Product Ruling PR 2017/13
Date of effect: 27 September 2017

What this ruling is about: 1. This Product Ruling sets out the Commissioner's opinion on the way in which the relevant provisions identified in the Ruling section apply to the defined class of entities who take part in the scheme to which this Ruling relates. All legislative references in this Ruling are to the Income Tax Assessment Act 1936 (ITAA 1936) unless otherwise indicated. 2. In this Product Ruling the scheme is the Pivot Portfolio Loan Facility, marketed as the 'Synergy Pivot Portfolio Loan' and the 'Switzer Pivot Home Loan', and involves the application of a 'customer loyalty rebate' to calculate a discounted interest rate that is charged by Synergy Home Loans Australia Pty Ltd (Synergy) on a home loan of a borrower who (directly or indirectly via an associated entity) also has one or more investment loans with Synergy. 3. This Product Ruling does not address: Class of entities 4. This part of the Product Ruling specifies which entities can rely on the Ruling section of this Product Ruling and which entities cannot rely on the Ruling section. In this Product Ruling, those entities that can rely on the Ruling section are referred to as the borrower. Where the borrower under the home loan is associated with the borrower under the investment loan(s) (but is not the same borrower), all references to the borrower under this Product Ruling are to be read as a reference to the applicable borrower under either loan, as the context requires. 5. The class of entities who can rely on the Ruling section of this Product Ruling consists of those entities that, as the borrower, enter into the scheme described in paragraphs 16 to 20 of this Product Ruling on or after the date this Ruling is made and on or before 30 June 2020. 6. The class of entities who can rely on the Ruling section of this Product Ruling does not include entities that: 7. This Product Ruling does not address the provisions of the Superannuation Industry (Supervision) Act 1993 (SISA). The Commissioner gives no assurance that the scheme is an appropriate investment for a superannuation fund. Trustees of superannuation funds are advised that no consideration has been given in this Product Ruling as to whether investment in this scheme may contravene the provisions of SISA. Qualifications 8. The class of entities defined in this Product Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 16 to 20 of this Ruling. 9. If the scheme actually carried out is materially different from the scheme that is described in this Product Ruling, then:

Class of entities or scheme: 4. This part of the Product Ruling specifies which entities can rely on the Ruling section of this Product Ruling and which entities cannot rely on the Ruling section. In this Product Ruling, those entities that can rely on the Ruling section are referred to as the borrower. Where the borrower under the home loan is associated with the borrower under the investment loan(s) (but is not the same borrower), all references to the borrower under this Product Ruling are to be read as a reference to the applicable borrower under either loan, as the context requires. 5. The class of entities who can rely on the Ruling section of this Product Ruling consists of those entities that, as the borrower, enter into the scheme described in paragraphs 16 to 20 of this Product Ruling on or after the date this Ruling is made and on or before 30 June 2020. 6. The class of entities who can rely on the Ruling section of this Product Ruling does not include entities that: 7. This Product Ruling does not address the provisions of the Superannuation Industry (Supervision) Act 1993 (SISA). The Commissioner gives no assurance that the scheme is an appropriate investment for a superannuation fund. Trustees of superannuation funds are advised that no consideration has been given in this Product Ruling as to whether investment in this scheme may contravene the provisions of SISA. | Qualifications: 8. The class of entities defined in this Product Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 16 to 20 of this Ruling. 9. If the scheme actually carried out is materially different from the scheme that is described in this Product Ruling, then: 10. This Product Ruling applies prospectively from 27 September 2017, the date it is published. It therefore applies only to the specified class of entities that enter into the scheme from 27 September 2017 until 30 June 2020, being its period of application. This Product Ruling will continue to apply to those entities even after its period of application has ended for the scheme entered into during the period of application. 11. However the Product Ruling only applies to the extent that there is no change in the scheme or in the entity's involvement in the scheme. | Changes in the law: 12. Although this Product Ruling deals with the income tax laws enacted at the time it was issued, later amendments may impact on this Product Ruling. Any such changes will take precedence over the application of this Product Ruling and, to that extent, this Product Ruling will have no effect. 13. Entities who are considering participating in the scheme are advised to confirm with their taxation adviser that changes in the law have not affected this Product Ruling since it was issued. | Note to promoters and advisers: 14. Product Rulings were introduced for the purpose of providing certainty about tax consequences for entities in schemes such as this. In keeping with that intention the Commissioner suggests that promoters and advisers ensure that participants are fully informed of any legislative changes after the Product Ruling has issued. 15. The application of Part IVA of the ITAA 1936 depends on a careful weighing of all the relevant facts and circumstances of each case. Provided the scheme ruled on is entered into and carried out as described in this Product Ruling, the anti-avoidance provisions in Part IVA of the ITAA 1936 will not apply to deny the borrower of a deduction allowed under section 8-1 of the ITAA 1997 for interest incurred under their investment loan(s). 16. The scheme that is the subject of this Ruling is identified and described in the application for a Product Ruling as constituted by documents and information received on 3 August 2017 and 14 August 2017. Note: certain information has been provided on a commercial-in-confidence-basis and will not be disclosed or released under Freedom of Information legislation. 17. For the purposes of describing the scheme to which this Ruling applies, and aside from the relevant home and investment loan documentation to be executed between the borrower and Synergy, there are no other agreements, whether formal or informal, and whether or not legally enforceable, which the borrower, or any associate of the borrower, will be a party to, which are a part of the scheme. 18. All Australian Securities and Investments Commission (ASIC) requirements are, or will be, complied with for the term of the agreements. 19. Following is a summary of the scheme: | Assumptions: 20. This Ruling is made on the basis of the following assumptions: Commissioner of Taxation 27 September 2017 | Refinancing an original loan: 21. The interest expense on a new loan will be deductible if the new loan is used to repay an existing loan which, at the time of the second borrowing, was being used in an assessable income producing activity (see paragraph 42 of Taxation Ruling TR 95/25 Income tax: deductions for interest under section 8-1 of the Income Tax Assessment Act 1997 following FC of T v. Roberts; FC of T v. Smith referring to FC of T v. Roberts; FC of T v. Smith 92 ATC 4380; (1992) 23 ATR 494 at ATC 4388; ATR 504). 22. Pursuant to the assumption at paragraph 20(b) of this Product Ruling, the borrower's investment loan is used in an assessable income producing activity. On the basis of that assumption and consistent with the principle set out in the above paragraph of this Product Ruling, interest incurred on any refinanced investment loan of the borrower will therefore also be deductible under section 8-1 of the ITAA 1997. | Application of Part IVA: 23. Part IVA is a general anti-avoidance rule which gives the Commissioner the power to cancel all or part of a tax benefit that has been obtained, or would, but for section 177F, be obtained, by a taxpayer in connection with a scheme to which Part IVA applies. 24. In broad terms, Part IVA will apply where the following requirements are satisfied: | Identification of the scheme: 25. The term 'scheme' is defined very broadly in section 177A to mean: 26. The precise description of a scheme for the purposes of Part IVA will depend on the facts of the particular case. The circumstances described in paragraphs 16 to 20 of this Product Ruling constitute a scheme for the purposes of the definition set out in section 177A. | The tax benefit test: 27. A tax benefit can arise in relation to a year of income where the amount of deductible interest incurred on an investment loan is greater than the amount of deductible interest that would have been allowable, or might reasonably be expected to have been allowable, under an investment loan but for entering into a scheme. 28. The amount of deductible interest incurred on the investment loan(s) of the borrower is not expected to be greater than the amount of deductible interest that would have been allowable to the borrower but for entering into the scheme described in paragraphs 16 to 20 of this Product Ruling. A tax benefit should therefore not arise to the borrower in relation to a year of income in connection with this scheme. 29. The following is a detailed contents list for this Ruling: © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Not previously issued as a draft

Ruling: This Product Ruling has been given on the basis that the entity(s) that applied for the Product Ruling, and their associates, will abide by strict terms of use. Any failure to comply with the terms of use may lead to the withdrawal of this Product Ruling. 1. This Product Ruling sets out the Commissioner's opinion on the way in which the relevant provisions identified in the Ruling section apply to the defined class of entities who take part in the scheme to which this Ruling relates. All legislative references in this Ruling are to the Income Tax Assessment Act 1936 (ITAA 1936) unless otherwise indicated. 2. In this Product Ruling the scheme is the Pivot Portfolio Loan Facility, marketed as the 'Synergy Pivot Portfolio Loan' and the 'Switzer Pivot Home Loan', and involves the application of a 'customer loyalty rebate' to calculate a discounted interest rate that is charged by Synergy Home Loans Australia Pty Ltd (Synergy) on a home loan of a borrower who (directly or indirectly via an associated entity) also has one or more investment loans with Synergy. 3. This Product Ruling does not address: | Class of entities: 4. This part of the Product Ruling specifies which entities can rely on the Ruling section of this Product Ruling and which entities cannot rely on the Ruling section. In this Product Ruling, those entities that can rely on the Ruling section are referred to as the borrower. Where the borrower under the home loan is associated with the borrower under the investment loan(s) (but is not the same borrower), all references to the borrower under this Product Ruling are to be read as a reference to the applicable borrower under either loan, as the context requires. 5. The class of entities who can rely on the Ruling section of this Product Ruling consists of those entities that, as the borrower, enter into the scheme described in paragraphs 16 to 20 of this Product Ruling on or after the date this Ruling is made and on or before 30 June 2020. 6. The class of entities who can rely on the Ruling section of this Product Ruling does not include entities that: 7. This Product Ruling does not address the provisions of the Superannuation Industry (Supervision) Act 1993 (SISA). The Commissioner gives no assurance that the scheme is an appropriate investment for a superannuation fund. Trustees of superannuation funds are advised that no consideration has been given in this Product Ruling as to whether investment in this scheme may contravene the provisions of SISA. | Qualifications: 8. The class of entities defined in this Product Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 16 to 20 of this Ruling. 9. If the scheme actually carried out is materially different from the scheme that is described in this Product Ruling, then:


Appendix: Refinancing an original loan: 21. The interest expense on a new loan will be deductible if the new loan is used to repay an existing loan which, at the time of the second borrowing, was being used in an assessable income producing activity (see paragraph 42 of Taxation Ruling TR 95/25 Income tax: deductions for interest under section 8-1 of the Income Tax Assessment Act 1997 following FC of T v. Roberts; FC of T v. Smith referring to FC of T v. Roberts; FC of T v. Smith 92 ATC 4380; (1992) 23 ATR 494 at ATC 4388; ATR 504). 22. Pursuant to the assumption at paragraph 20(b) of this Product Ruling, the borrower's investment loan is used in an assessable income producing activity. On the basis of that assumption and consistent with the principle set out in the above paragraph of this Product Ruling, interest incurred on any refinanced investment loan of the borrower will therefore also be deductible under section 8-1 of the ITAA 1997. | Application of Part IVA: 23. Part IVA is a general anti-avoidance rule which gives the Commissioner the power to cancel all or part of a tax benefit that has been obtained, or would, but for section 177F, be obtained, by a taxpayer in connection with a scheme to which Part IVA applies. 24. In broad terms, Part IVA will apply where the following requirements are satisfied: | Identification of the scheme: 25. The term 'scheme' is defined very broadly in section 177A to mean: 26. The precise description of a scheme for the purposes of Part IVA will depend on the facts of the particular case. The circumstances described in paragraphs 16 to 20 of this Product Ruling constitute a scheme for the purposes of the definition set out in section 177A. | The tax benefit test: 27. A tax benefit can arise in relation to a year of income where the amount of deductible interest incurred on an investment loan is greater than the amount of deductible interest that would have been allowable, or might reasonably be expected to have been allowable, under an investment loan but for entering into a scheme. 28. The amount of deductible interest incurred on the investment loan(s) of the borrower is not expected to be greater than the amount of deductible interest that would have been allowable to the borrower but for entering into the scheme described in paragraphs 16 to 20 of this Product Ruling. A tax benefit should therefore not arise to the borrower in relation to a year of income in connection with this scheme.


What this Ruling is about | NOT LEGALLY BINDING SECTION: | A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. | If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. | Potential participants must form their own view about the commercial and financial viability of the product. The Commissioner recommends a financial (or other) adviser be consulted for such information. | This Product Ruling provides certainty for potential participants by confirming that the tax benefits set out in the Ruling part of this document are available, provided that the scheme is carried out in accordance with the information we have been given, and have described below in the Scheme part of this document. If the scheme is not carried out as described, participants lose the protection of this Product Ruling. | (a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and | (b) any scheme, plan, proposal, action, course of action or course of conduct. | Appendix 2 - Detailed contents list


Related rulings: TR 95/25 TR 98/22 TD 2012/1
Legislative references: ITAA 1936 ITAA 1936 Pt IVA ITAA 1936 177A ITAA 1936 177C(1)(b) ITAA 1936 177D(2) ITAA 1936 177F ITAA 1936 177F(1)(b) ITAA 1997 ITAA 1997 8-1 ITAA 1997 Div 230 SISA 1993 TAA 1953
Case references: Federal Commissioner of Taxation v. Roberts - (1992) 37 FCR 246 (1992) 108 ALR 385 (1992) 23 ATR 494 92 ATC 4380