Private ruling: Capital raising
Date of advice: 30 July 2020
Published: September 2020

Ruling: Q1: Will each Note be treated as a non-share equity interest (as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)) for the purposes of Division 974 of the ITAA 1997? | A1: Yes. | Q2: Will the Distributions made on the Notes be frankable non-share dividends within the meaning of sections 202-30 and 202-40 of the ITAA 1997? | A2: Yes. | Q3: Will a franking debit arise as a result of the application of the linked distribution provisions in section 204-15 of the ITAA 1997? | A3: No. | Q4: Will the Commissioner make a determination under paragraph 204-30(3)(a) of the ITAA 1997 to give rise to a franking debit to Entity A in relation to distributions paid in respect of the Notes? | A4: No. | Q5: Will the Commissioner make a determination under paragraph 177EA(5)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) to give rise to a franking debit for Entity A in relation to Distributions paid in respect of the Notes? | A5: No. | Q6: Will the Commissioner make a determination under subsection 45C(3) of the ITAA 1936 in relation to the transaction? | A6: No. | Q7: Will the Notes be subject to the commercial debt forgiveness provisions in Division 245 of the ITAA 1997? | A7: No. | Q8: Will an assessable profit or gain arise for Entity A in relation to the issue of the Notes or the issue of Ordinary Shares on Exchange or Redemption? | A8: No. | Q9: Will Entity A be required to recognise gains and losses under Division 230 of the ITAA 1997 in relation to the Notes? | A9: No. | Q10: Will the share capital accounts of Entity A, Entity B and Entity C become tainted within the meaning of Division 197 of the ITAA 1997 upon the issue of the Notes or by the issue of Ordinary Shares on Exchange or Redemption? | A10: No. | Q11: Will issuing the Note cause Entity B to cease to be a 'wholly-owned subsidiary' of Entity A under section 703-30 of the ITAA 1997? | A11: No.

Relevant facts and circumstances: The head entity of a tax consolidated group (Entity A) applied for a private binding ruling in respect of the issuance of Notes by Entity B (wholly-owned subsidiary of Entity A) for the purpose of raising Additional Tier 1 capital. The issuance also involved Entity C (a related entity of Entity A).