Private ruling: Debt note
Date of advice: 16 April 2019
Published: June 2019

Ruling: Q1: Will the debt note be a financial arrangement under section 230-45 of the Income Tax Assessment Act 1997? | A1: Yes | Q2: If the answer to Question 1 is yes, will Company X be permitted to apply the accruals method or the realisation method provided for in Subdivision 230-B of the Income Tax Assessment Act 1997 to gains or losses from the debt note? | A2: Yes | Q3: Will the interest adjustment payment under the debt note be deductible to Company X under subsection 230-15(2) of the Income Tax Assessment Act 1997 , or be allowed as a deduction under the balancing adjustment method statement in subsection 230-445(1) of the Income Tax Assessment Act 1997? | A3: Yes | Q4: In the event that there is an adjustment to the purchase price under the sale agreement and Company X has to provide an additional amount, will this additional amount be capital in nature such that it forms part of the cost base of the shares under section 110-25 of the Income Tax Assessment Act 1997 ? | A4: Yes

Relevant facts and circumstances: The taxpayer (Company X) applied for a private ruling on the tax consequences, pursuant to Division 230 of the Income Tax Assessment Act 1997 and Division 110 of the Income Tax Assessment Act 1997 , arising from a debt note and a sale agreement for shares.