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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 6 - THE DICTIONARY  

PART 6-1 - CONCEPTS AND TOPICS  

Division 974 - Debt and equity interests    View history reference

Subdivision 974-B - Debt interests  

SECTION 974-20  The test for a debt interest  

 View history reference

Satisfying the debt test

974-20(1)  

A *scheme satisfies the debt test in this subsection in relation to an entity if:


(a) the scheme is a *financing arrangement for the entity; and


(b) the entity, or a *connected entity of the entity, receives, or will receive, a *financial benefit or benefits under the scheme; and


(c) the entity has, or the entity and a connected entity of the entity each has, an *effectively non-contingent obligation under the scheme to provide a financial benefit or benefits to one or more entities after the time when:


(i) the financial benefit referred to in paragraph (b) is received if there is only one; or

(ii) the first of the financial benefits referred to in paragraph (b) is received if there are more than one; and


(d) it is substantially more likely than not that the value provided (worked out under subsection (2)) will be at least equal to the value received (worked out under subsection (3)); and


(e) the value provided (worked out under subsection (2)) and the value received (worked out under subsection (3)) are not both nil.

The scheme does not need to satisfy paragraph (a) if the entity is a company and the interest arising from the scheme is an interest covered by item 1 of the table in subsection 974-75(1) (interest as a member or stockholder of the company).

Note:

Section 974-30 tells you when a financial benefit is taken to be provided to an entity.

974-20(2)  

The value provided is:


(a) the value of the *financial benefit to be provided under the *scheme by the entity or a *connected entity if there is only one; or


(b) the sum of the values of all the financial benefits provided or to be provided under the scheme by the entity or a connected entity of the entity if there are 2 or more.

Note:

Section 974-35 tells you how to value financial benefits.

974-20(3)  

The value received is:


(a) the value of the *financial benefit received, or to be received, under the *scheme by the entity or a *connected entity of the entity if there is only one; or


(b) the sum of the values of all the financial benefits received, or to be received, under the scheme by the entity or a connected entity if there are 2 or more.

974-20(4)  

For the purposes of paragraph (1)(b) and subsections (2) and (3):


(a) a *financial benefit to be provided under the *scheme by the entity or a *connected entity is taken into account only if it is one that the entity or connected entity has an *effectively non-contingent obligation to provide; and


(b) a financial benefit to be received under the scheme by the entity or a connected entity is taken into account only if it is one that another entity has an effectively non-contingent obligation to provide.

Multiple financial benefits

974-20(5)  

Paragraphs (1)(b) and (c) apply to 2 or more *financial benefits whether they are provided at the same time or over a period of time.

Regulations

974-20(6)  

The regulations:


(a) may specify circumstances in which paragraph (1)(d) is satisfied or not satisfied; and


(b) may otherwise specify rules to be applied in determining whether or not paragraph (1)(d) is satisfied.


 



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