:

  (a)   specify that particular * schemes are not financing arrangements ; and

  (b)   specify circumstances in which a scheme will not be a financing arrangement .


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