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Income Tax Assessment Act 1997

Authoritative Version
  • - C2012C00272
  • In force - Superseded Version
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Act No. 38 of 1997 as amended, taking into account amendments up to Clean Energy (Tax Laws Amendments) Act 2011
An Act about income tax and related matters
Administered by: Treasury
General Comments: This compilation is affected by retrospective amendments. Please see the Tax Laws Amendment (2011 Measures No. 9) Act 2012 (Act No. 12, 2012), the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Act 2012 (Act No. 158, 2012) and the Tax and Superannuation Laws Amendment (2013 Measures No. 2) Act 2013 (Act No. 85, 2013) for details.
Registered 02 Mar 2012
Start Date 01 Jan 2012
End Date 20 Mar 2012

Income Tax Assessment Act 1997

Act No. 38 of 1997 as amended

This compilation was prepared on 20 February 2012
taking into account amendments up to Act No. 159 of 2011

Volume 6 includes:     Table of Contents
                                   
Sections 230‑1 to 410‑50

The text of any of those amendments not in force
on that date is appended in the Notes section

The operation of amendments that have been incorporated may be
affected by application provisions that are set out in the Notes section

 

Chapter 3Specialist liability rules

  

  


Contents

Chapter 3—Specialist liability rules                                                                             i

Part 3‑10—Financial transactions                                                                                1

Division 230—Taxation of financial arrangements                                     1

Guide to Division 230                                                                                                1

230‑1..... What this Division is about................................................................. 1

230‑5..... Scope of this Division......................................................................... 2

Subdivision 230‑A—Core rules                                                                              3

Objects                                                                                                                           4

230‑10... Objects of this Division...................................................................... 4

Tax treatment of gains and losses from financial arrangements                  4

230‑15... Gains are assessable and losses deductible......................................... 4

230‑20... Gain or loss to be taken into account only once under this Act........... 6

230‑25... Associated financial benefits to be taken into account only once under this Act       8

230‑30... Treatment of gains and losses related to exempt income and non‑assessable non‑exempt income           9

230‑35... Treatment of gains and losses of private or domestic nature............... 9

Method to be applied to take account of gain or loss                                      10

230‑40... Methods for taking gain or loss into account.................................... 10

Financial arrangement concept                                                                            12

230‑45... Financial arrangement....................................................................... 12

230‑50... Financial arrangement (equity interest or right or obligation in relation to equity interest)        15

230‑55... Rights, obligations and arrangements (grouping and disaggregation rules)              16

General rules                                                                                                             17

230‑60... When financial benefit provided or received under financial arrangement                17

230‑65... Amount of financial benefit relating to more than one financial arrangement etc.     18

230‑70... Apportionment when financial benefit received or right ceases......... 19

230‑75... Apportionment when financial benefit provided or obligation ceases 20

230‑80... Consistency in working out gains or losses (integrity measure)....... 22

230‑85... Rights and obligations include contingent rights and obligations...... 22

Subdivision 230‑B—The accruals/realisation methods                                 23

Guide to Subdivision 230‑B                                                                                   24

230‑90... What this Subdivision is about.......................................................... 24

Objects of Subdivision                                                                                             24

230‑95... Objects of this Subdivision............................................................... 24

When accruals method or realisation method applies                                    25

230‑100. When accruals method or realisation method applies........................ 25

230‑105. Sufficiently certain overall gain or loss............................................. 26

230‑110. Sufficiently certain gain or loss from particular event....................... 27

230‑115. Sufficiently certain financial benefits................................................. 28

230‑120. Financial arrangements with notional principal................................. 30

The accruals method                                                                                               32

230‑125. Overview of the accruals method...................................................... 32

230‑130. Applying accruals method to work out period over which gain or loss is to be spread            32

230‑135. How gain or loss is spread................................................................ 33

230‑140. Method of spreading gain or loss—effective interest method........... 35

230‑145. Application of effective interest method where differing income and accounting years            36

230‑150. Election for portfolio treatment of fees.............................................. 37

230‑155. Election for portfolio treatment of fees where differing income and accounting years              38

230‑160. Portfolio treatment of fees................................................................. 39

230‑165. Portfolio treatment of premiums and discounts for acquiring portfolio 41

230‑170. Allocating gain or loss to income years............................................. 42

230‑175. Running balancing adjustments......................................................... 43

Realisation method                                                                                                  45

230‑180. Realisation method............................................................................ 45

Reassessment and re‑estimation                                                                           46

230‑185. Reassessment.................................................................................... 46

230‑190. Re‑estimation.................................................................................... 48

230‑195. Balancing adjustment if rate of return maintained on re‑estimation... 51

230‑200. Re‑estimation if balancing adjustment on partial disposal................. 52

Subdivision 230‑C—Fair value method                                                             54

230‑205. Objects of this Subdivision............................................................... 54

230‑210. Fair value election............................................................................. 54

230‑215. Fair value election where differing income and accounting years...... 55

230‑220. Financial arrangements to which fair value election applies.............. 57

230‑225. Financial arrangements to which election does not apply.................. 58

230‑230. Applying fair value method to gains and losses................................ 59

230‑235. Splitting financial arrangements into 2 financial arrangements.......... 60

230‑240. When election ceases to apply........................................................... 61

230‑245. Balancing adjustment if election ceases to apply............................... 61

Subdivision 230‑D—Foreign exchange retranslation method                      62

230‑250. Objects of this Subdivision............................................................... 62

230‑255. Foreign exchange retranslation election............................................. 63

230‑260. Foreign exchange retranslation election where differing income and accounting years            64

230‑265. Financial arrangements to which general election applies.................. 66

230‑270. Financial arrangements to which general election does not apply...... 67

230‑275. Balancing adjustment for election in relation to qualifying forex accounts               68

230‑280. Applying foreign exchange retranslation method to gains and losses 69

230‑285. When election ceases to apply........................................................... 71

230‑290. Balancing adjustment if election ceases to apply............................... 72

Subdivision 230‑E—Hedging financial arrangements method                    73

230‑295. Objects of this Subdivision............................................................... 73

230‑300. Applying hedging financial arrangement method to gains and losses 74

230‑305. Table of events and allocation rules................................................... 76

230‑310. Aligning tax classification of gain or loss from hedging financial arrangement with tax classification of hedged item.......................................................................................................... 77

230‑315. Hedging financial arrangement election............................................. 81

230‑320. Hedging financial arrangement election where differing income and accounting years            82

230‑325. Hedging financial arrangements to which election applies................ 82

230‑330. Hedging financial arrangements to which election does not apply.... 83

230‑335. Hedging financial arrangement and hedged item............................. 84

230‑340. Generally whole arrangement must be hedging financial arrangement 87

230‑345. Requirements not satisfied because of honest mistake or inadvertence 89

230‑350. Derivative financial arrangement and foreign currency hedge......... 89

230‑355. Recording requirements.................................................................... 90

230‑360. Determining basis for allocating gain or loss.................................... 92

230‑365. Effectiveness of the hedge................................................................. 93

230‑370. When election ceases to apply........................................................... 93

230‑375. Balancing adjustment if election ceases to apply............................... 94

230‑380. Where requirements not met.............................................................. 94

230‑385. You may be excluded from this Subdivision for deliberate failures to comply with requirements           96

Subdivision 230‑F—Reliance on financial reports                                          97

230‑390. Objects of this Subdivision............................................................... 97

230‑395. Election to rely on financial reports................................................... 98

230‑400. Financial reports election where differing income and accounting years  99

230‑405. Commissioner discretion to waive requirements in paragraphs 230‑395(2)(c) and (e)             101

230‑410. Financial arrangements to which the election applies...................... 101

230‑415. Financial arrangements not covered by election.............................. 104

230‑420. Effect of election to rely on financial reports................................... 105

230‑425. When election ceases to apply......................................................... 106

230‑430. Balancing adjustment if election ceases to apply............................. 107

Subdivision 230‑G—Balancing adjustment on ceasing to have a financial arrangement           108

230‑435. When balancing adjustment made................................................... 108

230‑440. Exceptions....................................................................................... 110

230‑445. Balancing adjustment...................................................................... 111

Subdivision 230‑H—Exceptions                                                                         115

230‑450. Short‑term arrangements where non‑money amount involved........ 116

230‑455. Certain taxpayers where no significant deferral............................... 116

230‑460. Various rights and/or obligations.................................................... 120

230‑465. Ceasing to have a financial arrangement in certain circumstances... 125

230‑470. Forgiveness of commercial debts.................................................... 126

230‑475. Clarifying exceptions...................................................................... 126

230‑480. Treatment of gains in form of franked distribution etc.................... 127

Subdivision 230‑I—Other provisions                                                                127

230‑485. Effect of change of residence—rules for particular methods........... 128

230‑490. Effect of change of residence—disposal and reacquisition etc. after ceasing to be Australian resident where no further recognised gains or losses from arrangement.................................. 130

230‑495. Effect of change of accounting principles or standards................... 130

230‑500. Comparable foreign accounting and auditing standards.................. 131

230‑505. Financial arrangement as consideration for provision or acquisition of a thing        131

230‑510. Non‑arm’s length dealings in relation to financial arrangement....... 133

230‑515. Arm’s length dealings in relation to financial arrangement—adjustment to gain or loss in certain situations           135

230‑520. Disregard gains or losses covered by value shifting regime............ 136

230‑525. Consolidated financial reports......................................................... 136

Subdivision 230‑J—Additional operation of Division                                  137

230‑530. Additional operation of Division..................................................... 137

Division 240—Arrangements treated as a sale and loan                      139

Guide to Division 240                                                                                            139

240‑1..... What this Division is about............................................................. 139

240‑3..... How the recharacterisation affects the notional seller...................... 139

240‑7..... How the recharacterisation affects the notional buyer..................... 140

Subdivision 240‑A—Application and scope of Division                               141

Operative provisions                                                                                             141

240‑10... Application of this Division............................................................ 141

240‑15... Scope of Division........................................................................... 141

Subdivision 240‑B—The notional sale and notional loan                            142

Operative provisions                                                                                             142

240‑17... Who is the notional seller and the notional buyer?.......................... 142

240‑20... Notional sale of property by notional seller and notional acquisition of property by notional buyer        142

240‑25... Notional loan by notional seller to notional buyer........................... 143

Subdivision 240‑C—Amounts to be included in notional seller’s assessable income    144

Guide to Subdivision 240‑C                                                                                 144

240‑30... What this Subdivision is about........................................................ 144

Operative provisions                                                                                             145

240‑35... Amounts to be included in notional seller’s assessable income....... 145

240‑40... Arrangement payments not to be included in notional seller’s assessable income    145

Subdivision 240‑D—Deductions allowable to notional buyer                     146

Guide to Subdivision 240‑D                                                                                 146

240‑45... What this Subdivision is about........................................................ 146

Operative provisions                                                                                             146

240‑50... Extent to which deductions are allowable to notional buyer............ 146

240‑55... Arrangement payments not to be deductions................................... 147

Subdivision 240‑E—Notional interest and arrangement payments          147

Operative provisions                                                                                             147

240‑60... Notional interest.............................................................................. 147

240‑65... Arrangement payments................................................................... 148

240‑70... Arrangement payment periods........................................................ 148

Subdivision 240‑F—The end of the arrangement                                          149

Operative provisions                                                                                             149

240‑75... When is the end of the arrangement?............................................... 149

240‑80... What happens if the arrangement is extended or renewed............... 150

240‑85... What happens if an amount is paid by or on behalf of the notional buyer to acquire the property            151

240‑90... What happens if the notional buyer ceases to have the right to use the property       151

Subdivision 240‑G—Adjustments if total amount assessed to notional seller differs from amount of interest     153

Guide to Subdivision 240‑G                                                                                 153

240‑100. What this Subdivision is about........................................................ 153

Operative provisions                                                                                             153

240‑105. Adjustments for notional seller....................................................... 153

240‑110. Adjustments for notional buyer....................................................... 154

Subdivision 240‑H—Application of Division 16E to certain arrangements 155

240‑112. Division 16E applies to certain arrangements.................................. 155

Subdivision 240‑I—Provisions applying to hire purchase agreements    156

Operative provisions                                                                                             156

240‑115. Another person, or no person taken to own property in certain cases 156

Division 242—Leases of luxury cars                                                                158

Guide to Division 242                                                                                            158

242‑1..... What this Division is about............................................................. 158

Subdivision 242‑A—Notional sale and loan                                                    159

Guide to Subdivision 242‑A                                                                                 159

242‑5..... What this Subdivision is about........................................................ 159

Operative provisions                                                                                             159

242‑10... Application...................................................................................... 159

242‑15... Notional sale and acquisition........................................................... 160

242‑20... Consideration for notional sale, and cost, of car.............................. 160

242‑25... Notional loan by lessor to lessee..................................................... 161

Subdivision 242‑B—Amount to be included in lessor’s assessable income 162

Guide to Subdivision 242‑B                                                                                 162

242‑30... What this Subdivision is about........................................................ 162

Operative provisions                                                                                             162

242‑35... Amount to be included in lessor’s assessable income..................... 162

242‑40... Treatment of lease payments........................................................... 164

Subdivision 242‑C—Deductions allowable to lessee                                      164

Guide to Subdivision 242‑C                                                                                 164

242‑45... What this Subdivision is about........................................................ 164

Operative provisions                                                                                             165

242‑50... Extent to which deductions are allowable to lessee......................... 165

242‑55... Lease payments not deductible........................................................ 165

Subdivision 242‑D—Adjustments if total amount assessed to lessor differs from amount of interest      166

Guide to Subdivision 242‑D                                                                                 166

242‑60... What this Subdivision is about........................................................ 166

Operative provisions                                                                                             166

242‑65... Adjustments for lessor.................................................................... 166

242‑70... Adjustments for lessee.................................................................... 167

Subdivision 242‑E—Extension, renewal and final ending of the lease     168

Guide to Subdivision 242‑E                                                                                 168

242‑75... What this Subdivision is about........................................................ 168

Operative provisions                                                                                             169

242‑80... What happens if the term of the lease is extended or the lease is renewed                169

242‑85... What happens if an amount is paid by the lessee to acquire the car. 170

242‑90... What happens if the lessee stops having the right to use the car...... 171

Division 243—Limited recourse debt                                                               173

Guide to Division 243                                                                                            173

243‑10... What this Division is about............................................................. 173

Subdivision 243‑A—Circumstances in which Division operates                173

Operative provisions                                                                                             174

243‑15... When does this Division apply?...................................................... 174

243‑20... What is limited recourse debt?......................................................... 175

243‑25... When is a debt arrangement terminated?......................................... 177

243‑30... What is the financed property and the debt property?...................... 178

Subdivision 243‑B—Working out the excessive deductions                        178

Operative provisions                                                                                             178

243‑35... Working out the excessive deductions............................................ 178

Subdivision 243‑C—Amounts included in assessable income and deductions                181

Operative provisions                                                                                             181

243‑40... Amount included in debtor’s assessable income............................. 181

243‑45... Deduction for later payments in respect of debt.............................. 181

243‑50... Deduction for payments for replacement debt................................. 182

243‑55... Effect of Division on later capital allowance deductions................. 184

243‑57... Effect of Division on later capital allowance balancing adjustments 184

243‑58... Adjustment where debt only partially used for expenditure............ 185

Subdivision 243‑D—Special provisions                                                            186

Operative provisions                                                                                             186

243‑60... Application of Division to partnerships.......................................... 186

243‑65... Application where partner reduces liability..................................... 186

243‑70... Application of Division to companies ceasing to be 100% subsidiary 188

243‑75... Application of Division where debt forgiveness rules also apply... 188

Division 245—Forgiveness of commercial debts                                       189

Guide to Division 245                                                                                            189

245‑1..... What this Division is about............................................................. 189

245‑2..... Simplified outline of this Division.................................................. 189

Subdivision 245‑A—Debts to which operative rules apply                          190

Guide to Subdivision 245‑A                                                                                 190

245‑5..... What this Subdivision is about........................................................ 190

Application of Division                                                                                         191

245‑10... Commercial debts............................................................................ 191

245‑15... Non‑equity shares........................................................................... 191

245‑20... Parts of debts.................................................................................. 191

Subdivision 245‑B—What constitutes forgiveness of a debt                       192

Guide to Subdivision 245‑B                                                                                 192

245‑30... What this Subdivision is about........................................................ 192

Operative provisions                                                                                             192

245‑35... What constitutes forgiveness of a debt............................................ 192

245‑36... What constitutes forgiveness of a debt if the debt is assigned......... 193

245‑37... What constitutes forgiveness of a debt if a subscription for shares enables payment of the debt              193

245‑40... Forgivenesses to which operative rules do not apply...................... 193

245‑45... Application of operative rules if forgiveness involves an arrangement 194

Subdivision 245‑C—Calculation of gross forgiven amount of a debt      195

Guide to Subdivision 245‑C                                                                                 195

245‑48... What this Subdivision is about........................................................ 195

Working out the value of a debt                                                                         196

245‑50... Extent of forgiveness if consideration is given................................ 196

245‑55... General rule for working out the value of a debt............................. 196

245‑60... Special rule for working out the value of a non‑recourse debt........ 197

245‑61... Special rule for working out the value of a previously assigned debt 198

Working out if an amount is offset against the value of the debt               199

245‑65... Amount offset against amount of debt............................................ 199

Working out the gross forgiven amount                                                          201

245‑75... Gross forgiven amount of a debt.................................................... 201

245‑77... Gross forgiven amount shared between debtors............................. 202

Subdivision 245‑D—Calculation of net forgiven amount of a debt          202

Guide to Subdivision 245‑D                                                                                 202

245‑80... What this Subdivision is about........................................................ 202

Operative provisions                                                                                             203

245‑85... Reduction of gross forgiven amount............................................... 203

245‑90... Agreement between companies under common ownership for creditor to forgo capital loss or deduction               204

Subdivision 245‑E—Application of net forgiven amounts                          205

Guide to Subdivision 245‑E                                                                                 205

245‑95... What this Subdivision is about........................................................ 205

General operative provisions                                                                              207

245‑100. Subdivision not to apply to calculation of attributable income......... 207

245‑105. How total net forgiven amount is applied....................................... 207

Reduction of tax losses                                                                                          208

245‑115. Total net forgiven amount is applied in reduction of tax losses....... 208

245‑120. Allocation of total net forgiven amount in respect of tax losses...... 208

Reduction of net capital losses                                                                            208

245‑130. Remaining total net forgiven amount is applied in reduction of net capital losses     208

245‑135. Allocation of remaining total net forgiven amount in respect of net capital losses    209

Reduction of expenditure                                                                                     209

245‑145. Remaining total net forgiven amount is applied in reduction of expenditure             209

245‑150. Allocation of remaining total net forgiven amount in respect of expenditures          211

245‑155. How expenditure is reduced—straight line deductions................... 211

245‑157. How expenditure is reduced—diminishing balance deductions...... 212

245‑160. Amount applied in reduction of expenditure included in assessable income in certain circumstances      212

Reduction of cost bases of assets                                                                         213

245‑175. Remaining total net forgiven amount is applied in reduction of cost bases of CGT assets       213

245‑180. Allocation of remaining total net forgiven amount among relevant cost bases of CGT assets  214

245‑185. Relevant cost bases of investments in associated entities are reduced last                214

245‑190. Reduction of the relevant cost bases of a CGT asset....................... 214

Unapplied total net forgiven amount                                                                215

245‑195. No further consequences if there is any remaining unapplied total net forgiven amount          215

Subdivision 245‑F—Special rules relating to partnerships                         216

Guide to Subdivision 245‑F                                                                                  216

245‑200. What this Subdivision is about........................................................ 216

Operative provisions                                                                                             216

245‑215. Unapplied total net forgiven amount of a partnership is transferred to partners        216

Subdivision 245‑G—Record keeping                                                                217

245‑265. Keeping and retaining records......................................................... 217

Division 247—Capital protected borrowings                                              220

Guide to Division 247                                                                                            220

247‑1..... What this Division is about............................................................. 220

Operative provisions                                                                                             220

247‑5..... Object of Division........................................................................... 220

247‑10... What capital protected borrowing and capital protection are......... 221

247‑15... Application of this Division............................................................ 221

247‑20... Treating capital protection as a put option....................................... 222

247‑25... Number of put options.................................................................... 224

247‑30... Exercise or expiry of option............................................................ 225

Division 250—Assets put to tax preferred use                                            226

Guide to Division 250                                                                                            226

250‑1..... What this Division is about............................................................. 226

Subdivision 250‑A—Objects                                                                                227

250‑5..... Main objects.................................................................................... 227

Subdivision 250‑B—When this Division applies to you and an asset        227

Overall test                                                                                                               228

250‑10... When this Division applies to you and an asset.............................. 228

250‑15... General test..................................................................................... 228

250‑20... First exclusion—small business entities.......................................... 229

250‑25... Second exclusion—financial benefits under minimum value limit.. 229

250‑30... Third exclusion—certain short term or low value arrangements..... 230

250‑35... Exceptions to section 250‑30.......................................................... 231

250‑40... Fourth exclusion—sum of present values of financial benefits less than amount otherwise assessable   233

250‑45... Fifth exclusion—Commissioner determination............................... 234

Tax preferred use of asset                                                                                    235

250‑50... End user of an asset........................................................................ 235

250‑55... Tax preferred end user................................................................... 235

250‑60... Tax preferred use of an asset.......................................................... 236

250‑65... Arrangement period for tax preferred use....................................... 237

250‑70... New tax preferred use at end of arrangement period if tax preferred use continues  238

250‑75... What constitutes a separate asset for the purposes of this Division. 239

250‑80... Treatment of particular arrangements in the same way as leases..... 240

Financial benefits in relation to tax preferred use                                        240

250‑85... Financial benefits in relation to tax preferred use of an asset........... 240

250‑90... Financial benefit provided directly or indirectly.............................. 243

250‑95... Expected financial benefits in relation to an asset put to tax preferred use                243

250‑100. Present value of financial benefit that has already been provided.... 243

Discount rate to be used in working out present values                                244

250‑105. Discount rate to be used in working out present values.................. 244

Predominant economic interest                                                                          244

250‑110. Predominant economic interest........................................................ 244

250‑115. Limited recourse debt test................................................................ 245

250‑120. Right to acquire asset test................................................................ 246

250‑125. Effectively non‑cancellable, long term arrangement test.................. 247

250‑130. Meaning of effectively non‑cancellable arrangement....................... 248

250‑135. Level of expected financial benefits test.......................................... 248

250‑140. When to retest predominant economic interest under section 250‑135 249

Subdivision 250‑C—Denial of, or reduction in, capital allowance deductions               251

250‑145. Denial of capital allowance deductions............................................ 251

250‑150. Apportionment rule......................................................................... 251

Subdivision 250‑D—Deemed loan treatment of financial benefits provided for tax preferred use          253

250‑155. Arrangement treated as loan............................................................ 253

250‑160. Financial benefits that are subject to deemed loan treatment........... 256

250‑180. End value of asset........................................................................... 258

250‑185. Financial benefits subject to deemed loan treatment not assessed.... 259

Subdivision 250‑E—Taxation of deemed loan                                               260

Guide to Subdivision 250‑E                                                                                 261

250‑190. What this Subdivision is about........................................................ 261

Application and objects of Subdivision                                                             261

250‑195. Application of Subdivision............................................................. 261

250‑200. Objects of this Subdivision............................................................. 262

Tax treatment of gains and losses from financial arrangements              262

250‑205. Gains are assessable and losses deductible..................................... 262

250‑210. Gain or loss to be taken into account only once under this Act....... 262

Method to be applied to take account of gain or loss                                    263

250‑215. Methods for taking gain or loss into account.................................. 263

General rules                                                                                                           264

250‑220. Consistency in working out gains or losses (integrity measure)..... 264

250‑225. Rights and obligations include contingent rights and obligations.... 264

The accruals method                                                                                             265

250‑230. Application of accruals method....................................................... 265

250‑235. Overview of the accruals method.................................................... 265

250‑240. Applying accruals method to work out period over which gain or loss is to be spread            265

250‑245. How gain or loss is spread.............................................................. 266

250‑250. Allocating gain or loss to income years........................................... 266

250‑255. When to re‑estimate......................................................................... 267

250‑260. Re‑estimation if balancing adjustment on partial disposal............... 269

Balancing adjustment                                                                                            271

250‑265. When balancing adjustment made................................................... 271

250‑270. Exception for subsidiary member leaving consolidated group........ 272

250‑275. Balancing adjustment...................................................................... 272

Other provisions                                                                                                     275

250‑280. Financial arrangement received or provided as consideration.......... 275

Subdivision 250‑F—Treatment of asset when Division ceases to apply to the asset      277

250‑285. Treatment of asset after Division ceases to apply to the asset.......... 278

250‑290. Balancing adjustment under Subdivision 40‑D in some circumstances 280

Subdivision 250‑G—Objections against determinations and decisions by the Commissioner   281

250‑295. Objections against determinations and decisions by the Commissioner 281

Division 253—Financial claims scheme for account‑holders with insolvent ADIs           282

Subdivision 253‑A—Tax treatment of entitlements under financial claims scheme     282

Guide to Subdivision 253‑A                                                                                 282

253‑1..... What this Subdivision is about........................................................ 282

Operative provisions                                                                                             283

253‑5..... Payment of entitlement under financial claims scheme treated as payment from ADI              283

253‑10... Disposal of rights against ADI to APRA and meeting of financial claims scheme entitlement have no CGT effects........................................................................................................ 283

253‑15... Cost base of financial claims scheme entitlement and any remaining part of account that gave rise to entitlement    284

Part 3‑25—Particular kinds of trusts                                                                     285

Division 275—Australian managed investment trusts                            285

Guide to Division 275                                                                                            285

275‑1..... What this Division is about............................................................. 285

Subdivision 275‑A—Extended concept of managed investment trust for the purposes of this Division  285

275‑5..... Treatment of trading trusts etc......................................................... 286

275‑10... Trust with investment management activities outside Australia....... 286

275‑15... Every member of trust is a managed investment trust..................... 286

275‑20... No fund payment made in relation to the income year..................... 287

275‑30... Temporary circumstances outside the control of the trustee............ 287

275‑35... Application of subsections 102L(15) and 102T(16)....................... 288

Subdivision 275‑B—Choice for capital treatment of managed investment trust gains and losses            288

275‑100. Consequences of making choice—CGT to be primary code for calculating MIT gains or losses            288

275‑105. Covered assets................................................................................ 291

275‑110. MIT not to be corporate unit trust or trading trust........................... 292

275‑115. MIT CGT choices........................................................................... 293

275‑120. Consequences of not making choice—revenue account treatment... 294

Subdivision 275‑C—Carried interests in managed investment trusts       294

275‑200. Gains and losses etc. from carried interests in managed investment trusts reflected in assessable income or deduction........................................................................................................ 295

Part 3‑30Superannuation                                                                                         297

Division 280—Guide to the superannuation provisions                         297

280‑1..... Effect of this Division..................................................................... 297

280‑5..... Overview........................................................................................ 298

Contributions phase                                                                                               298

280‑10... Contributions phase—deductibility................................................. 298

280‑15... Contributions phase—limits on superannuation tax concessions.... 299

Investment phase                                                                                                    299

280‑20... Investment phase............................................................................. 299

Benefits phase                                                                                                          300

280‑25... Benefits phase—different types of superannuation benefit............. 300

280‑30... Benefits phase—taxation varies with age of recipient and type of benefit                300

280‑35... Benefits phase—roll‑overs.............................................................. 301

The regulatory scheme outside this Act                                                            301

280‑40.. Other relevant legislative schemes................................................... 301

Division 285—General concepts relating to superannuation              302

285‑5..... Transfers of property...................................................................... 302

Division 290Contributions to superannuation funds                           303

Guide to Division 290                                                                                            303

290‑1..... What this Division is about............................................................. 303

Subdivision 290‑AGeneral rules                                                                    303

290‑5..... Non‑application to roll‑over superannuation benefits etc................ 303

290‑10... No deductions other than under this Division................................. 304

Subdivision 290‑B—Deduction of employer contributions and other employment‑connected contributions        304

Deducting employer contributions                                                                     305

290‑60... Employer contributions deductible.................................................. 305

290‑65... Application to employees etc........................................................... 305

Conditions for deducting an employer contribution                                     306

290‑70... Employment activity conditions...................................................... 306

290‑75... Complying fund conditions............................................................. 306

290‑80... Age related conditions..................................................................... 307

Other employment‑connected deductions                                                        308

290‑85... Contributions for former employees etc.......................................... 308

290‑90... Controlling interest deductions........................................................ 311

290‑95... Amounts offset against superannuation guarantee charge............... 312

Returned contributions                                                                                         312

290‑100. Returned contributions assessable................................................... 312

Subdivision 290‑CDeducting personal contributions                                313

290‑150. Personal contributions deductible.................................................... 313

Conditions for deducting a personal contribution                                         314

290‑155. Complying superannuation fund condition..................................... 314

290‑160. Maximum earnings as employee condition..................................... 314

290‑165. Age‑related conditions.................................................................... 315

290‑170. Notice of intent to deduct conditions............................................... 315

290‑175. Deduction limited by amount specified in notice............................. 317

290‑180. Notice may be varied but not revoked or withdrawn....................... 317

Subdivision 290‑DTax offsets for spouse contributions                           318

290‑230. Offset for spouse contribution........................................................ 318

290‑235. Limit on amount of tax offsets........................................................ 319

290‑240. Tax file number............................................................................... 320

Division 292Excess contributions tax                                                         321

Guide to Division 292                                                                                            321

292‑1..... What this Division is about............................................................. 321

Subdivision 292‑AObject of this Division                                                    321

292‑5..... Object of this Division.................................................................... 321

Subdivision 292‑BExcess concessional contributions tax                        322

292‑10... What this Subdivision is about........................................................ 322

Operative provisions                                                                                             322

292‑15... Liability for excess concessional contributions tax.......................... 322

292‑20... Your excess concessional contributions for a financial year........... 322

292‑25... Your concessional contributions for a financial year...................... 323

Subdivision 292‑CExcess non‑concessional contributions tax               324

292‑75... What this Subdivision is about........................................................ 324

Operative provisions                                                                                             324

292‑80... Liability for excess non‑concessional contributions tax.................. 324

292‑85... Your excess non‑concessional contributions for a financial year.... 324

292‑90... Your non‑concessional contributions for a financial year............... 326

292‑95... Contributions arising from structured settlements or orders for personal injuries    327

292‑100. Contribution relating to some CGT small business concessions..... 329

292‑105. CGT cap amount............................................................................. 331

Subdivision 292‑DModifications for defined benefit interests               332

292‑155. What this Subdivision is about........................................................ 332

Operative provisions                                                                                             332

292‑160. Application...................................................................................... 332

292‑165. Concessional contributions—special rules for defined benefit interests 333

292‑170. Notional taxed contributions........................................................... 333

292‑175. Defined benefit interest.................................................................... 336

Subdivision 292‑EExcess contributions tax assessments                         337

Guide to Subdivision 292‑E                                                                                 337

292‑225. What this Subdivision is about........................................................ 337

Operative provisions                                                                                             337

292‑230. Commissioner must make an excess contributions tax assessment. 337

292‑235. Part‑year assessment....................................................................... 338

292‑240. Validity of assessment.................................................................... 338

292‑245. Objections....................................................................................... 339

292‑250. Evidence.......................................................................................... 339

Subdivision 292‑FAmending excess contributions tax assessments      339

Guide to Subdivision 292‑F                                                                                  339

292‑300. What this Subdivision is about........................................................ 339

Operative provisions                                                                                             340

292‑305. Amendments within 4 years of the original assessment.................. 340

292‑310. Amended assessments are treated as excess contributions tax assessments             340

292‑315. Later amendments—on request....................................................... 340

292‑320. Later amendments—fraud or evasion.............................................. 341

292‑325. Further amendment of an amended particular.................................. 341

292‑330. Amendment on review etc............................................................... 342

Subdivision 292‑G—Collection and recovery                                                342

Guide to Subdivision 292‑G                                                                                 342

292‑380. What this Subdivision is about........................................................ 342

Operative provisions                                                                                             343

292‑385. Due date for payment of excess contributions tax........................... 343

292‑390. General interest charge.................................................................... 343

292‑395. Refunds of amounts overpaid......................................................... 343

292‑405. Release authority............................................................................. 343

292‑410. Giving a release authority to a superannuation provider.................. 344

292‑415. Superannuation provider given release authority must pay amount. 345

Subdivision 292‑HOther provisions                                                              347

292‑465. Commissioner’s discretion to disregard contributions etc. in relation to a financial year          347

292‑470. Power of Commissioner to obtain information............................... 349

Division 295Taxation of superannuation entities                                 350

Guide to Division 295                                                                                            350

295‑1..... What this Division is about............................................................. 350

Subdivision 295‑A—Provisions of general operation                                  351

295‑5..... Entities to which Division applies................................................... 351

295‑10... How to work out the tax payable by superannuation entities.......... 352

295‑15... Division does not impose a tax on property of a State.................... 353

295‑20... Exempting laws ineffective............................................................. 353

295‑25... Assessments on basis of anticipated SIS Act notice....................... 354

295‑30... Effect of revocation etc. of SIS Act notices..................................... 354

295‑35... Acronyms used in tables................................................................. 354

Subdivision 295‑BModifications of provisions of this Act                      355

295‑85... CGT to be primary code for calculating gains or losses.................. 355

295‑90... CGT rules for pre‑30 June 1988 assets........................................... 356

295‑95... Deductions related to contributions................................................. 357

295‑100. Deductions for investing in PSTs and life policies.......................... 358

295‑105. Distributions to PST unitholders..................................................... 359

Subdivision 295‑CContributions included                                                   359

Guide to Subdivision 295‑C                                                                                 359

295‑155. What this Subdivision is about........................................................ 359

Contributions and payments                                                                                361

295‑160. Contributions and payments............................................................ 361

295‑165. Exception—spouse contributions.................................................... 362

295‑170. Exception—Government co‑contributions and contributions for a child  362

295‑171. Exception—payments from FHSAs and Government FHSA contributions            362

295‑173. Exception—trustee contributions.................................................... 363

295‑175. Exception—payments by a member spouse.................................... 363

295‑180. Exception—choice to exclude certain contributions........................ 363

295‑185. Exception—temporary residents..................................................... 364

Personal contributions and roll‑over amounts                                               364

295‑190. Personal contributions and roll‑over amounts................................. 364

295‑195. Exclusion of personal contributions—contributions....................... 366

295‑197. Exclusion of personal contributions—successor funds................... 367

Transfers from foreign funds                                                                             368

295‑200. Transfers from foreign superannuation funds................................. 368

Application of tables to RSA providers                                                            368

295‑205. Application of tables to RSA providers.......................................... 368

Former constitutionally protected funds                                                          369

295‑210. Former constitutionally protected funds.......................................... 369

Subdivision 295‑DContributions excluded                                                  369

295‑260. Transfer of liability to investment vehicle........................................ 369

295‑265. Application of pre‑1 July 88 funding credits................................... 371

295‑270. Anticipated funding credits............................................................. 373

Subdivision 295‑EOther income amounts                                                   374

Amounts included                                                                                                   374

295‑320. Other amounts included in assessable income................................. 374

295‑325. Previously complying funds........................................................... 376

295‑330. Previously foreign funds................................................................. 376

Amounts excluded                                                                                                  376

295‑335. Amounts excluded from assessable income.................................... 376

Subdivision 295‑FExempt income                                                                 377

295‑385. Income from assets set aside to meet current pension liabilities...... 377

295‑390. Income from other assets used to meet current pension liabilities... 378

295‑395. Meaning of segregated non‑current assets..................................... 381

295‑400. Income of a PST attributable to current pension liabilities............... 381

295‑405. Other exempt income...................................................................... 382

295‑410. Amount credited to RSA................................................................. 383

Subdivision 295‑GDeductions                                                                         383

Death or disability benefits                                                                                  383

295‑460. Benefits for which deductions are available.................................... 383

295‑465. Complying funds—deductions for insurance premiums................. 384

295‑470. Complying funds—deductions for future liability to pay benefits... 387

295‑475. RSA providers—deductions for insurance premiums..................... 388

295‑480. Meaning of whole of life policy and endowment policy................... 389

Increased amount of superannuation lump sum death benefits                 389

295‑485. Deductions for increased amount of superannuation lump sum death benefit          389

Other deductions                                                                                                     390

295‑490. Other deductions............................................................................. 390

Certain amounts cannot be deducted                                                                 394

295‑495. Amounts that cannot be deducted.................................................... 394

Subdivision 295‑HComponents of taxable income                                    394

295‑545. Components of taxable income—complying superannuation funds, complying ADFs and PSTs           395

295‑550. Meaning of non‑arm’s length income............................................. 395

295‑555. Components of taxable income—RSA providers........................... 397

Subdivision 295‑INo‑TFN contributions                                                      398

295‑605. Liability for tax on no‑TFN contributions income........................... 398

295‑610. No‑TFN contributions income........................................................ 398

295‑615. Meaning of quoted (for superannuation purposes)........................ 399

295‑620. No reduction under Subdivision 295‑D.......................................... 400

295‑625. Assessments................................................................................... 400

Subdivision 295‑JTax offset for no‑TFN contributions income (TFN quoted within 4 years)               401

295‑675. Entitlement to a tax offset................................................................ 401

295‑680. Amount of the tax offset................................................................. 402

Division 301Superannuation member benefits paid from complying plans etc.           403

Guide to Division 301                                                                                            403

301‑1..... What this Division is about............................................................. 403

Subdivision 301‑A—Application                                                                        403

301‑5..... Division applies to superannuation member benefits paid from complying plans etc.              403

Subdivision 301‑B—Member benefits: general rules                                   404

Member benefits—recipient aged 60 or above                                               404

301‑10... All superannuation benefits are tax free.......................................... 404

Member benefits—recipient aged over preservation age and under 60  405

301‑15... Tax free status of tax free component.............................................. 405

301‑20... Superannuation lump sum—taxable component taxed at 0% up to low rate cap amount, 15% on remainder           405

301‑25... Superannuation income stream—taxable component attracts 15% offset 406

Member benefits—recipient aged under preservation age                         406

301‑30... Tax free status of tax free component.............................................. 406

301‑35... Superannuation lump sum—taxable component taxed at 20%........ 406

301‑40... Superannuation income stream—taxable component is assessable income, 15% offset for disability benefit          407

Subdivision 301‑C—Member benefits: elements untaxed in fund             407

301‑90... Tax free component and element taxed in fund dealt with under Subdivision 301‑B, but element untaxed in the fund dealt with under this Subdivision............................................................ 408

Member benefits (element untaxed in fund)—recipient aged 60 or above 408

301‑95... Superannuation lump sum—element untaxed in fund taxed at 15% up to untaxed plan cap amount, top rate on remainder........................................................................................................ 408

301‑100. Superannuation income stream—element untaxed in fund attracts 10% offset         409

Member benefits (element untaxed in fund)—recipient aged over preservation age and under 60          409

301‑105. Superannuation lump sum—element untaxed in fund taxed at 15% up to low rate cap amount, 30% up to untaxed plan cap amount, top rate on remainder................................................... 409

301‑110. Superannuation income stream—element untaxed in fund is assessable income      410

Member benefits (element untaxed in fund)—recipient aged under preservation age 410

301‑115. Superannuation lump sum—element untaxed in fund taxed at 30% up to untaxed plan cap amount, top rate on remainder........................................................................................................ 410

301‑120. Superannuation income stream—element untaxed in fund is assessable income      411

Miscellaneous                                                                                                          411

301‑125. Unclaimed money payments by the Commissioner......................... 411

Subdivision 301‑D—Departing Australia superannuation payments       411

301‑170. Departing Australia superannuation payments.............................. 411

301‑175. Treatment of departing Australia superannuation benefits............... 413

Subdivision 301‑E—Superannuation lump sum member benefits less than $200         413

301‑225. Superannuation lump sum member benefits less than $200 are tax free 413

Division 302Superannuation death benefits paid from complying plans etc. 415

Guide to Division 302                                                                                            415

302‑1..... What this Division is about............................................................. 415

Subdivision 302‑A—Application                                                                        415

302‑5..... Division applies to superannuation death benefits paid from complying plans etc.  415

302‑10... Superannuation death benefits paid to trustee of deceased estate..... 416

Subdivision 302‑B—Death benefits to dependant                                          416

Lump sum death benefits to dependants are tax free                                    417

302‑60... All of superannuation lump sum is tax free..................................... 417

Superannuation income stream—either deceased died aged 60 or above or dependant aged 60 or above            417

302‑65... Superannuation income stream benefits are tax free........................ 417

Superannuation income stream—deceased died aged under 60 and dependant aged under 60 418

302‑70... Superannuation income stream—tax free status of tax free component 418

302‑75... Superannuation income stream—taxable component attracts 15% offset 418

Death benefits to dependant—elements untaxed in fund                              418

302‑80... Treatment of element untaxed in the fund of superannuation income stream death benefit to dependant  418

302‑85... Deceased died aged 60 or above or dependant aged 60 years or above—superannuation income stream: element untaxed in fund attracts 10% offset.............................................................. 419

302‑90... Deceased died aged under 60 and dependant aged under 60—superannuation income stream: element untaxed in fund is assessable income........................................................................... 419

Subdivision 302‑C—Death benefits to non‑dependant                                  419

Superannuation lump sum                                                                                   420

302‑140. Superannuation lump sum—tax free status of tax free component.. 420

302‑145. Superannuation lump sum—element taxed in the fund taxed at 15%, element untaxed in the fund taxed at 30%     420

Subdivision 302‑D—Definitions relating to dependants                               420

302‑195. Meaning of death benefits dependant.............................................. 421

302‑200. What is an interdependency relationship?....................................... 421

Division 303—Superannuation benefits paid in special circumstances  423

303‑5..... Commutation of income stream if you are under 25 etc.................. 423

303‑10... Superannuation lump sum member benefit paid to member having a terminal medical condition             423

Division 304Superannuation benefits in breach of legislative requirements etc.         425

Guide to Division 304                                                                                            425

304‑1..... What this Division is about............................................................. 425

Operative provisions                                                                                             425

304‑5..... Application...................................................................................... 425

304‑10... Superannuation benefits in breach of legislative requirements etc... 425

304‑15... Excess payments from release authorities....................................... 427

Division 305—Superannuation benefits paid from non‑complying superannuation plans           428

Guide to Division 305                                                                                            428

305‑1..... What this Division is about............................................................. 428

Subdivision 305‑A—Superannuation benefits from Australian non‑complying superannuation funds  428

305‑5..... Tax treatment of superannuation benefits from certain Australian non‑complying superannuation funds                428

Subdivision 305‑B—Superannuation benefits from foreign superannuation funds     429

Application of Subdivision                                                                                   429

305‑55... Restriction to lump sums received from certain foreign superannuation funds         429

Lump sums received within 6 months after Australian residency or termination of foreign employment etc.     430

305‑60... Lump sums tax free—foreign resident period................................. 430

305‑65... Lump sums tax free—Australian resident period............................ 431

Lump sums to which sections 305‑60 and 305‑65 do not apply                  432

305‑70... Lump sums received more than 6 months after Australian residency or termination of foreign employment etc.     432

305‑75... Lump sums—applicable fund earnings.......................................... 433

305‑80... Lump sums paid into complying superannuation plans—choice..... 435

Division 306Roll‑overs etc.                                                                               436

Guide to Division 306                                                                                            436

306‑1..... What this Division is about............................................................. 436

Operative provisions                                                                                             436

306‑5..... Effect of a roll‑over superannuation benefit.................................... 436

306‑10... Roll‑over superannuation benefit.................................................... 436

306‑15... Tax on excess untaxed roll‑over amounts....................................... 437

306‑20... Effect of payment to government of unclaimed superannuation money 438

306‑25... Payments connected with financial claims scheme to RSAs........... 438

Division 307Key concepts relating to superannuation benefits    441

Guide to Division 307                                                                                            441

307‑1..... What this Division is about............................................................. 441

Subdivision 307‑A—Superannuation benefits generally                             442

307‑5..... What is a superannuation benefit?.................................................. 442

307‑10... Payments that are not superannuation benefits............................... 447

307‑15... Payments for your benefit or at your direction or request............... 448

Subdivision 307‑B—Superannuation lump sums and superannuation income stream benefits 448

307‑65... Meaning of superannuation lump sum........................................... 448

307‑70... Meaning of superannuation income stream and superannuation income stream benefit        448

Subdivision 307‑C—Components of a superannuation benefit                  449

307‑120. Components of superannuation benefit........................................... 449

307‑125. Proportioning rule........................................................................... 450

307‑130. Superannuation guarantee payment consists entirely of taxable component             451

307‑135. Superannuation co‑contribution benefit payment consists entirely of tax free component        451

307‑140. Contributions‑splitting superannuation benefit consists entirely of taxable component            452

307‑142. Components of certain unclaimed money payments........................ 452

307‑145. Modification for disability benefits................................................. 455

307‑150. Modification in respect of superannuation lump sum with element untaxed in fund                456

Subdivision 307‑D—Superannuation interests                                               457

307‑200. Regulations relating to meaning of superannuation interests........... 457

307‑205. Value of superannuation interest..................................................... 458

307‑210. Tax free component of superannuation interest............................... 458

307‑215. Taxable component of superannuation interest............................... 458

307‑220. What is the contributions segment?................................................. 459

307‑225. What is the crystallised segment?.................................................... 460

Subdivision 307‑E—Elements taxed and untaxed in the fund of the taxable component of superannuation benefit                                                                                                       461

307‑275. Element taxed in the fund and element untaxed in the fund of superannuation benefits            461

307‑280. Superannuation benefits from constitutionally protected funds etc.. 461

307‑285. Trustee can choose to convert element taxed in the fund to element untaxed in the fund          462

307‑290. Taxed and untaxed elements of death benefit superannuation lump sums                462

307‑295. Superannuation benefits from public sector superannuation schemes may include untaxed element        463

307‑297. Public sector superannuation schemes—elements set by regulations 464

307‑300. Certain unclaimed money payments................................................ 465

Subdivision 307‑F—Low rate cap and untaxed plan cap amounts            468

307‑345. Low rate cap amount...................................................................... 468

307‑350. Untaxed plan cap amount............................................................... 469

Subdivision 307‑G—Other concepts                                                                  470

307‑400. Meaning of service period for a superannuation lump sum............ 470

Division 310—Loss relief for merging superannuation funds            472

Guide to Division 310                                                                                            472

310‑1..... What this Division is about............................................................. 472

Operative provisions                                                                                             473

Subdivision 310‑A—Object of this Division                                                    473

310‑5..... Object.............................................................................................. 473

Subdivision 310‑B—Choice to transfer losses                                                473

310‑10... Original fund’s assets extend beyond life insurance policies and units in pooled superannuation trusts  473

310‑15... Original fund’s assets include a complying superannuation/FHSA life insurance policy         475

310‑20... Original fund’s assets include units in a pooled superannuation trust 477

Subdivision 310‑C—Consequences of choosing to transfer losses             478

310‑25... Who losses can be transferred to..................................................... 478

310‑30... Losses that can be transferred......................................................... 479

310‑35... Effect of transferring a net capital loss............................................ 480

310‑40... Effect of transferring a tax loss....................................................... 481

Subdivision 310‑D—Choice for assets roll‑over                                            482

310‑45... Choosing the assets roll‑over.......................................................... 482

310‑50... Choosing the form of the assets roll‑over....................................... 483

Subdivision 310‑E—Consequences of choosing assets roll‑over                484

310‑55... CGT assets—if global asset approach chosen................................. 485

310‑60... CGT assets—individual asset approach.......................................... 485

310‑65... Revenue assets—if global asset approach chosen........................... 486

310‑70... Revenue assets—individual asset approach.................................... 487

310‑75... Further consequences for roll‑overs involving life insurance companies 487

Subdivision 310‑F—Choices                                                                                487

310‑85... Choices........................................................................................... 488

Part 3‑32—Co‑operatives and mutual entities                                                  489

Division 315—Demutualisation of private health insurers                   489

Guide to Division 315                                                                                            489

315‑1..... What this Division is about............................................................. 489

Subdivision 315‑A—Capital gains and losses connected with a demutualisation of a private health insurer to be disregarded                                                                                490

Rules for policy holders                                                                                        491

315‑5..... Policy holders to disregard capital gains and losses related to demutualisation of private health insurer  491

315‑10... Effect on the legal personal representative or beneficiary................ 491

315‑15... Demutualisations to which this Division applies............................. 491

315‑20... What assets are covered.................................................................. 492

Rules for demutualising health insurer                                                            492

315‑25... Demutualising health insurers to disregard capital gains and losses related to demutualisation                492

Rules for other entities                                                                                          493

315‑30... Other entities to disregard capital gains and losses related to demutualisation          493

Subdivision 315‑B—Cost base of certain shares and rights in private health insurers                493

315‑80... Cost base and acquisition time of demutualisation assets................ 493

315‑85... Demutualisation asset...................................................................... 494

315‑90... Participating policy holders............................................................. 495

Subdivision 315‑C—Lost policy holders trust                                                495

315‑140. Lost policy holders trust.................................................................. 495

315‑145. CGT treatment of demutualisation assets in lost policy holders trust 496

315‑150. Roll‑over where assets transferred to lost policy holder.................. 497

315‑155. Trustee assessed if assets dealt with not for benefit of lost policy holder 497

315‑160. Subdivision 126‑E does not apply to lost policy holders trust........ 498

Subdivision 315‑D—Special cost base rules for certain shares and rights in holding companies             498

315‑210. Cost base for shares and rights in certain holding companies......... 498

Subdivision 315‑E—Special CGT rule for legal personal representatives and beneficiaries    500

315‑260. Special CGT rule for legal personal representatives and beneficiaries 500

Subdivision 315‑F—Non‑CGT consequences of demutualisation              501

315‑310. General taxation consequences of issue of demutualisation assets etc. 501

Division 316—Demutualisation of friendly society health or life insurers           502

Guide to Division 316                                                                                            502

316‑1..... What this Division is about............................................................. 502

Subdivision 316‑A—Application                                                                        502

316‑5..... Application of this Division............................................................ 502

Subdivision 316‑B—Capital gains and losses connected with the demutualisation       503

Guide to Subdivision 316‑B                                                                                 503

316‑50... What this Subdivision is about........................................................ 503

Gains and losses of members, insured entities and successors                    504

316‑55... Disregarding capital gains and losses, except some involving receipt of money      504

316‑60... Taking account of some capital gains and losses involving receipt of money           505

316‑65... Valuation factor for sections 316‑60, 316‑105 and 316‑165........... 506

316‑70... Value of the friendly society........................................................... 507

Friendly society’s gains and losses                                                                     509

316‑75... Disregarding friendly society’s capital gains and losses................. 509

Other entities’ gains and losses                                                                           509

316‑80... Disregarding other entities’ capital gains and losses....................... 509

Subdivision 316‑C—Cost base of shares and rights issued under the demutualisation                509

Guide to Subdivision 316‑C                                                                                 509

316‑100. What this Subdivision is about........................................................ 509

316‑105. Cost base and time of acquisition of shares and certain rights issued under demutualisation   510

316‑110. Demutualisation assets.................................................................... 511

316‑115. Entities to which section 316‑105 applies....................................... 511

Subdivision 316‑D—Lost policy holders trust                                                512

Guide to Subdivision 316‑D                                                                                 512

316‑150. What this Subdivision is about........................................................ 512

Application                                                                                                               513

316‑155. Lost policy holders trust.................................................................. 513

Effects of CGT events happening to interests and assets in trust               514

316‑160. Disregarding beneficiaries’ capital gains and losses, except some involving receipt of money                514

316‑165. Taking account of some capital gains and losses involving receipt of money by beneficiaries 514

316‑170. Roll‑over where shares or rights to acquire shares transferred to beneficiary of lost policy holders trust                515

316‑175. Trustee assessed if shares or rights dealt with not for benefit of beneficiary of lost policy holders trust  516

316‑180. Subdivision 126‑E does not apply.................................................. 516

Subdivision 316‑E—Special CGT rules for legal personal representatives and beneficiaries  517

316‑200. Demutualisation assets not owned by deceased but passing to beneficiary in deceased estate  517

316‑205. Interest in lost policy holders trust not owned by deceased but passing to beneficiary in deceased estate                518

Subdivision 316‑F—Non‑CGT consequences of the demutualisation       518

Guide to Subdivision 316‑F                                                                                  518

316‑250. What this Subdivision is about........................................................ 518

316‑255. General taxation consequences of issue of demutualisation assets etc. 519

316‑260. Franking debits to stop the friendly society and its subsidiaries having franking surpluses     520

316‑265. Franking debits to negate franking credits from some distributions to friendly society and subsidiaries  520

316‑270. Franking debits to negate franking credits from post‑demutualisation payments of pre‑demutualisation tax            521

316‑275. Franking credits to negate franking debits from refunds of tax paid before demutualisation    521

Part 3‑35—Insurance business                                                                                   522

Division 320—Life insurance companies                                                       522

Guide to Division 320                                                                                            522

320‑1..... What this Division is about............................................................. 522

Operative provisions                                                                                             524

Subdivision 320‑A—Preliminary                                                                       524

320‑5..... Object of Division........................................................................... 524

Subdivision 320‑B—What is included in a life insurance company’s assessable income            525

Guide to Subdivision 320‑B                                                                                 525

320‑10... What this Subdivision is about........................................................ 525

Operative provisions                                                                                             525

320‑15... Assessable income—various amounts............................................ 525

320‑30... Assessable income—special provision for certain income years..... 527

320‑35... Exempt income................................................................................ 528

320‑37... Non‑assessable non‑exempt income............................................... 528

320‑45... Tax treatment of gains or losses from CGT events in relation to complying superannuation/FHSA assets             531

Subdivision 320‑C—Deductions and capital losses                                        531

Guide to Subdivision 320‑C                                                                                 531

320‑50... What this Subdivision is about........................................................ 531

Operative provisions                                                                                             532

320‑55... Deduction for life insurance premiums where liabilities under life insurance policies are to be discharged from complying superannuation/FHSA assets.......................................................... 532

320‑60... Deduction for life insurance premiums where liabilities under life insurance policies are to be discharged from segregated exempt assets.................................................................................. 533

320‑65... Deduction for life insurance premiums in respect of life insurance policies that provide for participating or discretionary benefits............................................................................................ 533

320‑70... No deduction for life insurance premiums in respect of certain life insurance policies payable only on death or disability........................................................................................................ 533

320‑75... Deduction for ordinary investment policies..................................... 534

320‑80... Deduction for certain claims paid under life insurance policies....... 534

320‑85... Deduction for increase in value of liabilities under net risk components of life insurance policies           535

320‑87... Deduction for assets transferred from or to complying superannuation/FHSA asset pool       536

320‑100. Deduction for life insurance premiums paid under certain contracts of reinsurance 537

320‑105. Deduction for assets transferred to segregated exempt assets......... 537

320‑107. Deductions for increased amount of lump sum death benefit.......... 537

320‑110. Deduction for interest credited to income bonds............................. 538

320‑111. Deduction for funeral policy payout................................................ 539

320‑112. Deduction for scholarship plan payout............................................ 539

320‑115. No deduction for amounts credited to RSAs................................... 540

320‑120. Capital losses from assets other than complying superannuation/FHSA assets or segregated exempt assets           540

320‑125. Capital losses from complying superannuation/FHSA assets......... 540

Subdivision 320‑D—Income tax, taxable income and tax loss of life insurance companies       541

Guide to Subdivision 320‑D                                                                                 541

320‑130. What this Subdivision is about........................................................ 541

320‑131. Overview of Subdivision................................................................ 541

General rules                                                                                                           543

320‑133. Object of Subdivision..................................................................... 543

320‑134. Income tax of a life insurance company.......................................... 543

320‑135. Taxable income and tax loss of each of the 2 classes...................... 544

Taxable income and tax loss of life insurance companies                           545

320‑137. Taxable income—complying superannuation/FHSA class............. 545

320‑139. Taxable income—ordinary class..................................................... 547

320‑141. Tax loss—complying superannuation/FHSA class......................... 548

320‑143. Tax loss—ordinary class................................................................. 549

320‑149. Provisions that apply only in relation to the ordinary class............. 550

Subdivision 320‑E—No‑TFN contributions of life insurance companies that are RSA providers            550

Guide to Subdivision 320‑E                                                                                 550

320‑150. What this Subdivision is about........................................................ 550

Operative provisions                                                                                             551

320‑155. Subdivisions 295‑I and 295‑J apply to companies that are RSA providers              551

Subdivision 320‑F—Complying superannuation/FHSA asset pool           551

Guide to Subdivision 320‑F                                                                                  551

320‑165. What this Subdivision is about........................................................ 551

Operative provisions                                                                                             552

320‑170. Establishment of complying superannuation/FHSA asset pool....... 552

320‑175. Valuations of complying superannuation/FHSA assets and complying superannuation/FHSA liabilities for each valuation time.................................................................................. 553

320‑180. Consequences of a valuation under section 320‑175....................... 554

320‑185. Transfer of assets to complying superannuation/FHSA asset pool otherwise than as a result of a valuation under section 320‑175............................................................................... 555

320‑190. Complying superannuation/FHSA liabilities................................... 556

320‑195. Transfer of assets and payment of amounts from a complying superannuation/FHSA asset pool otherwise than as a result of a valuation under section 320‑175..................................... 557

320‑200. Consequences of transfer of assets to or from complying superannuation/FHSA asset pool   558

Subdivision 320‑H—Segregation of assets to discharge exempt life insurance policy liabilities              560

Guide to Subdivision 320‑H                                                                                 560

320‑220. What this Subdivision is about........................................................ 560

Operative provisions                                                                                             561

320‑225. Segregation of assets for purpose of discharging exempt life insurance policy liabilities         561

320‑230. Valuations of segregated exempt assets and exempt life insurance policy liabilities for each valuation time            562

320‑235. Consequences of a valuation under section 320‑230....................... 563

320‑240. Transfer of assets to segregated exempt assets otherwise than as a result of a valuation under section 320‑230      564

320‑245. Exempt life insurance policy liabilities............................................ 565

320‑246. Exempt life insurance policy........................................................... 566

320‑247. Policy split into an exempt life insurance policy and another life insurance policy   568

320‑250. Transfer of assets and payment of amounts from segregated exempt assets otherwise than as a result of a valuation under section 320‑230............................................................................... 569

320‑255. Consequences of transfer of assets to or from segregated exempt assets 570

Subdivision 320‑I—Transfers of business                                                       573

Guide to Subdivision 320‑I                                                                                   573

320‑300. What this Subdivision is about........................................................ 573

Operative provisions                                                                                             574

320‑305. When this Subdivision applies........................................................ 574

320‑310. Special deductions and amounts of assessable income.................... 574

320‑315. Complying superannuation/FHSA asset pool and segregated exempt assets           575

320‑320. Certain amounts treated as life insurance premiums........................ 575

320‑325. Friendly societies............................................................................ 576

320‑330. Immediate annuities......................................................................... 576

320‑335. Parts of assets treated as separate assets.......................................... 576

320‑340. Continuous disability policies......................................................... 577

320‑345. Exemption of management fees....................................................... 578

Division 321—General insurance companies and companies that self‑insure in respect of workers’ compensation liabilities                                                                  579

Subdivision 321‑A—Provision for, and payment of, claims by general insurance companies  579

321‑10... Assessable income to include amount for reduction in outstanding claims liability  579

321‑15... Deduction for increase in outstanding claims liability..................... 580

321‑20... How value of outstanding claims liability is worked out................. 580

321‑25... Deduction for claims paid during current year................................ 581

Subdivision 321‑B—Premium income of general insurance companies 581

321‑45... Assessable income to include gross premiums............................... 581

321‑50... Assessable income to include amount for reduction in value of unearned premium reserve     581

321‑55... Deduction for increase in value of unearned premium reserve........ 582

321‑60... How value of unearned premium reserve is worked out................. 582

Subdivision 321‑C—Companies that self‑insure in respect of workers’ compensation liabilities             584

321‑80... Assessable income to include amount for reduction in outstanding claims liability  584

321‑85... Deduction for outstanding claims liability....................................... 584

321‑90... How value of outstanding claims liability is worked out................. 585

321‑95... Deductions for claims paid during current year............................... 585

Division 322—Assistance for policyholders with insolvent general insurers      586

Guide to Division 322                                                                                            586

322‑1..... What this Division is about............................................................. 586

Subdivision 322‑A—HIH rescue package                                                        586

322‑5..... Rescue payments treated as insurance payments by HIH................ 586

322‑10... HIH Trust exempt from tax............................................................. 587

322‑15... Certain capital gains and capital losses disregarded......................... 587

Subdivision 322‑B—Tax treatment of entitlements under financial claims scheme     587

Guide to Subdivision 322‑B                                                                                 587

322‑20... What this Subdivision is about........................................................ 587

Operative provisions                                                                                             588

322‑25... Payment of entitlement under financial claims scheme treated as payment from insurer           588

322‑30... Disposal of rights against insurer to APRA and meeting of financial claims scheme entitlement have no CGT effects........................................................................................................ 589

Part 3‑45—Rules for particular industries and occupations                   590

Division 328—Small business entities                                                               590

Guide to Division 328                                                                                            590

328‑5..... What this Division is about............................................................. 590

328‑10... Concessions available to small business entities............................. 591

Subdivision 328‑B—Objects of this Division                                                   592

328‑50... Objects of this Division.................................................................. 592

Subdivision 328‑C—What is a small business entity                                     593

Guide to Subdivision 328‑C                                                                                 593

328‑105. What this Subdivision is about........................................................ 593

Operative provisions                                                                                             593

328‑110. Meaning of small business entity.................................................... 593

328‑115. Meaning of aggregated turnover.................................................... 595

328‑120. Meaning of annual turnover........................................................... 596

328‑125. Meaning of connected with an entity............................................... 597

328‑130. Meaning of affiliate......................................................................... 600

Subdivision 328‑D—Capital allowances for small business entities         600

Guide to Subdivision 328‑D                                                                                 600

328‑170. What this Subdivision is about........................................................ 600

Operative provisions                                                                                             602

328‑175. Calculations for depreciating assets................................................. 602

328‑180. Low cost assets............................................................................... 604

328‑185. Pooling............................................................................................ 605

328‑190. Calculation...................................................................................... 607

328‑195. Opening pool balance...................................................................... 608

328‑200. Closing pool balance....................................................................... 609

328‑205. Estimate of taxable use.................................................................... 610

328‑210. Low pool value............................................................................... 612

328‑215. Disposal etc. of depreciating assets................................................. 613

328‑220. What happens if you are not a small business entity or do not choose to use this Subdivision for an income year  614

328‑225. Change in business use................................................................... 614

328‑230. Estimate where deduction denied.................................................... 617

328‑235. Interaction with Divisions 85 and 86.............................................. 618

328‑243. Roll‑over relief................................................................................ 618

328‑245. Consequences of roll‑over.............................................................. 619

328‑247. Pool deductions............................................................................... 619

328‑250. Deductions for assets first used in BAE year.................................. 620

328‑253. Deductions for cost addition amounts............................................. 621

328‑255. Closing pool balance etc. below zero.............................................. 622

328‑257. Taxable use..................................................................................... 623

Subdivision 328‑E—Trading stock for small business entities                   624

Guide to Subdivision 328‑E                                                                                 624

328‑280. What this Subdivision is about........................................................ 624

Operative provisions                                                                                             624

328‑285. Trading stock for small business entities......................................... 624

328‑295. Value of trading stock on hand....................................................... 625

Division 345—FHSAs                                                                                               626

Guide to Division 345                                                                                            626

345‑1..... What this Division is about............................................................. 626

Subdivision 345‑A—Treatment of FHSA providers                                     626

345‑5..... FHSA provider that is trustee of FHSA trust—tax payable............ 627

345‑10... FHSA provider that is trustee of FHSA trust—CGT to be primary code for calculating gains or losses 627

345‑15... FHSA provider that is an ADI (other than RSA provider)—taxable income and standard component of taxable income........................................................................................................ 628

345‑20... FHSA provider that is an ADI—FHSA component of taxable income 629

345‑25... FHSA provider that is an ADI (other than an RSA provider)—amounts that cannot be deducted           629

345‑30... Amounts of tax paid by FHSA providers that are ADIs................. 629

Subdivision 345‑B—Treatment of FHSA holders                                          630

345‑50... Credits to and payments from FHSAs etc....................................... 630

Subdivision 345‑C—FHSA misuse tax                                                              630

345‑100. Liability for FHSA misuse tax........................................................ 630

345‑110. Due date for payment of FHSA misuse tax.................................... 631

345‑115. General interest charge.................................................................... 631

Division 355—Research and Development                                                   632

Guide to Division 355                                                                                            632

355‑1..... What this Division is about............................................................. 632

Subdivision 355‑A—Object                                                                                  633

355‑5..... Object.............................................................................................. 633

Subdivision 355‑B—Meaning of R&D activities and other terms             633

355‑20... R&D activities................................................................................. 633

355‑25... Core R&D activities........................................................................ 634

355‑30... Supporting R&D activities.............................................................. 635

355‑35... R&D entities.................................................................................... 635

Subdivision 355‑C—Entitlement to tax offset                                                 636

355‑100. Entitlement to tax offset................................................................... 636

355‑105. Deductions under this Division are notional only........................... 638

355‑110. Notional deductions include prepaid expenditure............................ 639

Subdivision 355‑D—Notional deductions for R&D expenditure                639

355‑200. What this Subdivision is about........................................................ 639

355‑205. When notional deductions for R&D expenditure arise.................... 640

355‑210. Conditions for R&D activities......................................................... 640

355‑215. R&D activities conducted by a permanent establishment for other parts of the body corporate                642

355‑220. R&D activities conducted for a foreign entity................................. 642

355‑225. Expenditure that cannot be notionally deducted............................... 644

Subdivision 355‑E—Notional deductions for decline in value of depreciating assets used for R&D activities     645

355‑300. What this Subdivision is about........................................................ 645

355‑305. When notional deductions for decline in value arise........................ 645

355‑310. Notional application of Division 40................................................ 646

355‑315. Balancing adjustments—assets only used for R&D activities......... 647

Subdivision 355‑F—Integrity Rules                                                                  649

355‑400. Expenditure incurred while not at arm’s length............................... 649

355‑405. Expenditure not at risk.................................................................... 650

355‑410. Disposal of R&D results................................................................. 651

355‑415. Reducing deductions to reflect mark‑ups within groups................. 652

Subdivision 355‑G—Clawback of R&D recoupments                                  654

355‑430. What this Subdivision is about........................................................ 654

355‑435. When extra income tax is payable................................................... 654

355‑440. Entity receives government recoupment.......................................... 654

355‑445. Recoupment could relate to R&D activities..................................... 655

355‑450. Amount on which extra income tax is payable................................ 655

Subdivision 355‑H—Feedstock adjustments                                                    656

355‑460. What this Subdivision is about........................................................ 657

355‑465. Feedstock adjustment to assessable income.................................... 657

355‑470. Feedstock revenue........................................................................... 658

355‑475. Application to connected entities and affiliates................................ 658

Subdivision 355‑I—Application to earlier income year R&D expenditure incurred to associates           659

355‑480. Notional deductions for expenditure incurred to associate in earlier income years   659

Subdivision 355‑J—Application to R&D partnerships                                 660

355‑500. What this Subdivision is about........................................................ 661

355‑505. Meaning of R&D partnership and partner’s proportion................ 661

355‑510. R&D partnership expenditure on R&D activities............................ 661

355‑515. R&D activities conducted by or for an R&D partnership................ 662

355‑520. When notional deductions arise for decline in value of depreciating assets of R&D partnerships            663

355‑525. Balancing adjustments for R&D partnership assets only used for R&D activities   664

355‑530. Implications for partner’s aggregated turnover................................ 666

355‑535. Disposal of R&D results for R&D partnerships............................. 666

355‑540. Application of recoupment rules..................................................... 667

355‑545. Relevance for net income, and losses, of the R&D partnership....... 668

Subdivision 355‑K—Application to Cooperative Research Centres         668

355‑580. When notional deductions for CRC contributions arise.................. 668

Subdivision 355‑W—Other matters                                                                  669

355‑700. Objecting to assessment of refundable tax offset............................ 670

355‑705. Effect of findings by Innovation Australia...................................... 670

355‑710. Amendment of assessments............................................................ 671

355‑715. Implications for other deductions and tax offsets............................ 673

Division 376—Films generally (tax offsets for Australian production expenditure)      675

Subdivision 376‑A—Guide to Division 376                                                     675

376‑1..... What this Division is about............................................................. 675

376‑2..... Key features of the tax offsets for Australian production expenditure on films        675

376‑5..... Structure of this Division................................................................ 676

Subdivision 376‑B—Tax offsets for Australian expenditure in making a film              677

Refundable tax offset for Australian expenditure in making a film (location offset)  678

376‑10... Film production company entitled to refundable tax offset for Australian expenditure in making a film (location offset)........................................................................................................ 678

376‑15... Amount of the location offset.......................................................... 679

376‑20... Minister must issue certificate for a film for the location offset....... 679

376‑30... Minister to determine a company’s qualifying Australian production expenditure for the location offset                682

Refundable tax offset for post, digital and visual effects production for a film (PDV offset)    682

376‑35... Film production company entitled to refundable tax offset for post, digital and visual effects production for a film (PDV offset).............................................................................................. 682

376‑40... Amount of the PDV offset.............................................................. 684

376‑45... Minister must issue certificate for a film for the PDV offset........... 684

376‑50... Minister to determine a company’s qualifying Australian production expenditure for the PDV offset    686

Refundable tax offset for Australian expenditure in making an Australian film (producer offset)         686

376‑55... Film production company entitled to refundable tax offset for Australian expenditure in making an Australian film (producer offset)............................................................................. 686

376‑60... Amount of the producer offset........................................................ 689

376‑65... Film authority must issue certificate for an Australian film for the producer offset  689

376‑70... Determination of content of film..................................................... 694

376‑75... Film authority to determine a company’s qualifying Australian production expenditure for the producer offset      694

Subdivision 376‑C—Production expenditure and qualifying Australian production expenditure           696

Production expenditure—common rules                                                         697

376‑125. Production expenditure—general test.............................................. 697

376‑130. Production expenditure—special qualifying Australian production expenditure      698

376‑135. Production expenditure—specific exclusions.................................. 699

Production expenditure—special rules for the location offset                   701

376‑140. Production expenditure—special rules for the location offset......... 701

Qualifying Australian production expenditure—common rules               702

376‑145. Qualifying Australian production expenditure—general test........... 702

376‑150. Qualifying Australian production expenditure—specific inclusions 702

376‑155. Qualifying Australian production expenditure—specific exclusions 704

376‑160. Qualifying Australian production expenditure—treatment of services embodied in goods      704

Qualifying Australian production expenditure—special rules for the location offset and the PDV offset             705

376‑165. Qualifying Australian production expenditure—special rules for the location offset and the PDV offset                705

Qualifying Australian production expenditure—special rules for the producer offset               706

376‑170. Qualifying Australian production expenditure—special rules for the producer offset              706

Expenditure generally—common rules                                                           710

376‑175. Expenditure to be worked out on an arm’s length basis.................. 710

376‑180. Expenditure incurred by prior production companies...................... 710

376‑185. Expenditure to be worked out excluding GST................................ 712

Subdivision 376‑D—Certificates for films and other matters                    712

376‑230. Production company may apply for certificate................................ 712

376‑235. Notice of refusal to issue certificate................................................. 713

376‑240. Issue of certificate........................................................................... 713

376‑245. Revocation of certificate.................................................................. 715

376‑250. Notice of decision or determination................................................. 716

376‑255. Review of decisions by the Administrative Appeals Tribunal......... 717

376‑260. Minister may make rules about the location offset and the PDV offset 717

376‑265. Film authority may make rules about the producer offset................ 718

376‑270. Amendment of assessments............................................................ 719

376‑275. Review in relation to certain production levels................................ 719

Division 380—National Rental Affordability Scheme                             720

Guide to Division 380                                                                                            720

380‑1..... What this Division is about............................................................. 720

Subdivision 380‑A—National Rental Affordability Scheme Tax Offset 720

NRAS certificates issued to individuals, corporate tax entities and superannuation funds         721

380‑5..... Claims by individuals, corporate tax entities and superannuation funds 721

NRAS certificates issued to NRAS approved participants                           722

380‑10... Members of NRAS consortiums—individuals, corporate tax entities and superannuation funds            722

380‑11... Elections by NRAS approved participants...................................... 723

380‑12... Elections by NRAS approved participants—tax offsets.................. 724

380‑13... Elections by NRAS approved participants—special rule for partnerships and trustees            725

380‑14... Members of NRAS consortiums—partnerships and trustees......... 726

NRAS certificates issued to partnerships and trustees                                  727

380‑15... Entities to whom NRAS rent flows indirectly................................. 727

380‑16... Elections by NRAS approved participants that are partnerships or trustees             728

380‑17... Elections by NRAS approved participants that are partnerships or trustees—tax offsets         729

380‑18... Elections by NRAS approved participants that are partnerships or trustees—special rule for partnerships and trustees........................................................................................................ 731

380‑20... Trustee of a trust that does not have net income for an income year 732

380‑25... When NRAS rent flows indirectly to or through an entity.............. 733

380‑30... Share of NRAS rent........................................................................ 735

Miscellaneous                                                                                                          738

380‑32... Amended certificates....................................................................... 738

Subdivision 380‑B—Payments made in relation to the National Rental Affordability Scheme etc.         739

380‑35... Payments made and non‑cash benefits provided in relation to the National Rental Affordability Scheme                739

Division 385—Primary production                                                                   740

Guide to Division 385                                                                                            740

385‑1..... What this Division is about............................................................. 740

385‑5..... Where to find some other rules relevant to primary producers........ 740

Subdivision 385‑E—Primary producer can elect to spread or defer tax on profit from forced disposal or death of live stock                                                                                     741

Guide to Subdivision 385‑E                                                                                 741

385‑90... What this Subdivision is about........................................................ 741

385‑95... Basic principles for elections under this Subdivision...................... 742

Operative provisions                                                                                             742

385‑100. Cases where you can make an election............................................ 742

385‑105. Election to spread tax profit over 5 years........................................ 744

385‑110. Alternative election to defer tax profit and reduce cost of replacement live stock     744

385‑115. Your assessable income includes an amount for replacement live stock you breed  745

385‑120. Purchase price of replacement live stock is reduced........................ 745

385‑125. Alternative election because of bovine tuberculosis has effect over 10 years not 5  746

Subdivision 385‑F—Insurance for loss of live stock or trees                      746

385‑130. Insurance for loss of live stock or trees........................................... 746

Subdivision 385‑G—Double wool clips                                                             747

385‑135. Election to defer including profit on second wool clip.................... 747

Subdivision 385‑H—Rules that apply to all elections made under Subdivisions 385‑E, 385‑F and 385‑G              748

385‑145. Partnerships and trusts.................................................................... 748

385‑150. Time for making election................................................................. 748

385‑155. Amounts are assessable income from carrying on the primary production business                749

385‑160. Effect of certain events on election.................................................. 749

385‑163. Disentitling events........................................................................... 750

385‑165. New partnership can elect to be treated as same entity as old partnership 751

385‑170. New partnership can elect to take advantage of election made by former owner of the business              752

Division 392—Long‑term averaging of primary producers’ tax liability            753

Guide to Division 392                                                                                            753

392‑1..... What this Division is about............................................................. 753

392‑5..... Overview of averaging process....................................................... 753

Subdivision 392‑A—Is your income tax affected by averaging?              756

392‑10... Individuals who carry on a primary production business................ 756

392‑15... Meaning of basic taxable income.................................................... 757

392‑20... Trust beneficiaries taken to be carrying on primary production business 758

392‑22... Trustee may choose that a beneficiary is a chosen beneficiary of the trust                759

392‑25... Choosing not to have your income tax averaged............................. 760

Subdivision 392‑B—What kind of averaging adjustment must you make? 760

Guide to Subdivision 392‑B                                                                                 760

392‑30... What this Subdivision is about........................................................ 760

Tax offset or extra income tax                                                                           761

392‑35... Will you get a tax offset or have to pay extra income tax?............... 761

How to work out the comparison rate                                                               763

392‑40... Identify income years for averaging your basic taxable income...... 763

392‑45... Work out your average income for those years............................... 763

392‑50... Work out the income tax on your average income at basic rates...... 764

392‑55... Work out the comparison rate......................................................... 764

Subdivision 392‑C—How big is your averaging adjustment?                    764

Guide to Subdivision 392‑C                                                                                 764

392‑60... What this Subdivision is about........................................................ 764

392‑65... What your averaging adjustment reflects......................................... 765

Your gross averaging amount                                                                            766

392‑70... Working out your gross averaging amount..................................... 766

Your averaging adjustment                                                                                 767

392‑75... Working out your averaging adjustment......................................... 767

How to work out your averaging component                                                  767

392‑80... Work out your taxable primary production income......................... 767

392‑85... Work out your taxable non‑primary production income.................. 768

392‑90... Work out your averaging component.............................................. 769

Subdivision 392‑D—Effect of permanent reduction of your basic taxable income      770

392‑95... You are treated as if you had not carried on business before.......... 771

Division 393—Farm management deposits                                                   772

Guide to Division 393                                                                                            772

393‑1..... What this Division is about............................................................. 772

Subdivision 393‑A—Tax consequences of farm management deposits   773

393‑5..... Deduction for making farm management deposit............................ 773

393‑10... Assessability on repayment of deposit............................................ 774

393‑15... Transactions to which the deduction, assessment and 12 month rules have modified application            777

Subdivision 393‑B—Meaning of farm management deposit and owner 778

393‑20... Farm management deposits............................................................. 778

393‑25... Owners of farm management deposits............................................ 779

393‑27... Trustee may choose that a beneficiary is a chosen beneficiary of the trust                781

393‑28... Application of Division to beneficiary no longer under legal disability 782

393‑30... Effect of contravening requirements................................................ 782

393‑35... Requirements of agreement for a farm management deposit........... 782

393‑40... Repayment of deposit within first 12 months.................................. 784

393‑45... Partly repaid farm management deposits......................................... 786

Subdivision 393‑C—Special rules relating to financial claims scheme for account‑holders with insolvent ADIs                                                                                                       787

Guide to Subdivision 393‑C                                                                                 787

393‑50... What this Subdivision is about........................................................ 787

Operative provisions                                                                                             787

393‑55... Farm management deposits arising from farm management deposits with ADIs subject to financial claims scheme........................................................................................................ 787

393‑60... Repayment if owner of farm management deposit with insolvent ADI dies, is bankrupt or ceases to be a primary producer.......................................................................................... 790

Division 394—Forestry managed investment schemes                           792

Guide to Division 394                                                                                            792

394‑1..... What this Division is about............................................................. 792

394‑5..... Object of this Division.................................................................... 792

394‑10... Deduction for amounts paid under forestry managed investment schemes               793

394‑15... Forestry managed investment schemes and related concepts........... 794

394‑20... Payments on behalf of participant in forestry managed investment scheme              795

394‑25... CGT event in relation to forestry interest in forestry managed investment scheme—initial participant     795

394‑30... CGT event in relation to forestry interest in forestry managed investment scheme—subsequent participant            796

394‑35... 70% DFE rule................................................................................. 798

394‑40... Payments under forestry managed investment scheme.................... 799

394‑45... Direct forestry expenditure.............................................................. 799

Division 402—Environment protection expenditure                               802

Guide to Division 402                                                                                            802

402‑1..... What this Division is about............................................................. 802

Subdivision 402‑W—Urban water tax offset                                                  802

Guide to Subdivision 402‑W                                                                                802

402‑750. What this Subdivision is about........................................................ 802

402‑755. Entitlement to urban water tax offset............................................... 803

402‑760. Certificates...................................................................................... 803

402‑765. Amount of urban water tax offset................................................... 804

402‑770. Revoking certificates....................................................................... 805

402‑775. AAT review.................................................................................... 806

402‑780. Guidelines....................................................................................... 806

Division 405—Above‑average special professional income of authors, inventors, performing artists, production associates and sportspersons                             807

Guide to Division 405                                                                                            807

405‑1..... What this Division is about............................................................. 807

405‑5..... Special rate of income tax on your above‑average special professional income        808

405‑10... Overview of the Division................................................................ 809

Subdivision 405‑A—Above‑average special professional income            810

405‑15... When do you have above‑average special professional income?..... 810

Subdivision 405‑B—Assessable professional income                                   811

405‑20... What you count as assessable professional income........................ 811

405‑25... Meaning of special professional, performing artist, production associate, sportsperson and sporting competition........................................................................................................ 813

405‑30... What you cannot count as assessable professional income............. 815

405‑35... Limits on counting amounts as assessable professional income...... 816

405‑40... Joint author or inventor treated as sole author or inventor............... 817

Subdivision 405‑C—Taxable professional income and average taxable professional income 817

405‑45... Working out your taxable professional income............................... 817

405‑50... Working out your average taxable professional income.................. 818

Division 410—Copyright and resale royalty collecting societies      820

Guide to Division 410                                                                                            820

410‑1..... What this Division is about............................................................. 820

Subdivision 410‑A—Notice of payments                                                          820

410‑5..... Copyright collecting society must give notice to member of society 820

410‑50... Resale royalty collecting society must give notice to holder of resale royalty right   821


Part 3‑10Financial transactions

Division 230Taxation of financial arrangements

Table of Subdivisions

             Guide to Division 230

230‑A   Core rules

230‑B    The accruals/realisation methods

230‑C    Fair value method

230‑D   Foreign exchange retranslation method

230‑E    Hedging financial arrangements method

230‑F    Reliance on financial reports

230‑G   Balancing adjustment on ceasing to have a financial arrangement

230‑H   Exceptions

230‑I     Other provisions

230‑J     Additional operation of Division

Guide to Division 230

230‑1  What this Division is about

This Division is about the tax treatment of gains and losses from your financial arrangements.

You recognise the gains and losses, as appropriate, over the life of a financial arrangement and ignore distinctions between income and capital unless specific rules apply.

If it is sufficiently certain that you will make a gain or loss, you use a compounding accruals method to recognise the gain or loss. Otherwise you use a realisation method. Instead of either, you may be able to choose to use a fair value or hedging method or to rely on your financial reports. You may also be able to choose to recognise foreign exchange gains and losses using a retranslation method.

230‑5  Scope of this Division

             (1)  You have a financial arrangement if you have one or more cash settlable legal or equitable rights and/or obligations to receive or provide a financial benefit.

             (2)  This Division does not apply to all financial arrangements. The main exceptions are if:

                     (a)  you are:

                              (i)  an individual; or

                             (ii)  a superannuation entity or fund, managed investment scheme or an entity substantially similar to a managed investment scheme under foreign law with assets of less than $100 million; or

                            (iii)  an ADI, securitisation vehicle or other financial sector entity with an aggregated turnover of less than $20 million; or

                            (iv)  another entity with an aggregated turnover of less than $100 million, financial assets of less than $100 million and assets of less than $300 million;

                            and either:

                            (iv)  the arrangement is to end not more than 12 months after you start to have it; or

                             (v)  the arrangement is not a qualifying security; or

                     (b)  the arrangement is a financial arrangement under section 230‑50 (equity interests etc.) and neither a fair value election, a hedging financial arrangement election nor an election to rely on financial reports applies to the arrangement.

Note:          Section 230‑455 provides for the exceptions referred to in paragraph (a).

Subdivision 230‑ACore rules

Table of sections

Objects

230‑10      Objects of this Division

Tax treatment of gains and losses from financial arrangements

230‑15      Gains are assessable and losses deductible

230‑20      Gain or loss to be taken into account only once under this Act

230‑25      Associated financial benefits to be taken into account only once under this Act

230‑30      Treatment of gains and losses related to exempt income and non‑assessable non‑exempt income

230‑35      Treatment of gains and losses of private or domestic nature

Method to be applied to take account of gain or loss

230‑40      Methods for taking gain or loss into account

Financial arrangement concept

230‑45      Financial arrangement

230‑50      Financial arrangement (equity interest or right or obligation in relation to equity interest)

230‑55      Rights, obligations and arrangements (grouping and disaggregation rules)

General rules

230‑60      When financial benefit provided or received under financial arrangement

230‑65      Amount of financial benefit relating to more than one financial arrangement etc.

230‑70      Apportionment when financial benefit received or right ceases

230‑75      Apportionment when financial benefit provided or obligation ceases

230‑80      Consistency in working out gains or losses (integrity measure)

230‑85      Rights and obligations include contingent rights and obligations

Objects

230‑10  Objects of this Division

                   The objects of this Division are:

                     (a)  to minimise the extent to which the tax treatment of gains and losses from your *financial arrangements distorts, by providing inappropriate impediments and stimulation, your trading, financing and investment decisions and your risk taking and risk management; and

                     (b)  to do so by aligning more closely the tax and commercial recognition of gains and losses from your financial arrangements in the following ways:

                              (i)  by allocating the gains and losses to income years throughout the life of your financial arrangements on a reasonable basis;

                             (ii)  by generally recognising gains and losses on revenue rather than capital account; and

                     (c)  to appropriately take account of, and minimise, your compliance costs.

Tax treatment of gains and losses from financial arrangements

230‑15  Gains are assessable and losses deductible

Gains

             (1)  Your assessable income includes a gain you make from a *financial arrangement.

Note:          This Division does not apply to gains that are subject to exceptions under Subdivision 230‑H.

Losses

             (2)  You can deduct a loss you make from a *financial arrangement, but only to the extent that:

                     (a)  you make it in gaining or producing your assessable income; or

                     (b)  you necessarily make it in carrying on a *business for the purpose of gaining or producing your assessable income.

Note:          This Division does not apply to losses that are subject to exceptions under Subdivision 230‑H.

             (3)  You can also deduct a loss you make from a *financial arrangement if:

                     (a)  you are an *Australian entity; and

                     (b)  you make the loss in deriving income from a foreign source; and

                     (c)  the income is *non‑assessable non‑exempt income under section 23AI, 23AJ or 23AK of the Income Tax Assessment Act 1936; and

                     (d)  the loss is, in whole or in part, a cost in relation to a *debt interest you issue that is covered by paragraph 820‑40(1)(a).

You can deduct the loss only to the extent to which it is a cost in relation to a *debt interest you issue that is covered by paragraph 820‑40(1)(a).

Note:          This Division does not apply to losses that are subject to exceptions under Subdivision 230‑H.

             (4)  If the *financial arrangement is a *debt interest, the loss is not prevented from being deductible for an income year under subsection (2) merely because of either or both of the following:

                     (a)  one or more of the *financial benefits that are taken into account in working out the amount of the loss are *contingent on the economic performance (whether past, current or future) of:

                              (i)  you or a part of your activities; or

                             (ii)  a *connected entity of yours or a part of the activities of a connected entity of yours;

                     (b)  one or more of the financial benefits that are taken into account in working out the amount of the loss secure a permanent or enduring benefit for you or a connected entity of yours.

          (4A)  A *dividend on a *debt interest is a loss you can deduct to the extent to which it would have been a deductible loss under subsection (2) if:

                     (a)  the payment of the amount of the dividend were the incurring of a liability to pay the same amount as interest; and

                     (b)  that interest were incurred in respect of the finance raised by you and in respect of which the dividend was paid or provided; and

                     (c)  the debt interest retained its character as a debt interest for the purposes of subsection (4).

             (5)  Subject to subsection (6), subsection (4) does not apply to the loss to the extent to which the annually compounded internal rate of return on the *debt interest exceeds the *benchmark rate of return for the debt interest increased by 150 basis points.

             (6)  If:

                     (a)  regulations made for the purposes of subsection 25‑85(6) provide that a specified number of basis points is to apply for the purposes of applying subsection 25‑85(5) in particular circumstances; and

                     (b)  those circumstances exist in relation to the *debt interest;

subsection (5) applies as if the reference in that subsection to 150 basis points were a reference to the number of basis points specified in the regulations.

Division does not affect foreign residence rules

             (7)  Nothing in this Division affects the operation of the provisions of Division 6 that provide for the significance of foreign residence for the assessability of ordinary and statutory income.

Note 1:       Gains that you make under this Division may be ordinary or statutory income for the purposes of Division 6.

Note 2:       For the effect of a change of residence during an income year, see sections 230‑485 and 230‑490.

230‑20  Gain or loss to be taken into account only once under this Act

Application of section

             (1)  This section applies to the following:

                     (a)  a gain that is included in your assessable income for an income year under this Division;

                     (b)  a loss that is allowable as a deduction to you for an income year under this Division;

                     (c)  a gain or a loss that is dealt with in accordance with subsection 230‑310(4) in relation to an income year.

Purpose of this section

             (2)  The purpose of this section is to ensure that your gains and losses, and *financial benefits, to which this section applies are taken into account only once under this Act in working out your taxable income.

Gain or loss to be taken into account only once

             (3)  A gain or loss to which this section applies is not to be (to any extent):

                     (a)  included in your assessable income; or

                     (b)  allowable as a deduction to you; or

                     (c)  dealt with in accordance with subsection 230‑310(4);

again under this Division for the same or any other income year.

             (4)  A gain or loss to which this section applies is not to be (to any extent):

                     (a)  included in your assessable income; or

                     (b)  allowable as a deduction to you;

under any provisions of this Act outside this Division for the same or any other income year.

Section does not give rise to exempt income

             (5)  A gain is not to be treated as *exempt income merely because it is not included in your assessable income under this section.

230‑25  Associated financial benefits to be taken into account only once under this Act

Application of section

             (1)  This section applies to a *financial benefit whose amount or value is taken into account in working out whether you make, or the amount of, a gain or loss to which paragraph 230‑20(1)(a), (b) or (c) applies.

Associated financial benefit to be taken into account only once

             (2)  A *financial benefit to which this section applies is not to be (to any extent):

                     (a)  included in your assessable income; or

                     (b)  allowable as a deduction to you;

under any provision of this Act outside this Division for the same or any other income year.

Exception for certain bad debts

             (3)  If:

                     (a)  a *financial benefit has been included in your assessable income under a provision of this Act outside this Division; and

                     (b)  a bad debt deduction would have been allowed under section 25‑35 in relation to the financial benefit;

subsection (2) does not prevent that bad debt deduction from being allowed under section 25‑35 in relation to the financial benefit as if the debt were still outstanding.

Section does not give rise to exempt income

             (4)  A *financial benefit is not to be treated as *exempt income merely because it is not included in your assessable income under this section.

230‑30  Treatment of gains and losses related to exempt income and non‑assessable non‑exempt income

             (1)  Despite section 230‑15, a gain that you make from a *financial arrangement:

                     (a)  to the extent that it reflects an amount that would be treated, or would reasonably expected to be treated, as *exempt income under a provision of this Act if this Division were disregarded—is exempt income; and

                     (b)  to the extent that it reflects an amount that would be treated or would reasonably expected to be treated, as *non‑assessable non‑exempt income under a provision of this Act if this Division were disregarded—is not assessable income and is not exempt income.

             (2)  Despite section 230‑15, a gain that you make from a *financial arrangement:

                     (a)  to the extent that, if it had been a loss, you would have made it in gaining or producing *exempt income—is exempt income; and

                     (b)  to the extent to which, if it had been a loss, you would have made it in gaining or producing *non‑assessable non‑exempt income—is not assessable income and is not exempt income.

             (3)  A loss you make from a *financial arrangement is not allowable as a deduction to you under any provision of this Act (other than subsection 230‑15(3)) to the extent that you make it in gaining or producing your:

                     (a)  *exempt income; or

                     (b)  *non‑assessable non‑exempt income.

230‑35  Treatment of gains and losses of private or domestic nature

Borrowings etc. used for private or domestic purpose

             (1)  Subsections (2) and (3) apply if:

                     (a)  a *borrowing is made by you, or credit is provided to you, under a *financial arrangement; and

                     (b)  you use some or all of the funds borrowed or the credit provided for a private or domestic purpose.

             (2)  This Division does not apply to a gain you make from the arrangement to the extent that you use the funds raised or the credit provided for a private or domestic purpose.

             (3)  A loss you make from the arrangement is not allowable as a deduction to you under any provision of this Act to the extent that you use the funds raised or the credit provided for a private or domestic purpose.

Derivative financial arrangement held for private or domestic purpose

             (4)  Subsections (5) and (6) apply if:

                     (a)  you are an individual; and

                     (b)  you make a gain or loss from a *derivative financial arrangement; and

                     (c)  the arrangement is held, wholly or in part, for a private or domestic purpose.

             (5)  This Division does not apply to a gain you make from the arrangement to the extent that the arrangement is held or used for a private or domestic purpose.

             (6)  A loss you make from the arrangement is not allowable as a deduction to you under any provision of this Act to the extent that the arrangement is held or used for a private or domestic purpose.

Method to be applied to take account of gain or loss

230‑40  Methods for taking gain or loss into account

Methods available

             (1)  The methods that can be applied to take account of a gain or loss you make from a *financial arrangement are:

                     (a)  the accruals and realisation methods provided for in Subdivision 230‑B; or

                     (b)  the fair value method provided for in Subdivision 230‑C; or

                     (c)  the foreign exchange retranslation method provided for in Subdivision 230‑D; or

                     (d)  the hedging financial arrangement method provided for in Subdivision 230‑E; or

                     (e)  the method of relying on your financial reports provided for in Subdivision 230‑F; or

                      (f)  a balancing adjustment provided for in Subdivision 230‑G.

Note:          The methods referred to in paragraphs (b) to (e) only apply if you make an election under the relevant Subdivision and you must meet certain requirements before you can make such an election.

             (2)  A gain or loss is not taken into account under any of the methods referred to in paragraphs (1)(a), (b), (c) and (e) to the extent to which it is taken into account under the method referred to in paragraph (1)(f) (balancing adjustment).

             (3)  A gain or loss is not taken into account under the method referred to in paragraph (1)(f) (balancing adjustment) to the extent to which it is taken into account under the method referred to in paragraph (1)(d) (hedging financial arrangement method).

Note:          The hedging financial arrangement method may take some account of the gain or loss by reference to the balancing adjustment method (see subsection 230‑300(5)).

Elections override accruals and realisation methods

             (4)  Subdivision 230‑B (accruals and realisation method) does not apply to a gain or loss you make from a *financial arrangement:

                     (a)  if Subdivision 230‑C (fair value method) applies to the arrangement; or

                     (b)  to the extent that Subdivision 230‑D (foreign exchange retranslation method) applies to the gain or loss; or

                     (c)  to the extent that Subdivision 230‑E (hedging financial arrangements method) applies to the arrangement; or

                     (d)  if Subdivision 230‑F (method of relying on financial reports) applies to the arrangement; or

                     (e)  if the arrangement is a financial arrangement under section 230‑50 (equity interests etc.).

Priorities among election methods

             (5)  Subdivision 230‑C (fair value method) does not apply to a gain or loss you make from a *financial arrangement:

                     (a)  to the extent that Subdivision 230‑E (hedging financial arrangements method) applies to the arrangement; or

                     (b)  if Subdivision 230‑F (method of relying on financial reports) applies to the arrangement.

             (6)  Subdivision 230‑D (foreign exchange retranslation method) does not apply to a gain or loss you make from a *financial arrangement:

                     (a)  if Subdivision 230‑C (fair value method) applies to the arrangement; or

                     (b)  to the extent that Subdivision 230‑E (hedging financial arrangements method) applies to the arrangement; or

                     (c)  if Subdivision 230‑F (method of relying on financial reports) applies to the arrangement.

             (7)  Subdivision 230‑F (method of relying on financial reports) does not apply to a gain or loss you make from a *financial arrangement to the extent that Subdivision 230‑E (hedging financial arrangements method) applies to the arrangement.

Financial arrangement concept

230‑45  Financial arrangement

             (1)  You have a financial arrangement if you have, under an *arrangement:

                     (a)  a *cash settlable legal or equitable right to receive a *financial benefit; or

                     (b)  a cash settlable legal or equitable obligation to provide a financial benefit; or

                     (c)  a combination of one or more such rights and/or one or more such obligations;

unless:

                     (d)  you also have under the arrangement one or more legal or equitable rights to receive something and/or one or more legal or equitable obligations to provide something; and

                     (e)  for one or more of the rights and/or obligations covered by paragraph (d):

                              (i)  the thing that you have the right to receive, or the obligation to provide, is not a financial benefit; or

                             (ii)  the right or obligation is not cash settlable; and

                      (f)  the one or more rights and/or obligations covered by paragraph (e) are not insignificant in comparison with the right, obligation or combination covered by paragraph (a), (b) or (c).

The right, obligation or combination covered by paragraph (a), (b) or (c) constitutes the financial arrangement.

Note 1:       Whether your rights and/or obligations under an arrangement constitute a financial arrangement can change over time depending on changes either to the terms of the arrangement or external circumstances (such as particular rights or obligations under the arrangement being satisfied by the parties). For example, a contract may provide for the transfer of a boat in 6 months time and payment of the contract price at the end of 2 years. Until the boat is delivered, there is no financial arrangement because of the operation of paragraphs (d), (e) and (f) above. Once the boat is delivered, there is a financial arrangement because those paragraphs are no longer applicable.

Note 2:       The operative provisions of this Division do not apply to all financial arrangements, and only apply partially to some: see the exceptions in Subdivision 230‑H.

Note 3:       There are some rules in this Division that tell you what happens if an arrangement ceases to be a financial arrangement (see Subdivision 230‑G and section 230‑505).

             (2)  A right you have to receive, or an obligation you have to provide, a *financial benefit is cash settlable if, and only if:

                     (a)  the benefit is money or a *money equivalent; or

                     (b)  in the case of a right—you intend to satisfy or settle it by receiving money or a money equivalent or by starting to have, or ceasing to have, another *financial arrangement; or

                     (c)  in the case of an obligation—you intend to satisfy or settle it by providing money or a money equivalent or by starting to have, or ceasing to have, another financial arrangement; or

                     (d)  you have a practice of satisfying or settling similar rights or obligations as mentioned in paragraph (b) or (c) (whether or not you intend to satisfy or settle the right or obligation in that way); or

                     (e)  you deal with the right or obligation, or with similar rights or obligations, in order to generate a profit from short‑term fluctuations in price, from a dealer’s margin, or from both; or

                      (f)  none of paragraphs (a) to (e) applies but you satisfy subsection (3); or

                     (g)  you are able to settle the right or obligation as mentioned in paragraph (b) or (c) (whether or not you intend to satisfy or settle the right or obligation in that way) and you do not have, as your sole or dominant purpose for entering into the arrangement under which you are to receive or provide the financial benefit, the purpose of receiving or delivering the financial benefit as part of your expected purchase, sale or usage requirements.

A reference in paragraph (b) or (c) to a financial arrangement does not include a reference to something that is a financial arrangement under section 230‑50.

Note:          Examples of dealing of the kind covered by paragraph (e) are:

(a)    dealing with the right or obligation, or similar rights or obligations, on a frequent basis, a short‑term basis or on a frequent and short‑term basis; and

(b)    acquiring the right or obligation, or similar rights or obligations, and managing the resulting risk by entering into offsetting arrangements that provide a profit margin.

             (3)  You satisfy this subsection if:

                     (a)  the *financial benefit is readily convertible into money or a *money equivalent; and

                     (b)  there is a market for the financial benefit that has a high degree of liquidity; and

                     (c)  subsection (4) or (5) is satisfied.

             (4)  This subsection is satisfied if, for the recipient of the *financial benefit, the amount of the money or *money equivalent referred to in paragraph (3)(a) is not subject to a substantial risk of substantial decrease in value.

             (5)  This subsection is satisfied if your purpose, or one of your purposes, for entering into the arrangement under which you are to receive or provide the *financial benefit, is to receive or deliver the financial benefit:

                     (a)  to raise or provide finance; or

                     (b)  if paragraph (a) does not apply—so that it may be converted or liquidated into money or a money equivalent (other than as part of your expected purchase, sale or usage requirements).

230‑50  Financial arrangement (equity interest or right or obligation in relation to equity interest)

             (1)  You also have a financial arrangement if you have an *equity interest. The equity interest constitutes the financial arrangement.

             (2)  You also have a financial arrangement if:

                     (a)  you have, under an *arrangement:

                              (i)  a legal or equitable right to receive something that is a financial arrangement under this section; or

                             (ii)  a legal or equitable obligation to provide something that is a financial arrangement under this section; or

                            (iii)  a combination of one or more such rights and/or obligations; and

                     (b)  the right, obligation or combination does not constitute, or form part of, a financial arrangement under subsection 230‑45(1).

The right, obligation or combination referred to in paragraph (a) constitutes the financial arrangement.

Note 1:       Paragraph 230‑40(4)(e) prevents the accruals method or the realisation method being applied to something that is a financial arrangement under this section.

Note 2:       Subsection 230‑270(1) prevents the retranslation method being applied to something that is a financial arrangement under this section.

Note 3:       Subsection 230‑330(1) prevents the hedging method being applied to something that is a financial arrangement under this section.

230‑55  Rights, obligations and arrangements (grouping and disaggregation rules)

Single right or obligation or multiple rights or obligations?

             (1)  If you have a right to receive 2 or more *financial benefits, you are taken, for the purposes of this Division, to have a separate right to receive each of those financial benefits.

             (2)  If you have an obligation to provide 2 or more *financial benefits, you are taken, for the purposes of this Division, to have a separate obligation to provide each of those financial benefits.

             (3)  Subsections (1) and (2) apply for the avoidance of doubt.

Matters relevant to determining what rights and/or obligations constitute particular arrangements

             (4)  For the purposes of this Division, whether a number of rights and/or obligations are themselves an *arrangement or are 2 or more separate arrangements is a question of fact and degree that you determine having regard to the following:

                     (a)  the nature of the rights and/or obligations;

                     (b)  their terms and conditions (including those relating to any payment or other consideration for them);

                     (c)  the circumstances surrounding their creation and their proposed exercise or performance (including what can reasonably be seen as the purposes of one or more of the entities involved);

                     (d)  whether they can be dealt with separately or must be dealt with together;

                     (e)  normal commercial understandings and practices in relation to them (including whether they are regarded commercially as separate things or as a group or series that forms a whole);

                      (f)  the objects of this Division.

In applying this subsection, have regard to the matters referred to in paragraphs (a) to (f) both in relation to the rights and/or obligations separately and in relation to the rights and/or obligations in combination with each other.

Example 1: Your rights and obligations under a typical convertible note, including the right to convert the note into a share or shares, would constitute one arrangement.

Example 2: Your rights and obligations under a typical price‑linked or index‑linked bond would constitute one arrangement.

Note 1:       If you raised funds by means of a contract that you would not have entered into without entering into another contract, and neither contract could be assigned to a third party without the other also being assigned, this would tend to indicate that your rights and obligations under the 2 contracts together constitute one arrangement.

Note 2:       If the commercial effect of your individual rights and/or obligations in a group or series cannot be understood without reference to the group or series as a whole, this would tend to indicate that all of your rights and/or obligations in the group or series together constitute one arrangement.

General rules

230‑60  When financial benefit provided or received under financial arrangement

Financial benefit provided under financial arrangement

             (1)  You are taken, for the purposes of this Division, to have (or to have had) an obligation to provide a *financial benefit under a *financial arrangement if:

                     (a)  you have (or had) an obligation to provide the financial benefit in relation to the arrangement; and

                     (b)  the financial benefit would not otherwise be treated as one that you have (or had) an obligation to provide under the arrangement; and

                     (c)  the financial benefit plays an integral role in determining:

                              (i)  whether you make a gain or loss from the arrangement; or

                             (ii)  the amount of such a gain or loss.

Paragraph (a) applies even if the entity to which you provide the financial benefit is not a party to the arrangement.

Note:          This means that the financial benefits you provide to acquire the financial arrangement (whether to the issuer, a previous holder or a third party) are taken to be financial benefits you provide under the arrangement. The financial benefits you provide may include, for example, fees paid or the forgoing of rights to receive a financial benefit.

Financial benefit received under financial arrangement

             (2)  You are taken, for the purposes of this Division, to have (or to have had) a right to receive a *financial benefit under a *financial arrangement if:

                     (a)  you have (or had) a right to receive the financial benefit in relation to the arrangement; and

                     (b)  the financial benefit would not otherwise be treated as one that you have (or had) a right to receive under the arrangement; and

                     (c)  the financial benefit plays an integral role in determining:

                              (i)  whether you make a gain or loss from the arrangement; or

                             (ii)  the amount of such a gain or loss.

Paragraph (a) applies even if the entity that provides the financial benefit is not a party to the arrangement.

Note:          The financial benefits you receive may include, for example, the waiving of an obligation you have to provide a financial benefit.

230‑65  Amount of financial benefit relating to more than one financial arrangement etc.

             (1)  This section applies if:

                     (a)  a *financial benefit plays the integral role mentioned in paragraph 230‑60(1)(c) or (2)(c) in relation to a *financial arrangement; and

                     (b)  either or both of the following apply:

                              (i)  the financial benefit plays that role in relation to one or more other financial arrangements;

                             (ii)  the financial benefit is provided or received for one or more other things that are not financial arrangements.

             (2)  For the purposes of this Division, determine the amount of the *financial benefit that plays that role in relation to a particular *financial arrangement by apportioning the actual amount of the financial benefit, on a reasonable basis, between:

                     (a)  that financial arrangement; and

                     (b)  each other financial arrangement (if any) in relation to which the benefit plays that role; and

                     (c)  each other thing (if any) mentioned in subparagraph (1)(b)(ii).

230‑70  Apportionment when financial benefit received or right ceases

             (1)  Apply subsection (2) in working out whether you make, or will make, a gain or loss (and the amount of the gain or loss) at a time when:

                     (a)  you receive a particular *financial benefit under a *financial arrangement; or

                     (b)  one of your rights under a financial arrangement ceases.

The gain or loss is to be calculated in nominal (and not *present value) terms.

             (2)  You must have regard to the extent to which the *financial benefits that you have provided, or are to provide, under the *financial arrangement are reasonably attributable, at the time mentioned in subsection (1), to the benefit or right referred to in paragraph (1)(a) or (b).

             (3)  Any attribution made under subsection (2) must reflect appropriate and commercially accepted valuation principles that properly take into account:

                     (a)  the nature of the rights and obligations under the *financial arrangement; and

                     (b)  the risks associated with each *financial benefit, right and obligation under the arrangement; and

                     (c)  the time value of money.

             (4)  Despite subsection (2), no *financial benefit that you have provided, or are to provide, under the *financial arrangement is to be attributed to the benefit or right referred to in paragraph (1)(a) or (b) if:

                     (a)  you are working out the amount of a gain or loss for the purposes of Subdivision 230‑B; and

                     (b)  the gain or loss is not an overall gain or loss from the arrangement (within the meaning of that Subdivision) at the time when you start to have the arrangement; and

                     (c)  the benefit or right referred to in paragraph (1)(a) or (b) is an amount that represents, or is a right to an amount that represents:

                              (i)  interest; or

                             (ii)  a *return paid or provided on a *debt interest; or

                            (iii)  something that is in the nature of interest; or

                            (iv)  something that could reasonably be regarded as being a substitute for interest; or

                             (v)  something prescribed by the regulations for the purposes of this paragraph.

Note 1:       An example of something in the nature of interest is a discount on a security.

Note 2:       An example of something that could reasonably be regarded as being a substitute for interest is a lump sum payment received instead of payments of interest.

230‑75  Apportionment when financial benefit provided or obligation ceases

             (1)  Apply subsection (2) in working out whether you make, or will make, a gain or loss (and the amount of the gain or loss) at a time when:

                     (a)  you provide a particular *financial benefit under the *financial arrangement; or

                     (b)  one of your obligations under a financial arrangement ceases.

The gain or loss is to be calculated in nominal (and not *present value) terms.

             (2)  You must have regard to the extent to which the *financial benefits that you have received, or are to receive, under the *financial arrangement are reasonably attributable, at the time mentioned in subsection (1), to the benefit or obligation referred to in paragraph (1)(a) or (b).

             (3)  Any attribution made under subsection (2) must reflect appropriate and commercially accepted valuation principles that properly take into account:

                     (a)  the nature of the rights and obligations under the *financial arrangement; and

                     (b)  the risks associated with each *financial benefit, right and obligation under the arrangement; and

                     (c)  the time value of money.

             (4)  Despite subsection (2), no *financial benefit that you have received, or are to receive, under the *financial arrangement is to be attributed to the benefit or obligation referred to in paragraph (1)(a) or (b) if:

                     (a)  you are working out the amount of a gain or loss for the purposes of Subdivision 230‑B; and

                     (b)  the gain or loss is not an overall gain or loss from the arrangement (within the meaning of that Subdivision) at the time when you start to have the arrangement; and

                     (c)  the benefit or obligation referred to in paragraph (1)(a) or (b) is an amount that represents, or is an obligation to provide an amount that represents:

                              (i)  interest; or

                             (ii)  a *return paid or provided on a *debt interest; or

                            (iii)  something that is in the nature of interest; or

                            (iv)  something that could reasonably be regarded as being a substitute for interest; or

                             (v)  something prescribed by the regulations for the purposes of this paragraph.

Note 1:       An example of something in the nature of interest is a discount on a security.

Note 2:       An example of something that could reasonably be regarded as being a substitute for interest is a lump sum payment made instead of payments of interest.

230‑80  Consistency in working out gains or losses (integrity measure)

Object of section

             (1)  The object of this section is to stop you obtaining an inappropriate tax benefit from not working out your gains and losses in a consistent manner.

Consistent treatment for particular financial arrangement

             (2)  If:

                     (a)  this Division provides that a particular method applies to gains or losses you make from a *financial arrangement; and

                     (b)  that method allows you to choose the particular manner in which you apply that method;

you must use that manner consistently for the arrangement for all income years.

Consistent treatment for financial arrangements of essentially the same nature

             (3)  If:

                     (a)  this Division provides that a particular method applies to gains or losses you make from 2 or more *financial arrangements; and

                     (b)  that method allows you to choose the particular manner in which you apply that method;

you must use that same manner consistently for all of those financial arrangements that are essentially of the same nature.

230‑85  Rights and obligations include contingent rights and obligations

                   To avoid doubt:

                     (a)  a right is treated as a right for the purposes of this Division even it is subject to a contingency; and

                     (b)  an obligation is treated as an obligation for the purposes of this Division even if it is subject to a contingency.

Subdivision 230‑BThe accruals/realisation methods

Table of sections

              Guide to Subdivision 230‑B

230‑90      What this Subdivision is about

Objects of Subdivision

230‑95      Objects of this Subdivision

When accruals method or realisation method applies

230‑100    When accruals method or realisation method applies

230‑105    Sufficiently certain overall gain or loss

230‑110    Sufficiently certain gain or loss from particular event

230‑115    Sufficiently certain financial benefits

230‑120    Financial arrangements with notional principal

The accruals method

230‑125    Overview of the accruals method

230‑130    Applying accruals method to work out period over which gain or loss is to be spread

230‑135    How gain or loss is spread

230‑140    Method of spreading gain or loss—effective interest method

230‑145    Application of effective interest method where differing income and accounting years

230‑150    Election for portfolio treatment of fees

230‑155    Election for portfolio treatment of fees where differing income and accounting years

230‑160    Portfolio treatment of fees

230‑165    Portfolio treatment of premiums and discounts for acquiring portfolio

230‑170    Allocating gain or loss to income years

230‑175    Running balancing adjustments

Realisation method

230‑180    Realisation method

Reassessment and re‑estimation

230‑185    Reassessment

230‑190    Re‑estimation

230‑195    Balancing adjustment if rate of return maintained on re‑estimation

230‑200    Re‑estimation if balancing adjustment on partial disposal

Guide to Subdivision 230‑B

230‑90  What this Subdivision is about

This Subdivision applies the accruals method to determine the amount and timing of gains and losses from a financial arrangement if they are sufficiently certain for such accrual to be done.

This Subdivision applies the realisation method to determine the amount and timing of gains and losses if they are not sufficiently certain to be dealt with under the accruals method.

If the accruals method is applied to a gain or loss on the basis of an estimate of a financial benefit and the benefit when received or provided is more or less than the estimate, a balancing adjustment is made to correct for the underestimate or overestimate.

If the accruals method is being applied to gains and losses from the arrangement and there is a material change to the arrangement, or the circumstances in which it operates, a reassessment is made of whether the accruals method or the realisation method should apply to gains and losses from the arrangement.

A change in circumstances may also cause a re‑estimation of gains and losses that the accruals method is being applied to.

Objects of Subdivision

230‑95  Objects of this Subdivision

                   The objects of this Subdivision are:

                     (a)  to properly recognise gains and losses from *financial arrangements by allocating them to appropriate periods of time; and

                     (b)  to reduce compliance costs by reflecting commercial accounting concepts where appropriate; and

                     (c)  to minimise tax deferral.

When accruals method or realisation method applies

230‑100  When accruals method or realisation method applies

When accruals method applies and when realisation method applies

             (1)  This section tells you when to apply the accruals method and when to apply the realisation method if this Subdivision applies to gains and losses from a *financial arrangement.

Accruals method—sufficiently certain overall gain or loss at start time

             (2)  The accruals method provided for in this Subdivision applies to a gain or loss you make from a *financial arrangement if:

                     (a)  the gain or loss is an overall gain or loss from the arrangement; and

                     (b)  the gain or loss is sufficiently certain at the time when you start to have the arrangement.

Note:          Subsection 230‑105(1) tells you when you have a sufficiently certain overall gain or loss.

Accruals method—sufficiently certain particular gain or loss

             (3)  The accruals method provided for in this Subdivision also applies to a gain or loss you make from a *financial arrangement if:

                     (a)  the gain or loss arises from a *financial benefit that you are to receive or are to provide under the arrangement; and

                     (b)  the gain or loss:

                              (i)  is sufficiently certain at the time when you start to have the arrangement and before you are to receive or provide the benefit; or

                             (ii)  becomes sufficiently certain after the time when you start to have the arrangement and before you are to receive or provide the benefit; and

                     (c)  the benefit has not already been taken into account in applying:

                              (i)  the accruals method provided for in this Subdivision; or

                             (ii)  the realisation method provided for in this Subdivision;

                            to another gain or loss from the arrangement.

This subsection has effect subject to subsection (4).

Note:          Subsection 230‑110(1) tells you when you have a sufficiently certain gain or loss at a particular time.

             (4)  Subsection (3) does not apply to a gain or loss that you make from a *financial arrangement if:

                     (a)  you are:

                              (i)  an individual; or

                             (ii)  an entity (other than an individual) that satisfies subsection 230‑455(2), (3) or (4) for the income year in which you start to have the arrangement; and

                     (b)  the arrangement is a *qualifying security; and

                     (c)  you have not made an election under subsection 230‑455(7).

Realisation method—gain or loss not sufficiently certain

             (5)  The realisation method provided for in this Subdivision applies to a gain or loss that you make from a *financial arrangement if the accruals method provided for in this Subdivision does not apply to that gain or loss.

Note:          Section 230‑180 tells you how to apply the realisation method to the gain or loss.

230‑105  Sufficiently certain overall gain or loss

             (1)  You have a sufficiently certain overall gain or loss from a *financial arrangement at the time when you start to have the arrangement only if it is sufficiently certain at that time that you will make an overall gain or loss from the arrangement of:

                     (a)  a particular amount; or

                     (b)  at least a particular amount.

The amount of the gain or loss is the amount referred to in paragraph (a) or (b).

Note:          Sections 230‑70 and 230‑75 (about apportionment of financial benefits) only apply in working out whether you make, or will make, a gain or loss (and the amount of the gain or loss) when particular events happen. They do not apply in working out, at the time when you start to have a financial arrangement, whether it is sufficiently certain that you will make an overall gain or loss from the arrangement.

             (2)  In applying subsection (1), you must:

                     (a)  assume that you will continue to have the *financial arrangement for the rest of its life; and

                     (b)  have regard to the extent of the risk that a *financial benefit that you are not sufficiently certain to provide or receive under the arrangement may reduce the amount of the gain or loss.

230‑110  Sufficiently certain gain or loss from particular event

             (1)  You have a sufficiently certain gain or loss from a *financial arrangement at a particular time if it is sufficiently certain at that time that you will make a gain or loss from the arrangement of:

                     (a)  a particular amount; or

                     (b)  at least a particular amount;

when one of the following occurs:

                     (c)  you receive a particular *financial benefit under the arrangement or one of your rights under the arrangement ceases;

                     (d)  you provide a particular financial benefit under the arrangement or one of your obligations under the arrangement ceases.

The amount of the gain or loss is the amount referred to in paragraph (a) or (b).

             (2)  In applying subsection (1) to work out whether you have a sufficiently certain gain or loss at a particular time:

                     (a)  have regard to the extent of the risk that a *financial benefit that you are not sufficiently certain to provide or receive under the arrangement may reduce the amount of the gain or loss; and

                     (b)  disregard any financial benefit that has already been taken into account in working out the amount of a sufficiently certain overall gain or loss from the *financial arrangement under subsection 230‑105(1) at the time when you started to have the arrangement; and

                     (c)  disregard any financial benefit (or that part of any financial benefit) that has already been taken into account in working out the amount of a sufficiently certain gain or loss from the *financial arrangement under subsection (1).

Note:          Sections 230‑70 and 230‑75 allow you to apportion financial benefits provided and financial benefits received in working out the amount of a gain or loss.

230‑115  Sufficiently certain financial benefits

             (1)  In deciding for the purposes of this Subdivision whether it is sufficiently certain at a particular time that you will make a gain or loss from a *financial arrangement:

                     (a)  have regard only to:

                              (i)  *financial benefits that you are sufficiently certain to receive; and

                             (ii)  financial benefits that you are sufficiently certain to provide; and

                     (b)  have regard to those financial benefits only to the extent that the amount or value of the benefits is, at that time, fixed or determinable with reasonable accuracy.

Note:          The particular time may be the time at which you start to have the arrangement.

             (2)  A *financial benefit that you are to receive or provide is to be treated as one that you are sufficiently certain to receive or to provide only if:

                     (a)  it is reasonably expected that you will receive or provide the financial benefit (assuming that you will continue to have the *financial arrangement for the rest of its life); and

                     (b)  at least some of the amount or value of the benefit is, at that time, fixed or determinable with reasonable accuracy.

             (3)  In applying subsection (2) to the *financial benefit:

                     (a)  you must have regard to:

                              (i)  the terms and conditions of the *financial arrangement; and

                             (ii)  accepted pricing and valuation techniques; and

                            (iii)  the economic or commercial substance and effect of the arrangement; and

                            (iv)  the contingencies that attach to the other financial benefits that are to be provided or received under the arrangement; and

                     (b)  you must treat the financial benefit as if it were not contingent if it is appropriate to do so having regard to the contingencies that attach to the other financial benefits that are to be received or provided under the arrangement.

             (4)  In applying paragraph (2)(b) at a particular time (the reference time) to a *financial benefit that depends on a variable that is based on:

                     (a)  an interest rate; or

                     (b)  a rate that solely or primarily reflects the time value of money; or

                     (c)  a rate that solely or primarily reflects a consumer price index; or

                     (d)  a rate that solely or primarily reflects an index prescribed by the regulations for the purposes of this paragraph;

you must assume that that variable will continue to have the value it has at the reference time.

             (5)  Despite subsection (4), in applying paragraph (2)(b) at a particular time to a *financial benefit that depends on a rate of change to a variable that is based on:

                     (a)  a rate that solely or primarily reflects a consumer price index; or

                     (b)  a rate that solely or primarily reflects an index prescribed by the regulations for the purposes of this paragraph;

you must assume that the rate of change to that variable will continue to be the rate of change that is current at that time.

             (6)  If subsection (4) or (5) applies to a gain or loss and you are determining the amount of the gain or loss at a particular time, you must also assume that that variable will continue to have the value that it has at that time.

             (7)  Subsections (4) and (5) do not limit paragraph (2)(b).

             (8)  If all of the *financial benefits provided and received under the *financial arrangement are denominated in a particular *foreign currency, those financial benefits are not to be translated into:

                     (a)  your *applicable functional currency; or

                     (b)  if you do not have an applicable functional currency—Australian currency;

for the purposes of applying subsection (2) to the arrangement.

             (9)  To avoid doubt:

                     (a)  a *financial benefit that you have already provided at a particular time is taken to be one that it is, at that time, a financial benefit that you are sufficiently certain to provide; and

                     (b)  a financial benefit that you have already received at a particular time is taken to be one that it is, at that time, a financial benefit that you are sufficiently certain to receive.

230‑120  Financial arrangements with notional principal

             (1)  This section applies to a *financial arrangement that you have if, in substance or effect, and having regard to the pricing, terms and conditions of the arrangement:

                     (a)  the arrangement consists of these things:

                              (i)  a leg, the *financial benefits to be provided or received in respect of which are calculated by reference to, or are reasonably related to, a notional principal;

                             (ii)  another leg, the financial benefits to be provided or received in respect of which also are calculated by reference to, or are reasonably related to, a notional principal;

                            (iii)  if the arrangement includes one or more other things—those things; and

                     (b)  when you start to have the arrangement, the value of the notional principal in relation to one leg is equal to the value of the notional principal in relation to the other leg; and

                     (c)  all or part of the notional principal in relation to each leg is provided or received at a time, regardless of whether that time is different in relation to each leg.

Example:    A swap contract.

             (2)  To avoid doubt, the *financial benefits mentioned in subparagraphs (1)(a)(i) and (ii), and the notional principal in relation to each leg, need not actually be provided or received.

             (3)  In applying this Subdivision to the *financial arrangement:

                     (a)  work out the *financial benefits from the arrangement as follows:

                              (i)  work out the financial benefits from each thing of which the arrangement consists separately from the financial benefits from each other thing of which the arrangement consists;

                             (ii)  ensure that results under subparagraph (i) are consistent with the timing and amount of financial benefits to be actually provided or received under the arrangement; and

                     (b)  work out your gains and losses from the arrangement as follows:

                              (i)  work out the gains and losses from each thing of which the arrangement consists separately from the gains and losses from each other thing of which the arrangement consists;

                             (ii)  treat the gains and losses mentioned in subparagraph (i) for all of those things as your gains and losses from the arrangement; and

                     (c)  in working out a gain or loss from a thing for the purposes of subparagraph (b)(i), and, if the accruals method applies to the gain or loss, how it is to be spread and allocated:

                              (i)  if the thing is a leg—take into account the amount of the notional principal at a time and in a manner that properly reflects the way in which the financial benefits in respect of that leg are calculated; and

                             (ii)  if the thing is not a leg—take into account an amount relevant to the thing at a time and in a manner that properly reflects the way in which the financial benefits in respect of that thing are calculated.

The accruals method

230‑125  Overview of the accruals method

                   If the accruals method applies to a gain or loss you make from a *financial arrangement:

                     (a)  you use section 230‑130 to work out the period over which the gain or loss is to be spread; and

                     (b)  you use section 230‑135 to work out how to allocate the gain or loss to particular intervals within the period over which the gain or loss is to be spread; and

                     (c)  if an interval to which part of the gain or loss is allocated straddles 2 income years, you use section 230‑170 to work out how to allocate that part of the gain or loss allocated between those 2 income years.

230‑130  Applying accruals method to work out period over which gain or loss is to be spread

Period over which overall gain or loss is to be spread

             (1)  If you have a sufficiently certain overall gain or loss from a *financial arrangement under subsection 230‑105(1), the period over which the gain or loss is to be spread is the period that:

                     (a)  starts when you start to have the arrangement; and

                     (b)  ends when you will cease to have the arrangement.

In applying paragraph (b), you must assume that you will continue to have the arrangement for the rest of its life.

             (2)  However, if you have sufficiently certain gains or losses from the arrangement that:

                     (a)  can be spread under subsection (3); and

                     (b)  when considered together, represent adequately the overall gain or loss mentioned in subsection (1);

you may spread those gains or losses in accordance with subsection (3) instead of spreading the overall gain or loss in accordance with subsection (1).

Period over which particular gain or loss is to be spread

             (3)  If you have a sufficiently certain gain or loss from a *financial arrangement under subsection 230‑110(1), the period over which the gain or loss is to be spread is the period to which the gain or loss relates. Have regard to the pricing, terms and conditions of the arrangement in working out the period to which the gain or loss relates. This subsection has effect subject to subsections (4) and (5).

             (4)  The start of the period over which a gain or loss to which subsection (3) applies is to be spread must:

                     (a)  not start earlier than the time when you start to have the *financial arrangement; and

                     (b)  not start earlier than the start of the income year during which it becomes sufficiently certain that you will make the gain or loss.

             (5)  The end of the period over which a gain or loss to which subsection (3) applies is to be spread must:

                     (a)  not end later than the time when you will cease to have the *financial arrangement; and

                     (b)  not end later than the end of the income year during which:

                              (i)  the *financial benefit that gives rise to the gain or loss is to be received or provided; or