Private ruling: Capital Raising
Published: August 2014

Ruling: The ruling concerned the following: | 1. Will each Interest satisfy the definition of 'non-share equity interest' in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)? | 2. Will each Distribution paid by the Issuer in respect of each Interest be a 'frankable distribution' as defined in section 202-40 of the ITAA 1997? | 3. Will section 204-15 of the ITAA 1997 apply to the Transaction? | 4. Will section 204-30 of the ITAA 1997 apply to the Transaction? | 5. Will section 177EA of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the Transaction? | 6. Will the Commissioner make a determination under subsection 45C(3) of the ITAA 1936 in relation to the Transaction? | 7. Will the Interests constitute a 'commercial debt' under section 245-10 of the ITAA 1997? | 8.1 Will the issue of the Interests or the issue of Ordinary Shares on Exchange or Redemption be ordinary income to the Issuer under section 6-5 of the ITAA 1997? | 8.2 Will CGT event D1 happen for the Issuer on the issue of the Interests or the issue of Ordinary Shares on Exchange or Redemption under section 104-35 of the ITAA 1997? | 9.1 Will the Interests be considered a financial arrangement under subsection 230-50(1) of the ITAA 1997? | 9.2 If the answer to question 9.1 is yes, will paragraph 230-40(4)(e) of the ITAA 1997 apply such that the default accruals and realisation method outlined in Subdivision 230-B of the ITAA 1997 will not apply to a gain or loss made in relation to the Interests? | 9.3 If the answer to question 9.1 is yes, will subsection 230-440(1) of the ITAA 1997 apply such that the balancing adjustment provisions in Subdivision 230-G of the ITAA 1997 will not apply to the Interests? | 10. Will section 197-5 of the ITAA 1997 apply to the issue of the Interests or Ordinary Shares on Conversion? | 11. Will the benchmark rule in section 203-25 of the ITAA 1997 be satisfied if all of the Distributions made on the Interests and Dividends paid on Ordinary Shares within a particular franking period are franked to the same franking percentage? | Decision | The Commissioner ruled that: | 1. Yes. Each Interest satisfies the definition of 'non-share equity interest' in subsection 995-1(1) ITAA 1997. | 2. Yes. Each Distribution paid by the Issuer in respect of each Interest will be a 'frankable distribution' as defined in section 202-40 of the ITAA 1997. | 3. No. Section 204-15 of the ITAA 1997 will not apply to the Transaction. | 4. No. Section 204-30 of the ITAA 1997 will not apply to the Transaction. | 5. No. Section 177EA of the ITAA 1936 will not apply to the Transaction. | 6. No. The Commissioner will not make a determination under subsection 45C(3) of the ITAA 1936 in relation to the Transaction. | 7. No. The Interests will not constitute a 'commercial debt' under section 245-10 of the ITAA 1997. | 8.1 No. The issue of the Interests or the issue of Ordinary Shares on Exchange or Redemption will not be ordinary income to the Issuer under section 6-5 of the ITAA 1997. | 8.2 No. CGT event D1 will not happen for the Issuer on the issue of the Interests or the issue of Ordinary Shares on Exchange or Redemption under section 104-35 of the ITAA 1997. | 9.1 Yes. The Interests will be considered a financial arrangement under subsection 230-50(1) of the ITAA 1997. | 9.2 Yes. Paragraph 230-40(4)(e) of the ITAA 1997 will apply such that the default accruals and realisation method outlined in Subdivision 230-B of the ITAA 1997 will not apply to a gain or loss made in relation to the Interests. | 9.3 Yes. Subsection 230-440(1) of the ITAA 1997 will apply such that the balancing adjustment provisions in Subdivision 230-G of the ITAA 1997 will not apply to the Interests? | 10. No. Section 197-5 of the ITAA 1997 will not apply to the issue of the Interests or Ordinary Shares on Conversion? | 11. Yes. The benchmark rule in section 203-25 of the ITAA 1997 will be satisfied if all of the Distributions made on the Interests and Dividends paid on Ordinary Shares within a particular franking period are franked to the same franking percentage?