Private ruling: Issue Floating Rate Notes
Published: October 2011

Ruling: Q1: Is there a financial arrangement pursuant to section 230-45 of the ITAA 1997? | A1: Yes | Q2: Will the arrangement not be treated as a financing arrangement under subsection 230-50(1) of the ITAA 1997? | A2: Yes | Q3: Will the losses from the arrangement will be deductible pursuant to subsection 230-15(2) of the ITAA 1997? | A3: Yes | Q4: Will the gains/ losses be treated on an accruals basis pursuant to subsection 230-100(2) of the ITAA 1997? | A4: Yes | Q5: Will there be two arrangements pursuant to subsections 230-55(1) and (2) of the ITAA 1997? | A5: Yes

Relevant facts and circumstances: The Taxpayer is seeking to raise funds from the Australian retail market by issuing securities. The securities will be issued in accordance with specified Terms and Conditions. During the term of the securities, the Taxpayer will make interest payments quarterly in arrears. Upon maturity and/ or redemption of the securities, the principal amount of the securities will also be paid by the Taxpayer. The Taxpayer will also enter into a hedging arrangement to hedge the financial risks emanating from the securities. The hedge will be priced independently and unrelated to the securities.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 230-15(2) | Income Tax Assessment Act 1997 Section 230-45 | Income Tax Assessment Act 1997 Subsection 230-50(1) | Income Tax Assessment Act 1997 Subsection 230-50(2) | Income Tax Assessment Act 1997 Subsection 230-55(1) | Income Tax Assessment Act 1997 Subsection 230-55(2) | Income Tax Assessment Act 1997 Subsection 230-100(2)

Reasons for decision: Summary: Is there a financial arrangement pursuant to section 230-45 of the ITAA 1997? As the taxpayer's arrangement satisfies all of the requirements of section 230-45 of the ITAA 1997, it will constitute a financial arrangement under this provision. Will the arrangement not be treated as a financing arrangement under subsection 230-50(1) of the ITAA 1997? As the taxpayer has not satisfied all of the requirements of an "equity interest", the arrangement will not be treated as a financial arrangement under subsection 230-50(1) of the ITAA 1997. Will the losses from the arrangement will be deductible pursuant to subsection 230-15(2) of the ITAA 1997? As the taxpayer has satisfied all of the requirements of subsection 230-15(2) of the ITAA 1997, it will be entitled to claim losses from the financial arrangement under this provision. Will the gains/ losses be treated on an accruals basis pursuant to subsection 230-100(2) of the ITAA 1997? As the gains/ losses of the taxpayer have met all of the requirements of 230-100(2) of the ITAA 1997, the taxpayer will be entitled to treat such gains/ losses in respect of the financial arrangement on an accruals basis. Will there be two arrangements pursuant to subsections 230-55(1) and (2) of the ITAA 1997? An examination of the factors contained in subsection 230-55(4) of the ITAA 1997 to arrangements A and B demonstrates that there will be two separate arrangements for the purposes of 230-55(1) and (2) of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.