ATO ID 2003/901: Non-share equity interest
Date of decision: 26 September 2003
Year of income: Year ended 30 June 2004
Business line: Public Groups and International

Issue
If an equity interest in a company is composed of related interests where at least one of the interests is not a share, is the interest a 'non-share equity interest'?

Decision
Yes. Part of the interest is not a share and the interest is therefore a non-share equity interest.

Facts
A company issues an equity interest to raise finance for its business operations. The equity interest comprises a number of related interests. At least one of the related interests is not a share.

Reasons for decision
Summary: A 'non-share equity interest' in a company is defined under subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as 'an equity interest in the company that is not solely a share'. For the equity interest to be a non-share equity interest, it must be an interest that is not 'solely' a share. The ordinary meaning of the word 'solely' is defined in the Macquarie Dictionary to be - 'as the only one or ones; exclusively or only'. The equity interest in question is not solely a share because one of the related interests that comprise the equity interest issued by the company is not a share. Therefore, the equity interest in question is a 'non-share equity interest'.

Legislative references: Income Tax Assessment Act 1997 subsection 995-1(1)
Other references: Australian Macquarie Dictionary
Subject references: Non-share equity interest Debt equity borderline