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INCOME TAX ASSESSMENT ACT 1997 - SECT 974.130

Financing arrangement

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

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

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

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

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

                     (a)  a bill of exchange;

                     (b)  income securities;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

             (5)  The regulations may:

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

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



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