Product Ruling PR 2025/1
Date of effect: 1 July 2025

What this ruling is about: 1. This Ruling sets out the income tax consequences for entities that participate as an Investor in the scheme referred to as C2 Gateway Deferred Purchase Agreement (DPA) offered by C2 Specialist Investments Pty Ltd (Issuer) and arranged by C2 Financial Services Pty Ltd (Arranger). 2. All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. Terms which are defined in the C2 Gateway Deferred Purchase Agreement Master Product Disclosure Statement (Master PDS) referred to in paragraph 11 of this Ruling have been capitalised. 3. This Ruling does not address: Who this Ruling applies to 4. This Ruling applies to you if: 5. This Ruling does not apply to you if you: Requirements of the Superannuation Industry (Supervision) Act 1993 6. This Ruling does not address the provisions of the Superannuation Industry (Supervision) Act 1993. We give 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 Ruling as to whether investment in this scheme may contravene the provisions of the Superannuation Industry (Supervision) Act 1993 . 7. This Ruling applies from 1 July 2025 to an Investor specified in paragraph 4 of this Ruling that enters into the scheme described in paragraphs 11 to 26 of this Ruling on a relevant Issue Date from 1 July 2025 until 30 June 2028. 8. However, the Ruling only applies and may be relied on to the extent that there is no change in the scheme or in the Investor's involvement in the scheme. If the scheme carried out is materially different from the scheme described at paragraphs 11 to 26 of this Ruling, this Ruling cannot be relied upon and may be withdrawn or modified. 9. Subject to paragraph 3 of this Ruling and the assumptions in paragraph 10 of this Ruling: Assumptions 10. This Ruling is made on the basis of the following necessary assumptions: 11. The scheme 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. 12. For the purposes of describing the scheme, 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. 13. All Australian Securities and Investments Commission requirements are, or will be, complied with for the term of the agreements. Overview of scheme 14. An offer to participate in the C2 Gateway DPA will be made to prospective investors in various Series by way of the Master PDS and a Term Sheet PDS. Each Series will be governed by the general terms in the Master PDS and specific terms in the Term Sheet PDS which are applicable to that Series (Terms). 15. On acceptance of an Investor's Application and receipt by the Issuer of the amounts payable by the Investor by the Offer Closing Date, the Issuer will issue Units on the Issue Date to the Custodian to hold in separate Investor Trusts for the Investor on the terms of the Custody Deed Poll and subject to the terms of the Global Investor Security Deed. Upon the issue of those Units, the Investor will receive a beneficial interest in a Portion of the Delivery Assets (Beneficial Interest). That Beneficial Interest may not be dealt with separately in any way from the Investor's interest in the Units. 16. The Minimum Investment Amount required to be invested by each Investor will be set out in the relevant Term Sheet PDS for a Series. The Issue Price of a Unit will be $1.00 per Unit. 17. One or more Coupons may be payable in respect of issued Units, as specified in the relevant Term Sheet PDS, and the Custodian directs the Issuer to pay those Coupons on the relevant Coupon Payment Dates directly to the Investor (as the beneficiary of each relevant Investor Trust). The Coupons comprise of: 18. Investors must enter into a limited recourse Investment Loan from the Issuer, as Lender, to finance up to 100% of the Investment Amount payable to the Issuer. 19. The Investment Loan: 20. Investors that are not superannuation entities may be offered a full recourse Interest Loan from the Issuer, as Lender, to fund up to 100% of the Prepaid Interest owing to the Lender under the Investment Loan. The Interest Loan: 21. Where the Investor repays the Investment Loan and any Interest Loan in full on or before the Maturity Date and does not validly elect to use the Agency Sale Option under a Notice of Maturity at least 10 Business Days before the Maturity Date, physical delivery of the Delivery Parcel will occur. Where this occurs, the Issuer will purchase the Delivery Parcel, register the shares in an issuer sponsored holding account in the name of the Investor, and deliver the Delivery Parcel to the Investor on the Settlement Date or as soon as possible thereafter. 22. Where the Investor does not repay their Investment Loan and any Interest Loan in full by the Maturity Date and is deemed to have elected to use the Agency Sale Option, the Investor assigns and novates their rights and obligations under the Loan Agreement to the Acceptor and the Issuer will be directed by the Custodian to sell the Delivery Parcel on or as soon as reasonably practicable after the Settlement Date. The Sale Monies will be applied to repay the Loan Amount. 23. Where the Investor (having repaid the Loan Amount by the Maturity Date) validly elects to use the Agency Sale Option under a Notice of Maturity at least 10 Business Days before the Maturity Date, the Custodian will be directed by the Investor to sell the Delivery Parcel on or as soon as reasonably practicable after the Settlement Date and pay the Sale Monies to the Investor. 24. Upon delivery of the Delivery Parcel as outlined in paragraph 21 of this Ruling or the payment or application of the Sale Monies in accordance with paragraphs 22 and 23 of this Ruling, the Issuer's obligations to the Investor under the Terms will be satisfied and discharged. 25. The features of each Series described in a Term Sheet PDS will include: 26. The Reference Asset to which the Units will provide exposure over the Investment Term will be any one or more of the following: Commissioner of Taxation 5 March 2025 Assessability of trust income 27. Any Fixed Coupon, Conditional Coupon and Performance Coupon paid by the Issuer on the Units held by the Custodian on trust for the Investor are ordinary income of the trust constituted under the Custody Deed Poll and included in the calculation of the trust estate's net income pursuant to section 95 of the ITAA 1936 in the income year in which they are paid. 28. The Investor shall be assessable under section 97 of the ITAA 1936 on a share of the net income of the trust that reflects the proportion of income of the trust estate to which the Investor is presently entitled. Deductibility of interest under section 8-1 29. 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. 30. Interest incurred by the Investor on the Investment Loan and the Interest Loan (if applicable) under the C2 Gateway DPA has a sufficient connection with the gaining of assessable income (being trust income) to be deductible under section 8-1 and is 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 31. 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. Subdivision H of Division 3 of Part III of the ITAA 1936 32. Subdivision H of Division 3 of Part III of the ITAA 1936 deals with the timing of deductions for certain advance expenditure incurred under an agreement in return for the doing of a thing under that agreement that will not be wholly done within the same year of income. Separate rules apply depending on whether the expenditure is incurred in the carrying on of a business, whether the Investor is a small or medium business entity, whether the Investor is an individual and whether the Investor is not an individual and incurs the expenditure otherwise than in carrying on a business. This Subdivision does not apply to 'excluded expenditure', which is defined in subsection 82KZL(1) of the ITAA 1936 to include amounts of less than $1,000 or amounts of expenditure that are of a capital nature. Subdivision 328-C  small business entities for the purposes of Subdivision H of Division 3 of Part III of the ITAA 1936 33. Under section 328-110, an Investor carrying on a business in an income year will be a small business entity for that year (the current year) if: The eligible service period for the purposes of Subdivision H of Division 3 of Part III of the ITAA 1936 34. The Prepaid Interest charged on the Investment Loan that is deductible under section 8-1 may or may not be in relation to a prepayment of loan interest for a period that is 12 months or less. Paragraph 82KZL(2)(a) of the ITAA 1936 provides that a payment of interest that is made in return for the making available of a loan principal 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 interest payment relates. The eligible service period in relation to a payment of loan interest is determined by reference to the period to which the interest relates and not to the period of the loan. Sections 82KZME and 82KZMF of the ITAA 1936  prepaid expenditure and 'tax shelter' style arrangements 35. 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. 36. 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 C2 Gateway DPA, including the financing. 37. Section 82KZMF of the ITAA 1936 will have operation and apportion over the relevant period each Prepaid Interest amount incurred by the Investor which is allowable as a deduction under section 8-1 where: 38. 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 Prepaid Interest incurred from the operation of section 82KZMF of the ITAA 1936. Sections 82KZMA and 82KZMD of the ITAA 1936  prepaid non-business expenditure incurred by non-individuals and non-small and medium business entities 39. Sections 82KZMA and 82KZMD of the ITAA 1936 set the amount and timing of deductions for expenditure which is incurred by an Investor (other than a small business entity, or an entity covered by subsection 82KZMA(2A) of the ITAA 1936 [3] , for the year of income that has not chosen to apply section 82KZMD of the ITAA 1936 to the expenditure) that is not an individual and does not carry on a business. The expenditure must not be excluded expenditure and must be incurred in return for the doing of a thing under an agreement that is not to be wholly done within the expenditure year. 40. For these Investors, the amount of Prepaid Interest incurred under the Investment Loan which is allowable as a deduction under section 8-1 will be apportioned over the relevant interest payment period. Sections 82KZM of the ITAA 1936  prepaid expenditure incurred by certain small and medium business entities and individuals incurring non-business expenditure 41. Subject to paragraph 42 of this Ruling, section 82KZM of the ITAA 1936 operates to spread over more than one income year a deduction which, apart from that section, would be allowable under section 8-1 for the year of income in which the prepaid expenditure is incurred under an agreement by a taxpayer that is either: 42. Section 82KZM of the ITAA 1936 applies if: 43. Where the Prepaid Interest is not excluded expenditure and the eligible service period in relation to the deductible Prepaid Interest under the Investment Loan is more than 12 months, section 82KZM of the ITAA 1936 will have application to Investors that are a small business entity (or an entity covered by subsection 82KZM(1A) of the ITAA 1936) for the year of income and that have not chosen to apply section 82KZMD of the ITAA 1936 to the expenditure, or to Investors who are individuals that have not incurred the expenditure in carrying on a business. Application of the capital gain tax provisions to Units under the C2 Gateway Deferred Purchase Agreement 44. 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 under the Terms to the C2 Gateway DPA are legally enforceable rights and therefore, in their totality, a CGT asset according to the definition in subsection 108-5(1). 45. Where the Final Coupon calculated at Maturity (if any) is paid to the Investor, together with either delivery of the Delivery Parcel or application or payment of the Sale Monies under the Agency Sale Option, the Investor's ownership of the contractual rights under the C2 Gateway DPA is discharged or satisfied. This discharge or satisfaction of the contractual rights gives rise to CGT event C2 (paragraph 104-25(1)(b)). 46. 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)). 47. The Investor's capital proceeds from the CGT event will be equal to the Sale Monies obtained under the Agency Sale Option, or the market value of the Delivery Parcel received by the Investor on (or shortly after) the Settlement Date, as applicable (section 116-20). 48. The cost base or reduced cost base of the Investor's rights under the C2 Gateway DPA includes, as its first element, the Investment Amount (subsections 110-25(2) and 110-55(2)). Division 245  commercial debt forgiveness 49. The Investment Loan will be treated as a 'commercial debt' under section 245-10. 50. Where the limited recourse provisions of the Investment Loan come into effect, an Investor is not required to repay the shortfall between the Loan Amount and the redemption proceeds of the Units. This will result in the forgiveness of a commercial debt at that time, under paragraph 245-35(a). 51. Under Division 245, where the forgiveness of a commercial debt results in the Investor having a positive 'net forgiven amount', the Investor will be required to reduce certain tax attributes that could otherwise reduce their taxable income (in the same or a later income year), to the extent of the net forgiven amount. 52. To calculate the net forgiven amount of a debt, it is first necessary to calculate the 'gross forgiven amount' of a debt. In the Investor's circumstances, Division 245 will have no practical effect as there will be no gross forgiven amount in respect of the Investment Loan. The gross forgiven amount is equal to the value of the debt when it is forgiven (worked out under section 245-60) less the amount (if any) that is offset against the value of the debt when it is forgiven (worked out under section 245-65). 53. As the value of the Investment Loan when it is forgiven will be equal to the amount that is offset against the value of that loan when it is forgiven, there will be no gross forgiven amount in respect of the Investment Loan (subsection 245-75(2)). 54. Accordingly, the commercial debt forgiveness rules in Division 245 will not reduce the tax attributes of an Investor as a result of the debt forgiveness that occurs when the limited recourse provisions of the Investment Loan come into effect. Subsection 159GP(1) of the ITAA 1936  a Unit is not a 'security' 55. Under subsection 159GP(1) of the ITAA 1936, a 'security' means: 56. The Units issued under the C2 Gateway DPA 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 do they 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. Section 25-25  Loan Establishment Fee 57. The Loan Establishment Fee, if applicable, incurred by an Investor upon successful application for an Investment Loan will be an allowable deduction pursuant to section 25-25 because it is a cost of borrowing money which is used for the purpose of producing assessable income. The Loan Establishment Fee will be deductible on a straight line basis over the period of the shorter of the term of the Investment Loan or 5 years. © 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).

Class of entities or scheme: 14. An offer to participate in the C2 Gateway DPA will be made to prospective investors in various Series by way of the Master PDS and a Term Sheet PDS. Each Series will be governed by the general terms in the Master PDS and specific terms in the Term Sheet PDS which are applicable to that Series (Terms). 15. On acceptance of an Investor's Application and receipt by the Issuer of the amounts payable by the Investor by the Offer Closing Date, the Issuer will issue Units on the Issue Date to the Custodian to hold in separate Investor Trusts for the Investor on the terms of the Custody Deed Poll and subject to the terms of the Global Investor Security Deed. Upon the issue of those Units, the Investor will receive a beneficial interest in a Portion of the Delivery Assets (Beneficial Interest). That Beneficial Interest may not be dealt with separately in any way from the Investor's interest in the Units. 16. The Minimum Investment Amount required to be invested by each Investor will be set out in the relevant Term Sheet PDS for a Series. The Issue Price of a Unit will be $1.00 per Unit. 17. One or more Coupons may be payable in respect of issued Units, as specified in the relevant Term Sheet PDS, and the Custodian directs the Issuer to pay those Coupons on the relevant Coupon Payment Dates directly to the Investor (as the beneficiary of each relevant Investor Trust). The Coupons comprise of: 18. Investors must enter into a limited recourse Investment Loan from the Issuer, as Lender, to finance up to 100% of the Investment Amount payable to the Issuer. 19. The Investment Loan: 20. Investors that are not superannuation entities may be offered a full recourse Interest Loan from the Issuer, as Lender, to fund up to 100% of the Prepaid Interest owing to the Lender under the Investment Loan. The Interest Loan: 21. Where the Investor repays the Investment Loan and any Interest Loan in full on or before the Maturity Date and does not validly elect to use the Agency Sale Option under a Notice of Maturity at least 10 Business Days before the Maturity Date, physical delivery of the Delivery Parcel will occur. Where this occurs, the Issuer will purchase the Delivery Parcel, register the shares in an issuer sponsored holding account in the name of the Investor, and deliver the Delivery Parcel to the Investor on the Settlement Date or as soon as possible thereafter. 22. Where the Investor does not repay their Investment Loan and any Interest Loan in full by the Maturity Date and is deemed to have elected to use the Agency Sale Option, the Investor assigns and novates their rights and obligations under the Loan Agreement to the Acceptor and the Issuer will be directed by the Custodian to sell the Delivery Parcel on or as soon as reasonably practicable after the Settlement Date. The Sale Monies will be applied to repay the Loan Amount. 23. Where the Investor (having repaid the Loan Amount by the Maturity Date) validly elects to use the Agency Sale Option under a Notice of Maturity at least 10 Business Days before the Maturity Date, the Custodian will be directed by the Investor to sell the Delivery Parcel on or as soon as reasonably practicable after the Settlement Date and pay the Sale Monies to the Investor. 24. Upon delivery of the Delivery Parcel as outlined in paragraph 21 of this Ruling or the payment or application of the Sale Monies in accordance with paragraphs 22 and 23 of this Ruling, the Issuer's obligations to the Investor under the Terms will be satisfied and discharged. 25. The features of each Series described in a Term Sheet PDS will include: 26. The Reference Asset to which the Units will provide exposure over the Investment Term will be any one or more of the following: Commissioner of Taxation 5 March 2025 | Assessability of trust income: 27. Any Fixed Coupon, Conditional Coupon and Performance Coupon paid by the Issuer on the Units held by the Custodian on trust for the Investor are ordinary income of the trust constituted under the Custody Deed Poll and included in the calculation of the trust estate's net income pursuant to section 95 of the ITAA 1936 in the income year in which they are paid. 28. The Investor shall be assessable under section 97 of the ITAA 1936 on a share of the net income of the trust that reflects the proportion of income of the trust estate to which the Investor is presently entitled. | Deductibility of interest under section 8-1: 29. 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. 30. Interest incurred by the Investor on the Investment Loan and the Interest Loan (if applicable) under the C2 Gateway DPA has a sufficient connection with the gaining of assessable income (being trust income) to be deductible under section 8-1 and is 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: 31. 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. | Subdivision H of Division 3 of Part III of the ITAA 1936: 32. Subdivision H of Division 3 of Part III of the ITAA 1936 deals with the timing of deductions for certain advance expenditure incurred under an agreement in return for the doing of a thing under that agreement that will not be wholly done within the same year of income. Separate rules apply depending on whether the expenditure is incurred in the carrying on of a business, whether the Investor is a small or medium business entity, whether the Investor is an individual and whether the Investor is not an individual and incurs the expenditure otherwise than in carrying on a business. This Subdivision does not apply to 'excluded expenditure', which is defined in subsection 82KZL(1) of the ITAA 1936 to include amounts of less than $1,000 or amounts of expenditure that are of a capital nature. | Subdivision 328-C  small business entities for the purposes of Subdivision H of Division 3 of Part III of the ITAA 1936: 33. Under section 328-110, an Investor carrying on a business in an income year will be a small business entity for that year (the current year) if: | The eligible service period for the purposes of Subdivision H of Division 3 of Part III of the ITAA 1936: 34. The Prepaid Interest charged on the Investment Loan that is deductible under section 8-1 may or may not be in relation to a prepayment of loan interest for a period that is 12 months or less. Paragraph 82KZL(2)(a) of the ITAA 1936 provides that a payment of interest that is made in return for the making available of a loan principal 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 interest payment relates. The eligible service period in relation to a payment of loan interest is determined by reference to the period to which the interest relates and not to the period of the loan. | Sections 82KZME and 82KZMF of the ITAA 1936  prepaid expenditure and 'tax shelter' style arrangements: 35. 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. 36. 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 C2 Gateway DPA, including the financing. 37. Section 82KZMF of the ITAA 1936 will have operation and apportion over the relevant period each Prepaid Interest amount incurred by the Investor which is allowable as a deduction under section 8-1 where: 38. 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 Prepaid Interest incurred from the operation of section 82KZMF of the ITAA 1936. | Sections 82KZMA and 82KZMD of the ITAA 1936  prepaid non-business expenditure incurred by non-individuals and non-small and medium business entities: 39. Sections 82KZMA and 82KZMD of the ITAA 1936 set the amount and timing of deductions for expenditure which is incurred by an Investor (other than a small business entity, or an entity covered by subsection 82KZMA(2A) of the ITAA 1936 [3] , for the year of income that has not chosen to apply section 82KZMD of the ITAA 1936 to the expenditure) that is not an individual and does not carry on a business. The expenditure must not be excluded expenditure and must be incurred in return for the doing of a thing under an agreement that is not to be wholly done within the expenditure year. 40. For these Investors, the amount of Prepaid Interest incurred under the Investment Loan which is allowable as a deduction under section 8-1 will be apportioned over the relevant interest payment period. | Sections 82KZM of the ITAA 1936  prepaid expenditure incurred by certain small and medium business entities and individuals incurring non-business expenditure: 41. Subject to paragraph 42 of this Ruling, section 82KZM of the ITAA 1936 operates to spread over more than one income year a deduction which, apart from that section, would be allowable under section 8-1 for the year of income in which the prepaid expenditure is incurred under an agreement by a taxpayer that is either: 42. Section 82KZM of the ITAA 1936 applies if: 43. Where the Prepaid Interest is not excluded expenditure and the eligible service period in relation to the deductible Prepaid Interest under the Investment Loan is more than 12 months, section 82KZM of the ITAA 1936 will have application to Investors that are a small business entity (or an entity covered by subsection 82KZM(1A) of the ITAA 1936) for the year of income and that have not chosen to apply section 82KZMD of the ITAA 1936 to the expenditure, or to Investors who are individuals that have not incurred the expenditure in carrying on a business. | Application of the capital gain tax provisions to Units under the C2 Gateway Deferred Purchase Agreement: 44. 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 under the Terms to the C2 Gateway DPA are legally enforceable rights and therefore, in their totality, a CGT asset according to the definition in subsection 108-5(1). 45. Where the Final Coupon calculated at Maturity (if any) is paid to the Investor, together with either delivery of the Delivery Parcel or application or payment of the Sale Monies under the Agency Sale Option, the Investor's ownership of the contractual rights under the C2 Gateway DPA is discharged or satisfied. This discharge or satisfaction of the contractual rights gives rise to CGT event C2 (paragraph 104-25(1)(b)). 46. 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)). 47. The Investor's capital proceeds from the CGT event will be equal to the Sale Monies obtained under the Agency Sale Option, or the market value of the Delivery Parcel received by the Investor on (or shortly after) the Settlement Date, as applicable (section 116-20). 48. The cost base or reduced cost base of the Investor's rights under the C2 Gateway DPA includes, as its first element, the Investment Amount (subsections 110-25(2) and 110-55(2)). | Division 245  commercial debt forgiveness: 49. The Investment Loan will be treated as a 'commercial debt' under section 245-10. 50. Where the limited recourse provisions of the Investment Loan come into effect, an Investor is not required to repay the shortfall between the Loan Amount and the redemption proceeds of the Units. This will result in the forgiveness of a commercial debt at that time, under paragraph 245-35(a). 51. Under Division 245, where the forgiveness of a commercial debt results in the Investor having a positive 'net forgiven amount', the Investor will be required to reduce certain tax attributes that could otherwise reduce their taxable income (in the same or a later income year), to the extent of the net forgiven amount. 52. To calculate the net forgiven amount of a debt, it is first necessary to calculate the 'gross forgiven amount' of a debt. In the Investor's circumstances, Division 245 will have no practical effect as there will be no gross forgiven amount in respect of the Investment Loan. The gross forgiven amount is equal to the value of the debt when it is forgiven (worked out under section 245-60) less the amount (if any) that is offset against the value of the debt when it is forgiven (worked out under section 245-65). 53. As the value of the Investment Loan when it is forgiven will be equal to the amount that is offset against the value of that loan when it is forgiven, there will be no gross forgiven amount in respect of the Investment Loan (subsection 245-75(2)). 54. Accordingly, the commercial debt forgiveness rules in Division 245 will not reduce the tax attributes of an Investor as a result of the debt forgiveness that occurs when the limited recourse provisions of the Investment Loan come into effect. | Subsection 159GP(1) of the ITAA 1936  a Unit is not a 'security': 55. Under subsection 159GP(1) of the ITAA 1936, a 'security' means: 56. The Units issued under the C2 Gateway DPA 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 do they 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. | Section 25-25  Loan Establishment Fee: 57. The Loan Establishment Fee, if applicable, incurred by an Investor upon successful application for an Investment Loan will be an allowable deduction pursuant to section 25-25 because it is a cost of borrowing money which is used for the purpose of producing assessable income. The Loan Establishment Fee will be deductible on a straight line basis over the period of the shorter of the term of the Investment Loan or 5 years. © 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).

Ruling: 1. This Ruling sets out the income tax consequences for entities that participate as an Investor in the scheme referred to as C2 Gateway Deferred Purchase Agreement (DPA) offered by C2 Specialist Investments Pty Ltd (Issuer) and arranged by C2 Financial Services Pty Ltd (Arranger). 2. All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. Terms which are defined in the C2 Gateway Deferred Purchase Agreement Master Product Disclosure Statement (Master PDS) referred to in paragraph 11 of this Ruling have been capitalised. 3. This Ruling does not address: | Who this Ruling applies to: 4. This Ruling applies to you if: 5. This Ruling does not apply to you if you: | Requirements of the Superannuation Industry (Supervision) Act 1993: 6. This Ruling does not address the provisions of the Superannuation Industry (Supervision) Act 1993. We give 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 Ruling as to whether investment in this scheme may contravene the provisions of the Superannuation Industry (Supervision) Act 1993 . 7. This Ruling applies from 1 July 2025 to an Investor specified in paragraph 4 of this Ruling that enters into the scheme described in paragraphs 11 to 26 of this Ruling on a relevant Issue Date from 1 July 2025 until 30 June 2028. 8. However, the Ruling only applies and may be relied on to the extent that there is no change in the scheme or in the Investor's involvement in the scheme. If the scheme carried out is materially different from the scheme described at paragraphs 11 to 26 of this Ruling, this Ruling cannot be relied upon and may be withdrawn or modified. 9. Subject to paragraph 3 of this Ruling and the assumptions in paragraph 10 of this Ruling: | Assumptions: 10. This Ruling is made on the basis of the following necessary assumptions: 11. The scheme 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. 12. For the purposes of describing the scheme, 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. 13. All Australian Securities and Investments Commission requirements are, or will be, complied with for the term of the agreements. | Overview of scheme: 14. An offer to participate in the C2 Gateway DPA will be made to prospective investors in various Series by way of the Master PDS and a Term Sheet PDS. Each Series will be governed by the general terms in the Master PDS and specific terms in the Term Sheet PDS which are applicable to that Series (Terms). 15. On acceptance of an Investor's Application and receipt by the Issuer of the amounts payable by the Investor by the Offer Closing Date, the Issuer will issue Units on the Issue Date to the Custodian to hold in separate Investor Trusts for the Investor on the terms of the Custody Deed Poll and subject to the terms of the Global Investor Security Deed. Upon the issue of those Units, the Investor will receive a beneficial interest in a Portion of the Delivery Assets (Beneficial Interest). That Beneficial Interest may not be dealt with separately in any way from the Investor's interest in the Units. 16. The Minimum Investment Amount required to be invested by each Investor will be set out in the relevant Term Sheet PDS for a Series. The Issue Price of a Unit will be $1.00 per Unit. 17. One or more Coupons may be payable in respect of issued Units, as specified in the relevant Term Sheet PDS, and the Custodian directs the Issuer to pay those Coupons on the relevant Coupon Payment Dates directly to the Investor (as the beneficiary of each relevant Investor Trust). The Coupons comprise of: 18. Investors must enter into a limited recourse Investment Loan from the Issuer, as Lender, to finance up to 100% of the Investment Amount payable to the Issuer. 19. The Investment Loan: 20. Investors that are not superannuation entities may be offered a full recourse Interest Loan from the Issuer, as Lender, to fund up to 100% of the Prepaid Interest owing to the Lender under the Investment Loan. The Interest Loan: 21. Where the Investor repays the Investment Loan and any Interest Loan in full on or before the Maturity Date and does not validly elect to use the Agency Sale Option under a Notice of Maturity at least 10 Business Days before the Maturity Date, physical delivery of the Delivery Parcel will occur. Where this occurs, the Issuer will purchase the Delivery Parcel, register the shares in an issuer sponsored holding account in the name of the Investor, and deliver the Delivery Parcel to the Investor on the Settlement Date or as soon as possible thereafter. 22. Where the Investor does not repay their Investment Loan and any Interest Loan in full by the Maturity Date and is deemed to have elected to use the Agency Sale Option, the Investor assigns and novates their rights and obligations under the Loan Agreement to the Acceptor and the Issuer will be directed by the Custodian to sell the Delivery Parcel on or as soon as reasonably practicable after the Settlement Date. The Sale Monies will be applied to repay the Loan Amount. 23. Where the Investor (having repaid the Loan Amount by the Maturity Date) validly elects to use the Agency Sale Option under a Notice of Maturity at least 10 Business Days before the Maturity Date, the Custodian will be directed by the Investor to sell the Delivery Parcel on or as soon as reasonably practicable after the Settlement Date and pay the Sale Monies to the Investor. 24. Upon delivery of the Delivery Parcel as outlined in paragraph 21 of this Ruling or the payment or application of the Sale Monies in accordance with paragraphs 22 and 23 of this Ruling, the Issuer's obligations to the Investor under the Terms will be satisfied and discharged. 25. The features of each Series described in a Term Sheet PDS will include: 26. The Reference Asset to which the Units will provide exposure over the Investment Term will be any one or more of the following: Commissioner of Taxation 5 March 2025 | Assessability of trust income: 27. Any Fixed Coupon, Conditional Coupon and Performance Coupon paid by the Issuer on the Units held by the Custodian on trust for the Investor are ordinary income of the trust constituted under the Custody Deed Poll and included in the calculation of the trust estate's net income pursuant to section 95 of the ITAA 1936 in the income year in which they are paid. 28. The Investor shall be assessable under section 97 of the ITAA 1936 on a share of the net income of the trust that reflects the proportion of income of the trust estate to which the Investor is presently entitled. | Deductibility of interest under section 8-1: 29. 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. 30. Interest incurred by the Investor on the Investment Loan and the Interest Loan (if applicable) under the C2 Gateway DPA has a sufficient connection with the gaining of assessable income (being trust income) to be deductible under section 8-1 and is 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: 31. 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. | Subdivision H of Division 3 of Part III of the ITAA 1936: 32. Subdivision H of Division 3 of Part III of the ITAA 1936 deals with the timing of deductions for certain advance expenditure incurred under an agreement in return for the doing of a thing under that agreement that will not be wholly done within the same year of income. Separate rules apply depending on whether the expenditure is incurred in the carrying on of a business, whether the Investor is a small or medium business entity, whether the Investor is an individual and whether the Investor is not an individual and incurs the expenditure otherwise than in carrying on a business. This Subdivision does not apply to 'excluded expenditure', which is defined in subsection 82KZL(1) of the ITAA 1936 to include amounts of less than $1,000 or amounts of expenditure that are of a capital nature. | Subdivision 328-C  small business entities for the purposes of Subdivision H of Division 3 of Part III of the ITAA 1936: 33. Under section 328-110, an Investor carrying on a business in an income year will be a small business entity for that year (the current year) if: | The eligible service period for the purposes of Subdivision H of Division 3 of Part III of the ITAA 1936: 34. The Prepaid Interest charged on the Investment Loan that is deductible under section 8-1 may or may not be in relation to a prepayment of loan interest for a period that is 12 months or less. Paragraph 82KZL(2)(a) of the ITAA 1936 provides that a payment of interest that is made in return for the making available of a loan principal 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 interest payment relates. The eligible service period in relation to a payment of loan interest is determined by reference to the period to which the interest relates and not to the period of the loan. | Sections 82KZME and 82KZMF of the ITAA 1936  prepaid expenditure and 'tax shelter' style arrangements: 35. 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. 36. 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 C2 Gateway DPA, including the financing. 37. Section 82KZMF of the ITAA 1936 will have operation and apportion over the relevant period each Prepaid Interest amount incurred by the Investor which is allowable as a deduction under section 8-1 where: 38. 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 Prepaid Interest incurred from the operation of section 82KZMF of the ITAA 1936. | Sections 82KZMA and 82KZMD of the ITAA 1936  prepaid non-business expenditure incurred by non-individuals and non-small and medium business entities: 39. Sections 82KZMA and 82KZMD of the ITAA 1936 set the amount and timing of deductions for expenditure which is incurred by an Investor (other than a small business entity, or an entity covered by subsection 82KZMA(2A) of the ITAA 1936 [3] , for the year of income that has not chosen to apply section 82KZMD of the ITAA 1936 to the expenditure) that is not an individual and does not carry on a business. The expenditure must not be excluded expenditure and must be incurred in return for the doing of a thing under an agreement that is not to be wholly done within the expenditure year. 40. For these Investors, the amount of Prepaid Interest incurred under the Investment Loan which is allowable as a deduction under section 8-1 will be apportioned over the relevant interest payment period. | Sections 82KZM of the ITAA 1936  prepaid expenditure incurred by certain small and medium business entities and individuals incurring non-business expenditure: 41. Subject to paragraph 42 of this Ruling, section 82KZM of the ITAA 1936 operates to spread over more than one income year a deduction which, apart from that section, would be allowable under section 8-1 for the year of income in which the prepaid expenditure is incurred under an agreement by a taxpayer that is either: 42. Section 82KZM of the ITAA 1936 applies if: 43. Where the Prepaid Interest is not excluded expenditure and the eligible service period in relation to the deductible Prepaid Interest under the Investment Loan is more than 12 months, section 82KZM of the ITAA 1936 will have application to Investors that are a small business entity (or an entity covered by subsection 82KZM(1A) of the ITAA 1936) for the year of income and that have not chosen to apply section 82KZMD of the ITAA 1936 to the expenditure, or to Investors who are individuals that have not incurred the expenditure in carrying on a business. | Application of the capital gain tax provisions to Units under the C2 Gateway Deferred Purchase Agreement: 44. 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 under the Terms to the C2 Gateway DPA are legally enforceable rights and therefore, in their totality, a CGT asset according to the definition in subsection 108-5(1). 45. Where the Final Coupon calculated at Maturity (if any) is paid to the Investor, together with either delivery of the Delivery Parcel or application or payment of the Sale Monies under the Agency Sale Option, the Investor's ownership of the contractual rights under the C2 Gateway DPA is discharged or satisfied. This discharge or satisfaction of the contractual rights gives rise to CGT event C2 (paragraph 104-25(1)(b)). 46. 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)). 47. The Investor's capital proceeds from the CGT event will be equal to the Sale Monies obtained under the Agency Sale Option, or the market value of the Delivery Parcel received by the Investor on (or shortly after) the Settlement Date, as applicable (section 116-20). 48. The cost base or reduced cost base of the Investor's rights under the C2 Gateway DPA includes, as its first element, the Investment Amount (subsections 110-25(2) and 110-55(2)). | Division 245  commercial debt forgiveness: 49. The Investment Loan will be treated as a 'commercial debt' under section 245-10. 50. Where the limited recourse provisions of the Investment Loan come into effect, an Investor is not required to repay the shortfall between the Loan Amount and the redemption proceeds of the Units. This will result in the forgiveness of a commercial debt at that time, under paragraph 245-35(a). 51. Under Division 245, where the forgiveness of a commercial debt results in the Investor having a positive 'net forgiven amount', the Investor will be required to reduce certain tax attributes that could otherwise reduce their taxable income (in the same or a later income year), to the extent of the net forgiven amount. 52. To calculate the net forgiven amount of a debt, it is first necessary to calculate the 'gross forgiven amount' of a debt. In the Investor's circumstances, Division 245 will have no practical effect as there will be no gross forgiven amount in respect of the Investment Loan. The gross forgiven amount is equal to the value of the debt when it is forgiven (worked out under section 245-60) less the amount (if any) that is offset against the value of the debt when it is forgiven (worked out under section 245-65). 53. As the value of the Investment Loan when it is forgiven will be equal to the amount that is offset against the value of that loan when it is forgiven, there will be no gross forgiven amount in respect of the Investment Loan (subsection 245-75(2)). 54. Accordingly, the commercial debt forgiveness rules in Division 245 will not reduce the tax attributes of an Investor as a result of the debt forgiveness that occurs when the limited recourse provisions of the Investment Loan come into effect. | Subsection 159GP(1) of the ITAA 1936  a Unit is not a 'security': 55. Under subsection 159GP(1) of the ITAA 1936, a 'security' means: 56. The Units issued under the C2 Gateway DPA 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 do they 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. | Section 25-25  Loan Establishment Fee: 57. The Loan Establishment Fee, if applicable, incurred by an Investor upon successful application for an Investment Loan will be an allowable deduction pursuant to section 25-25 because it is a cost of borrowing money which is used for the purpose of producing assessable income. The Loan Establishment Fee will be deductible on a straight line basis over the period of the shorter of the term of the Investment Loan or 5 years. © 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).


Appendix: Assessability of trust income: 27. Any Fixed Coupon, Conditional Coupon and Performance Coupon paid by the Issuer on the Units held by the Custodian on trust for the Investor are ordinary income of the trust constituted under the Custody Deed Poll and included in the calculation of the trust estate's net income pursuant to section 95 of the ITAA 1936 in the income year in which they are paid. 28. The Investor shall be assessable under section 97 of the ITAA 1936 on a share of the net income of the trust that reflects the proportion of income of the trust estate to which the Investor is presently entitled. | Deductibility of interest under section 8-1: 29. 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. 30. Interest incurred by the Investor on the Investment Loan and the Interest Loan (if applicable) under the C2 Gateway DPA has a sufficient connection with the gaining of assessable income (being trust income) to be deductible under section 8-1 and is 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: 31. 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. | Subdivision H of Division 3 of Part III of the ITAA 1936: 32. Subdivision H of Division 3 of Part III of the ITAA 1936 deals with the timing of deductions for certain advance expenditure incurred under an agreement in return for the doing of a thing under that agreement that will not be wholly done within the same year of income. Separate rules apply depending on whether the expenditure is incurred in the carrying on of a business, whether the Investor is a small or medium business entity, whether the Investor is an individual and whether the Investor is not an individual and incurs the expenditure otherwise than in carrying on a business. This Subdivision does not apply to 'excluded expenditure', which is defined in subsection 82KZL(1) of the ITAA 1936 to include amounts of less than $1,000 or amounts of expenditure that are of a capital nature. | Subdivision 328-C  small business entities for the purposes of Subdivision H of Division 3 of Part III of the ITAA 1936: 33. Under section 328-110, an Investor carrying on a business in an income year will be a small business entity for that year (the current year) if: | The eligible service period for the purposes of Subdivision H of Division 3 of Part III of the ITAA 1936: 34. The Prepaid Interest charged on the Investment Loan that is deductible under section 8-1 may or may not be in relation to a prepayment of loan interest for a period that is 12 months or less. Paragraph 82KZL(2)(a) of the ITAA 1936 provides that a payment of interest that is made in return for the making available of a loan principal 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 interest payment relates. The eligible service period in relation to a payment of loan interest is determined by reference to the period to which the interest relates and not to the period of the loan. | Sections 82KZME and 82KZMF of the ITAA 1936  prepaid expenditure and 'tax shelter' style arrangements: 35. 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. 36. 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 C2 Gateway DPA, including the financing. 37. Section 82KZMF of the ITAA 1936 will have operation and apportion over the relevant period each Prepaid Interest amount incurred by the Investor which is allowable as a deduction under section 8-1 where: 38. 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 Prepaid Interest incurred from the operation of section 82KZMF of the ITAA 1936. | Sections 82KZMA and 82KZMD of the ITAA 1936  prepaid non-business expenditure incurred by non-individuals and non-small and medium business entities: 39. Sections 82KZMA and 82KZMD of the ITAA 1936 set the amount and timing of deductions for expenditure which is incurred by an Investor (other than a small business entity, or an entity covered by subsection 82KZMA(2A) of the ITAA 1936 [3] , for the year of income that has not chosen to apply section 82KZMD of the ITAA 1936 to the expenditure) that is not an individual and does not carry on a business. The expenditure must not be excluded expenditure and must be incurred in return for the doing of a thing under an agreement that is not to be wholly done within the expenditure year. 40. For these Investors, the amount of Prepaid Interest incurred under the Investment Loan which is allowable as a deduction under section 8-1 will be apportioned over the relevant interest payment period. | Sections 82KZM of the ITAA 1936  prepaid expenditure incurred by certain small and medium business entities and individuals incurring non-business expenditure: 41. Subject to paragraph 42 of this Ruling, section 82KZM of the ITAA 1936 operates to spread over more than one income year a deduction which, apart from that section, would be allowable under section 8-1 for the year of income in which the prepaid expenditure is incurred under an agreement by a taxpayer that is either: 42. Section 82KZM of the ITAA 1936 applies if: 43. Where the Prepaid Interest is not excluded expenditure and the eligible service period in relation to the deductible Prepaid Interest under the Investment Loan is more than 12 months, section 82KZM of the ITAA 1936 will have application to Investors that are a small business entity (or an entity covered by subsection 82KZM(1A) of the ITAA 1936) for the year of income and that have not chosen to apply section 82KZMD of the ITAA 1936 to the expenditure, or to Investors who are individuals that have not incurred the expenditure in carrying on a business. | Application of the capital gain tax provisions to Units under the C2 Gateway Deferred Purchase Agreement: 44. 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 under the Terms to the C2 Gateway DPA are legally enforceable rights and therefore, in their totality, a CGT asset according to the definition in subsection 108-5(1). 45. Where the Final Coupon calculated at Maturity (if any) is paid to the Investor, together with either delivery of the Delivery Parcel or application or payment of the Sale Monies under the Agency Sale Option, the Investor's ownership of the contractual rights under the C2 Gateway DPA is discharged or satisfied. This discharge or satisfaction of the contractual rights gives rise to CGT event C2 (paragraph 104-25(1)(b)). 46. 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)). 47. The Investor's capital proceeds from the CGT event will be equal to the Sale Monies obtained under the Agency Sale Option, or the market value of the Delivery Parcel received by the Investor on (or shortly after) the Settlement Date, as applicable (section 116-20). 48. The cost base or reduced cost base of the Investor's rights under the C2 Gateway DPA includes, as its first element, the Investment Amount (subsections 110-25(2) and 110-55(2)). | Division 245  commercial debt forgiveness: 49. The Investment Loan will be treated as a 'commercial debt' under section 245-10. 50. Where the limited recourse provisions of the Investment Loan come into effect, an Investor is not required to repay the shortfall between the Loan Amount and the redemption proceeds of the Units. This will result in the forgiveness of a commercial debt at that time, under paragraph 245-35(a). 51. Under Division 245, where the forgiveness of a commercial debt results in the Investor having a positive 'net forgiven amount', the Investor will be required to reduce certain tax attributes that could otherwise reduce their taxable income (in the same or a later income year), to the extent of the net forgiven amount. 52. To calculate the net forgiven amount of a debt, it is first necessary to calculate the 'gross forgiven amount' of a debt. In the Investor's circumstances, Division 245 will have no practical effect as there will be no gross forgiven amount in respect of the Investment Loan. The gross forgiven amount is equal to the value of the debt when it is forgiven (worked out under section 245-60) less the amount (if any) that is offset against the value of the debt when it is forgiven (worked out under section 245-65). 53. As the value of the Investment Loan when it is forgiven will be equal to the amount that is offset against the value of that loan when it is forgiven, there will be no gross forgiven amount in respect of the Investment Loan (subsection 245-75(2)). 54. Accordingly, the commercial debt forgiveness rules in Division 245 will not reduce the tax attributes of an Investor as a result of the debt forgiveness that occurs when the limited recourse provisions of the Investment Loan come into effect. | Subsection 159GP(1) of the ITAA 1936  a Unit is not a 'security': 55. Under subsection 159GP(1) of the ITAA 1936, a 'security' means: 56. The Units issued under the C2 Gateway DPA 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 do they 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. | Section 25-25  Loan Establishment Fee: 57. The Loan Establishment Fee, if applicable, incurred by an Investor upon successful application for an Investment Loan will be an allowable deduction pursuant to section 25-25 because it is a cost of borrowing money which is used for the purpose of producing assessable income. The Loan Establishment Fee will be deductible on a straight line basis over the period of the shorter of the term of the Investment Loan or 5 years. © 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. | This Ruling has been given on the basis that the entity who applied for the 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 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. | (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.


Legislative references: ITAA 1936 51AAA ITAA 1936 82KH ITAA 1936 82KL ITAA 1936 Pt III Div 3 Subdiv H ITAA 1936 82KZL(1) ITAA 1936 82KZL(2)(a) ITAA 1936 82KZM ITAA 1936 82KZM(1A) ITAA 1936 82KZMA ITAA 1936 82KZMA(2A) ITAA 1936 82KZMD 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 95 ITAA 1936 97 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 8-1 ITAA 1997 25-25 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 ITAA 1997 Div 245 ITAA 1997 245-10 ITAA 1997 245-35(a) ITAA 1997 245-60 ITAA 1997 245-65 ITAA 1997 245-75(2) ITAA 1997 Subdiv 328-C ITAA 1997 328-110 SISA 1993