ATO ID 2003/441: Infrastructure Borrowings: Direct and indirect - cancellation of Development Allowance Authority certificate - concessional treatment
Date of decision: 31 March 2003
Year of income: Year ended 30 June 2003
Business line: Public Groups and International

Issue
Will the concessional treatment provided to the taxpayer by section 159GZZZZE of the Income Tax Assessment Act 1936 (ITAA 1936) be affected by any cancellation by the Development Allowance Authority (DAA) of the Direct Infrastructure Borrowing (DIB) Certificate or the Indirect Infrastructure Borrowing (IIB) Certificate given the terms of subsection 159GZZZZE(1A) of the ITAA 1936?

Decision
No. The concessional treatment provided to the taxpayer by section 159GZZZZE of the ITAA 1936 will not be affected by any cancellation by the DAA of the DIB Certificate or the IIB Certificate, given the terms of subsection 159GZZZZE(1A) of the ITAA 1936.

Facts
The project company currently holds a certificate from the DAA permitting it to issue DIBs with which it financed construction of an infrastructure project. In turn, the taxpayer holds a corresponding certificate from the DAA permitting it to issue IIBs to fund the taxpayer's subscription for the DIBs issued by the project company.

Reasons for decision
Summary: In the event of cancellation of a certificate by the DAA, the holder of the certificate is subject to tax in accordance with section 159GZZZZH of the ITAA 1936. Subsection 159GZZZZE(1A) of the ITAA 1936 provides that the non-assessability and non-deductibility of the DIBs and IIBs continues in the event of cancellation of the certificates. Therefore, the concessional treatment provided to the taxpayer will apply under section 159GZZZZE of the ITAA 1936, in the event of the cancellation of the DIB and IIB certificates.

Legislative references: Income Tax Assessment Act 1936 section 159GZZZZE subsection 159GZZZZE(1A) section 159GZZZZH
Subject references: Infrastructure borrowings