Product Ruling PR 2022/5
Date of effect: 1 July 2022

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 that participates in the scheme to which this Product Ruling relates. All legislative references in this Product Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. 2. In this Product Ruling, the scheme is referred to as the Instreet Masti, offered by Instreet Structured Investment Pty Ltd (the Issuer). [1] 3. This Product Ruling does not address:

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. Those entities that can rely on the Ruling section are referred to as Investors. 5. The class of entities that can rely on the Ruling section of this Product Ruling consists of those entities whose rights and obligations under the Terms will commence on a relevant Commencement Date, being a Commencement Date on or between 1 July 2022 and 30 June 2025, and that at the time of entering into the scheme: 6. The class of entities that can rely on the Ruling section of this Product Ruling does not include entities: | Superannuation Industry (Supervision) Act 1993: 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. The 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 the 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 Product Ruling. 9. If the scheme actually carried out is materially different from the scheme that is described in this Product Ruling, then this Product Ruling:

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 that participates in the scheme to which this Product Ruling relates. All legislative references in this Product Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. 2. In this Product Ruling, the scheme is referred to as the Instreet Masti, offered by Instreet Structured Investment Pty Ltd (the Issuer). [1] 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. Those entities that can rely on the Ruling section are referred to as Investors. 5. The class of entities that can rely on the Ruling section of this Product Ruling consists of those entities whose rights and obligations under the Terms will commence on a relevant Commencement Date, being a Commencement Date on or between 1 July 2022 and 30 June 2025, and that at the time of entering into the scheme: 6. The class of entities that can rely on the Ruling section of this Product Ruling does not include entities: | Superannuation Industry (Supervision) Act 1993: 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. The 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 the 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 Product Ruling. 9. If the scheme actually carried out is materially different from the scheme that is described in this Product Ruling, then this Product Ruling:


Appendix: Coupons assessable as ordinary income under section 6-5: 21. Section 6-5 includes income according to ordinary concepts (ordinary income) in assessable income. Whether or not a particular amount is income according to ordinary concepts depends on the nature and character of the receipt in the hands of the taxpayer. 22. The Coupons receivable by the Investor are a product of their investment in Units under the Instreet Masti, received fully and finally, periodically and may be relied upon to offset any Finance Cost Payments. Accordingly, the Fixed Coupons and any Final Coupon paid or credited by the Issuer to the Investor are ordinary income, assessable under section 6-5 in the income year in which they are paid or credited to the Investor. | Deductibility of Finance Cost Payments under section 8-1: 23. A loss or outgoing is deductible under section 8-1 if its essential character is that of expenditure that has a sufficient connection with the operations or activities which more directly gain or produce a taxpayer's assessable income, provided that the expenditure is not of a capital, private or domestic nature. 24. The Finance Cost Payments incurred by the Investor in respect of their Units under the Instreet Masti have a sufficient connection with the gaining of assessable income (being the Fixed Coupons and any Final Coupon) to be deductible under section 8-1 and are deductible in full on the basis that the Investor's purpose of investing in the Units is to derive a return from these assessable amounts in excess of their expenditure. | Section 82KL of the ITAA 1936: 25. The operation of section 82KL of the ITAA 1936 depends, among other things, on the identification of a certain quantum of 'additional benefits' (as defined in section 82KH of the ITAA 1936). Insufficient additional benefits will be provided to trigger the application of section 82KL of the ITAA 1936. Section 82KL of the ITAA 1936 will not apply to deny the deductions otherwise allowable under section 8-1. | Sections 82KZME and 82KZMF of the ITAA 1936 - prepaid expenditure and 'tax shelter'-style arrangements: 26. The rules in sections 82KZME and 82KZMF of the ITAA 1936 apply, subject to the exceptions in section 82KZME of the ITAA 1936, where expenditure is incurred in relation to a 'tax shelter'-style arrangement for the doing of a thing under an agreement that is not to be wholly done within the expenditure year, and where certain requirements for that agreement are met. 27. A Finance Cost Payment incurred in respect of Units under the Instreet Masti is made in return for the deferral of the payment of the Total Purchase Price until the subsequent Period (or in the case of the final Finance Cost Payment, until the Maturity Date) and is to be taken, for the purposes of Subdivision H of Division 3 of Part III of the ITAA 1936, to be expenditure incurred under an agreement in return for the doing of a thing under the agreement for the Period to which the Finance Cost Payment relates. [3] 28. For the purposes of section 82KZME of the ITAA 1936, 'agreements' are broadly defined to include an entire scheme of which a contract may form part. Under subsection 82KZME(4) of the ITAA 1936, the relevant agreement is all the contractual arrangements and activities associated with participation in the Instreet Masti. 29. Section 82KZMF of the ITAA 1936 will have application and apportion over the relevant Period each prepaid Finance Cost Payment incurred by the Investor which is allowable as a deduction under section 8-1 where the relevant Finance Cost Payment for the expenditure year is incurred on a date other than 1 July and is not excluded expenditure; and the Investor's allowable deduction in respect of that Finance Cost Payment for the expenditure year exceeds their assessable Coupon in that same year. Each of the other requirements for the agreement under subsection 82KZME(3) of the ITAA 1936 are met and none of the other exceptions contained in subsections 82KZME(5), (8) or (9) of the ITAA 1936 apply to exclude Finance Cost Payments incurred from the operation of section 82KZMF of the ITAA 1936. 30. For each of the 2 years of income during which part of the Period for the Finance Cost Payment occurs, the Investor can deduct an amount using the following formula set out in paragraph 82KZMF(1)(b) of the ITAA 1936: Expenditure × Number of days of eligible service period in the year of income / Total number of days of eligible service period | Application of the capital gains tax provisions to Units under the Instreet Masti: 31. Under subsection 108-5(1), a CGT asset is any kind of property or a legal or equitable right that is not property. The rights of an Investor in respect of their Units under the Instreet Masti are legally enforceable rights and therefore, in their totality, a CGT asset according to the definition in subsection 108-5(1). 32. Where the Final Coupon (if any) is paid to the Investor, together with either a payment of the Final Value (under a cash settlement) or delivery of the Final Assets (under a physical settlement), the Investor's ownership of the contractual rights in respect of their Units under the Instreet Masti is discharged or satisfied. This discharge or satisfaction of the contractual rights gives rise to CGT event C2 (paragraph 104-25(1)(b)). 33. The Investor will make a capital gain from this CGT event if the capital proceeds from the ending of the Investor's ownership of the asset are more than the asset's cost base or, alternatively, a capital loss from this CGT event if those capital proceeds are less than the asset's reduced cost base (subsection 104-25(3)). 34. The Investor's capital proceeds from the CGT event will be equal to the Final Value or market value of the Final Assets, as applicable, received on (or shortly after) the Settlement Date (section 116-20). 35. The cost base or reduced cost base of the Investor's rights in respect of their Units under the Instreet Masti includes, as its first element, the Total Purchase Price (subsections 110-25(2) and 110-55(2)). | Subsection 159GP(1) of the ITAA 1936 - a Unit is not a 'security': 36. Under subsection 159GP(1) of the ITAA 1936, a 'security' means: 37. The Units issued under the Instreet Masti are not considered to have sufficient debt like obligations to be a contract to which paragraph (d) of the definition of security in subsection 159GP(1) of the ITAA 1936 applies, nor does it fall within paragraphs (a), (b) or (c) of that definition. Therefore, such Units do not meet the definition of security under subsection 159GP(1) of the ITAA 1936. © 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).


What this Ruling is about | If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. | 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. | Date of effect: 10. This Product Ruling applies from 1 July 2022. It applies only to the specified class of entities that enter into the scheme on a relevant Commencement Date (see paragraph 5 of this Product Ruling). This Product Ruling provides advice to the specified class of entities from 1 July 2022 until 30 June 2025, being its period of application. Where relevant, this Product Ruling will continue to apply to those entities even after its period of application has ended for the scheme entered into on a relevant Commencement Date. | 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 that are considering participating in the scheme are advised to confirm with their tax 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. Subject to paragraph 3 of this Product Ruling and the assumptions in paragraph 20 of this Product Ruling: | 16. The scheme that is the subject of this Product Ruling is identified and described in the following: | 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 Product Ruling applies, there are no other agreements, whether formal or informal, and whether or not legally enforceable, which an Investor, or any associate of an Investor, will be a party to, which are a part of the scheme. | 18. All Australian Securities and Investments Commission requirements are, or will be, complied with for the term of the agreements. | Overview: 19. The details of the Instreet Masti are: | Assumptions: 20. This Product Ruling is made on the basis of the following necessary assumptions: | Commissioner of Taxation 15 June 2022 | (a) stock, a bond, debenture, certificate of entitlement, bill of exchange, promissory note or other security; | (b) a deposit with a bank or other financial institution; | (c) a secured or unsecured loan; or | (d) any other contract, whether or not in writing, under which a person is liable to pay an amount or amounts, whether or not the liability is secured.


Related rulings: PR 2015/1 PR 2017/10
Legislative references: ITAA 1936 82KH ITAA 1936 82KL ITAA 1936 Pt III Div 3 Subdiv H ITAA 1936 82KZL(1) ITAA 1936 82KZME ITAA 1936 82KZME(3) ITAA 1936 82KZME(4) ITAA 1936 82KZME(5) ITAA 1936 82KZME(8) ITAA 1936 82KZME(9) ITAA 1936 82KZMF ITAA 1936 82KZMF(1)(b) ITAA 1936 159GP(1) ITAA 1936 159GP(1)(a) ITAA 1936 159GP(1)(b) ITAA 1936 159GP(1)(c) ITAA 1936 159GP(1)(d) ITAA 1936 Pt IVA ITAA 1997 6-5 ITAA 1997 8-1 ITAA 1997 104-25 ITAA 1997 104-25(1)(b) ITAA 1997 104-25(3) ITAA 1997 108-5(1) ITAA 1997 110-25(2) ITAA 1997 110-55(2) ITAA 1997 116-20 ITAA 1997 Div 230 ITAA 1997 230-455