Income Tax Assessment Act 1997

s 230-100 — When accruals method or realisation method applies

When accruals method applies and when realisation method applies (1) This section tells you when to apply the accruals method and when to apply the realisation method if this Subdivision applies to gains and losses from a * financial arrangement. Accruals method—sufficiently certain overall gain or loss at start time (2) The accruals method provided for in this Subdivision applies to a gain or loss you have from a * financial arrangement if: (a) the gain or loss is an overall gain or loss from the arrangement; and (b) the gain or loss is sufficiently certain at the time when you start to have the arrangement; and (c) you choose to apply the accruals method to the gain or loss, or subsection (4) applies to the gain or loss. Note: Subsection 230 ‑ 105(1) tells you when you have a sufficiently certain overall gain or loss. Accruals method—sufficiently certain particular gain or loss (3) The accruals method provided for in this Subdivision also applies to a gain or loss you have from a * financial arrangement if: (a) the gain or loss arises from a * financial benefit that you are to receive or are to provide under the arrangement; and (b) the gain or loss: (i) is sufficiently certain before or at the time when you start to have the arrangement and before you are to receive or provide the benefit; or (ii) becomes sufficiently certain after the time when you start to have the arrangement and before you are to receive or provide the benefit; and (c) the benefit has not already been taken into account in applying: (i) the accruals method provided for in this Subdivision; or (ii) the realisation method provided for in this Subdivision; to another gain or loss from the arrangement. This subsection has effect subject to subsection (4). Note: Subsection 230 ‑ 110(1) tells you when you have a sufficiently certain gain or loss at a particular time. Accruals method—particular gain or loss becomes sufficiently certain (3A) The accruals method provided for in this Subdivision also applies to a gain or loss you have from a * financial arrangement if: (a) the gain or loss arises from a * financial benefit that you are to receive or are to provide under the arrangement; and (b) the gain or loss becomes sufficiently certain at the time you receive or provide the benefit; and (c) at least part of the period over which the gain or loss would be spread under that method (assuming that method applied) occurs after the time you receive or provide the benefit. This subsection has effect subject to subsection (4). Note 1: Subsection 230 ‑ 110(1) tells you when you have a sufficiently certain gain or loss at a particular time. Note 2: For the period over which the gain or loss would be spread, see subsections 230 ‑ 130(3) to (5). Accruals method—particular gain or loss from qualifying security (4) Subsection (3) or (3A) does not apply to a gain or loss that you have from a * financial arrangement if: (a) you are: (i) an individual; or (ii) an entity (other than an individual) that satisfies subsection 230 ‑ 455(2), (3) or (4) for the income year in which you start to have the arrangement; and (b) the arrangement is a * qualifying security; and (c) you have not made an election under subsection 230 ‑ 455(7). Realisation method—gain or loss not sufficiently certain (5) The realisation method provided for in this Subdivision applies to a gain or loss that you have from a * financial arrangement if the accruals method provided for in this Subdivision does not apply to that gain or loss. Note: Section 230 ‑ 180 tells you how to apply the realisation method to the gain or loss.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-105 — Sufficiently certain overall gain or loss

(1) You have a sufficiently certain overall gain or loss from a * financial arrangement at the time when you start to have the arrangement only if it is sufficiently certain at that time that you will make an overall gain or loss from the arrangement of: (a) a particular amount; or (b) at least a particular amount. The amount of the gain or loss is the amount referred to in paragraph (a) or (b). Note: Sections 230 ‑ 70 and 230 ‑ 75 (about apportionment of financial benefits) only apply in working out whether you make, or will make, a gain or loss (and the amount of the gain or loss) when particular events happen. They do not apply in working out, at the time when you start to have a financial arrangement, whether it is sufficiently certain that you will make an overall gain or loss from the arrangement. (2) In applying subsection (1), you must: (a) assume that you will continue to have the * financial arrangement for the rest of its life; and (b) have regard to the extent of the risk that a * financial benefit that you are not sufficiently certain to provide or receive under the arrangement may reduce the amount of the gain or loss.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-110 — Sufficiently certain gain or loss from particular event

(1) You have a sufficiently certain gain or loss from a * financial arrangement at a particular time if it is sufficiently certain at that time that you make, or will make, a gain or loss from the arrangement of: (a) a particular amount; or (b) at least a particular amount; when one of the following occurs: (c) you receive a particular * financial benefit under the arrangement or one of your rights under the arrangement ceases; (d) you provide a particular financial benefit under the arrangement or one of your obligations under the arrangement ceases. The amount of the gain or loss is the amount referred to in paragraph (a) or (b). (2) In applying subsection (1) to work out whether you have a sufficiently certain gain or loss at a particular time: (a) have regard to the extent of the risk that a * financial benefit that you are not sufficiently certain to provide or receive under the arrangement may reduce the amount of the gain or loss, and the extent to which such a financial benefit is, for the purposes of subsection 230 ‑ 70(2) or 230 ‑ 75(2), reasonably attributable to the benefit, right or obligation mentioned in paragraph (1)(c) or (d) of this section at the time mentioned in subsection (1); and (b) disregard any financial benefit that has already been taken into account, under subsection 230 ‑ 105(1), in working out, at the time when you started to have the arrangement, the amount of a sufficiently certain overall gain or loss from the * financial arrangement to which the accruals method applies; and (c) disregard any financial benefit (or that part of any financial benefit) that has already been taken into account in working out the amount of a sufficiently certain gain or loss from the * financial arrangement under subsection (1). Note: Sections 230 ‑ 70 and 230 ‑ 75 allow you to apportion financial benefits provided and financial benefits received in working out the amount of a gain or loss.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-115 — Sufficiently certain financial benefits

(1) In deciding for the purposes of this Subdivision whether it is sufficiently certain at a particular time that you make, or will make, a gain or loss from a * financial arrangement: (a) have regard only to: (i) * financial benefits that you are sufficiently certain to receive; and (ii) financial benefits that you are sufficiently certain to provide; and (b) have regard to those financial benefits only to the extent that the amount or value of the benefits is, at that time, fixed or determinable with reasonable accuracy. Note: The particular time may be the time at which you start to have the arrangement. (2) A * financial benefit that you are to receive or provide is to be treated as one that you are sufficiently certain to receive or to provide only if: (a) it is reasonably expected that you will receive or provide the financial benefit (assuming that you will continue to have the * financial arrangement for the rest of its life); and (b) at least some of the amount or value of the benefit is, at that time, fixed or determinable with reasonable accuracy. (3) In applying subsection (2) to the * financial benefit: (a) you must have regard to: (i) the terms and conditions of the * financial arrangement; and (ii) accepted pricing and valuation techniques; and (iii) the economic or commercial substance and effect of the arrangement; and (iv) the contingencies that attach to the other financial benefits that are to be provided or received under the arrangement; and (b) you must treat the financial benefit as if it were not contingent if it is appropriate to do so having regard to the contingencies that attach to the other financial benefits that are to be received or provided under the arrangement. (4) In applying paragraph (2)(b) at a particular time (the reference time ) to a * financial benefit that depends on a variable that is based on: (a) an interest rate; or (b) a rate that solely or primarily reflects the time value of money; or (c) a rate that solely or primarily reflects a consumer price index; or (d) a rate that solely or primarily reflects an index prescribed by the regulations for the purposes of this paragraph; you must assume that that variable will continue to have the value it has at the reference time. (5) Despite subsection (4), in applying paragraph (2)(b) at a particular time to a * financial benefit that depends on a rate of change to a variable that is based on: (a) a rate that solely or primarily reflects a consumer price index; or (b) a rate that solely or primarily reflects an index prescribed by the regulations for the purposes of this paragraph; you must assume that the rate of change to that variable will continue to be the rate of change that is current at that time. (6) If subsection (4) or (5) applies to a gain or loss and you are determining the amount of the gain or loss at a particular time, you must also assume that that variable will continue to have the value that it has at that time. (7) Subsections (4) and (5) do not limit paragraph (2)(b). (8) If all of the * financial benefits provided and received under the * financial arrangement are denominated in a particular * foreign currency, those financial benefits are not to be translated into: (a) your * applicable functional currency; or (b) if you do not have an applicable functional currency—Australian currency; for the purposes of applying subsection (2) to the arrangement. (9) To avoid doubt: (a) a * financial benefit that you have already provided at a particular time is taken to be one that it is, at that time, a financial benefit that you are sufficiently certain to provide; and (b) a financial benefit that you have already received at a particular time is taken to be one that it is, at that time, a financial benefit that you are sufficiently certain to receive.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-120 — Financial arrangements with notional principal

(1) This section applies to a * financial arrangement that you have if, in substance or effect, and having regard to the pricing, terms and conditions of the arrangement: (a) the arrangement consists of these things: (i) a leg, the * financial benefits to be provided or received in respect of which are calculated by reference to, or are reasonably related to, a notional principal; (ii) another leg, the financial benefits to be provided or received in respect of which also are calculated by reference to, or are reasonably related to, a notional principal; (iii) if the arrangement includes one or more other things—those things; and (b) when you start to have the arrangement, the value of the notional principal in relation to one leg is equal to the value of the notional principal in relation to the other leg; and (c) all or part of the notional principal in relation to each leg is provided or received at a time, regardless of whether that time is different in relation to each leg. Example: A swap contract. (2) To avoid doubt, the * financial benefits mentioned in subparagraphs (1)(a)(i) and (ii), and the notional principal in relation to each leg, need not actually be provided or received. (3) In applying this Subdivision to the * financial arrangement: (a) work out the * financial benefits from the arrangement as follows: (i) work out the financial benefits from each thing of which the arrangement consists separately from the financial benefits from each other thing of which the arrangement consists; (ii) ensure that results under subparagraph (i) are consistent with the timing and amount of financial benefits to be actually provided or received under the arrangement; and (b) work out your gains and losses from the arrangement as follows: (i) work out the gains and losses from each thing of which the arrangement consists separately from the gains and losses from each other thing of which the arrangement consists; (ii) treat the gains and losses mentioned in subparagraph (i) for all of those things as your gains and losses from the arrangement; and (c) in working out a gain or loss from a thing for the purposes of subparagraph (b)(i), and, if the accruals method applies to the gain or loss, how it is to be spread and allocated: (i) if the thing is a leg—take into account the amount of the notional principal at a time and in a manner that properly reflects the way in which the financial benefits in respect of that leg are calculated; and (ii) if the thing is not a leg—take into account an amount relevant to the thing at a time and in a manner that properly reflects the way in which the financial benefits in respect of that thing are calculated.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-125 — Overview of the accruals method

If the accruals method applies to a gain or loss you have from a * financial arrangement: (a) you use section 230 ‑ 130 to work out the period over which the gain or loss is to be spread; and (b) you use section 230 ‑ 135 to work out how to allocate the gain or loss to particular intervals within the period over which the gain or loss is to be spread; and (c) if an interval to which part of the gain or loss is allocated straddles 2 income years, you use section 230 ‑ 170 to work out how to allocate that part of the gain or loss allocated between those 2 income years.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-130 — Applying accruals method to work out period over which gain or loss is to be spread

Period over which overall gain or loss is to be spread (1) If you have a sufficiently certain overall gain or loss from a * financial arrangement under subsection 230 ‑ 105(1), the period over which the gain or loss is to be spread is the period that: (a) starts when you start to have the arrangement; and (b) ends when you will cease to have the arrangement. In applying paragraph (b), you must assume that you will continue to have the arrangement for the rest of its life. Period over which particular gain or loss is to be spread (3) If you have a sufficiently certain gain or loss from a * financial arrangement under subsection 230 ‑ 110(1), the period over which the gain or loss is to be spread is the period to which the gain or loss relates. Have regard to the pricing, terms and conditions of the arrangement in working out the period to which the gain or loss relates. This subsection has effect subject to subsections (4) and (5). (4) The start of the period over which a gain or loss to which subsection (3) applies is to be spread must: (a) not start earlier than the time when you start to have the * financial arrangement; and (b) other than in the case of a gain or loss to which subsection 230 ‑ 100(3A) or subsection (4A) of this section applies—not start earlier than the start of the income year during which it becomes sufficiently certain that you will make the gain or loss. (4A) This subsection applies to a gain or loss to which subsection (3) applies, if: (a) there is an impairment (within the meaning of the * accounting principles) of: (i) the * financial arrangement; or (ii) a financial asset or financial liability that forms part of the arrangement; and (b) because of the impairment, you make a reassessment under section 230 ‑ 185 in relation to the arrangement; and (c) you determine on the reassessment that the gain or loss is not sufficiently certain (whether or not the gain or loss was sufficiently certain before the reassessment); and (d) there is a reversal of the impairment loss (within the meaning of the accounting principles) that resulted from the impairment; and (e) because of the reversal, you make a reassessment under section 230 ‑ 185 in relation to the arrangement; and (f) you determine on the reassessment that the gain or loss has become sufficiently certain. Note: For the income years to which the gain or loss is allocated, see section 230 ‑ 170. (5) The end of the period over which a gain or loss to which subsection (3) applies is to be spread must not end later than the time when you will cease to have the * financial arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-135 — How gain or loss is spread

How to spread gain or loss (1) This section tells you how to spread a gain or loss to which the accruals method applies. Compounding accruals or approximation (2) The gain or loss is to be spread using: (a) compounding accruals; or (b) a method whose results approximate those obtained using the method referred to in paragraph (a) (having regard to the length of the period over which the gain or loss is to be spread). (3) The following subsections of this section clarify the way in which the gain or loss is to be spread in accordance with paragraph (2)(a). Intervals to which parts of gain or loss allocated (4) The intervals to which parts of the gain or loss are allocated must: (a) not exceed 12 months; and (b) all be of the same length. Paragraph (b) does not apply to the first and last intervals. These may be shorter than the other intervals. Fixing of amount and rate for interval (5) For each interval: (a) determine a rate of return; and (b) determine an amount to which you apply the rate of return. (6) For the purposes of paragraph (5)(b), in determining the amount to which you apply the rate of return for an interval, have regard to: (a) the amount or value; and (b) the timing; of * financial benefits that are to be taken into account in working out the amount of the gain or loss, and were provided or received by you during the interval. (6A) However, if there is only one * financial benefit that is to be taken into account in working out the amount of the gain or loss, then, for the purposes of paragraph (5)(b), in determining the amount to which you apply the rate of return, have regard to a notional principal: (a) by reference to which the financial benefit is calculated; or (b) which is reasonably related to the financial benefit. Assumption of continuing to hold arrangement for rest of its life (7) The gain or loss is to be spread assuming that you will continue to have the * financial arrangement for the rest of its life. Regard to be had to financial benefits provided or received in interval (8) In allocating the gain or loss to intervals, have regard to the * financial benefits to be provided or received in each of those intervals.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-140 — Method of spreading gain or loss—effective interest method

(1) This section clarifies that the method mentioned in subsection (2) of spreading gains and losses is a method covered by paragraph 230 ‑ 135(2)(b) (methods approximating compounding accruals). (2) The method is the effective interest method mentioned in * accounting standard AASB 139 (or another accounting standard prescribed by the regulations for the purposes of this subsection). (3) However, this section applies to a particular * financial arrangement you have only if: (a) in a case where there is a discount or premium under the arrangement—when you start to have the arrangement, the annually compounded rate of return applicable to the discount or premium does not exceed 1%; and (b) when you start to have the arrangement, neither the maximum life of the arrangement (as determined under the terms and conditions of the arrangement) nor the expected life of the arrangement exceeds: (i) unless subparagraph (ii) applies—30 years; or (ii) if the regulations prescribe a different period for the purposes of this subparagraph—that period; and (c) each * financial benefit that you have an obligation to provide or a right to receive under the arrangement, and that gives rise to a gain or loss from the arrangement (other than a gain or loss that is attributable to any discount or premium): (i) relates to a period not exceeding 12 months; and (ii) is to be provided or received in the period to which it relates; and Note: Different financial benefits may relate to different periods. (d) you prepare a financial report for the year in which you start to have the arrangement; and (e) that financial report is: (i) prepared in accordance with paragraph 230 ‑ 210(2)(a); and (ii) audited in accordance with paragraph 230 ‑ 210(2)(b); and (f) all gains and losses from the arrangement to which the accrual method applies are spread in a way that is consistent with that financial report. (4) For the purposes of paragraph (3)(a), assume that you will continue to have the arrangement for the rest of its expected life.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-145 — Application of effective interest method where differing income and accounting years

(1) This section applies if: (a) you prepare a financial report for a year (the first year ); and (b) you prepare a financial report for the subsequent year (the second year ); and (c) your income year starts in the first year and ends in the second year; and (d) both the financial report for the first year and the financial report for the second year are: (i) prepared in accordance with paragraph 230 ‑ 210(2)(a); and (ii) audited in accordance with paragraph 230 ‑ 210(2)(b); and (e) the auditor’s reports are unqualified for both the financial report for the first year and the financial report for the second year. (2) For the purposes of paragraph 230 ‑ 140(3)(d), treat yourself as having prepared a financial report for the income year in which you start to have the arrangement. (3) Work out the gain or loss you make from the arrangement for the income year as follows: (a) firstly, work out the gain or loss you make from the arrangement for the first year in accordance with paragraph 230 ‑ 140(3)(f) (treating the first year as an income year); (b) next, work out how much of the gain or loss mentioned in paragraph (a) is attributable to the income year in accordance with subsection (4); (c) next, work out the gain or loss you make from the arrangement for the second year in accordance with paragraph 230 ‑ 140(3)(f) (treating the second year as an income year); (d) next, work out how much of the gain or loss mentioned in paragraph (c) is attributable to the income year in accordance with subsection (4); (e) next: (i) if the amounts worked out under paragraphs (b) and (d) are both gains—add them together to work out the gain from the arrangement for the income year; or (ii) if the amounts worked out under paragraphs (b) and (d) are both losses—add them together to work out the loss from the arrangement for the income year; or (iii) if one of the amounts worked out under paragraphs (b) and (d) is a loss and the other is a gain—subtract the loss from the gain. If the result is positive, this is the gain from the arrangement for the income year. If the result is negative, this is the loss from the arrangement for the income year. (4) For the purposes of paragraphs (3)(b) and (d), work out how much of the gain or loss is attributable to the income year by: (a) using a methodology that is reasonable; and (b) using the same methodology for the first and second years.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-150 — Election for portfolio treatment of fees

(1) You may make an election for an income year under this section if: (a) you prepare a financial report for the income year in accordance with: (i) the * accounting principles; or (ii) if the accounting principles do not apply to the preparation of the financial report—comparable standards for accounting made under a * foreign law that apply to the preparation of the financial report under a foreign law; and (b) the financial report is audited in accordance with: (i) the * auditing principles; or (ii) if the auditing principles do not apply to the auditing of the financial report—comparable standards for auditing made under a foreign law. (2) An election under this section is irrevocable.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-155 — Election for portfolio treatment of fees where differing income and accounting years

(1) This section applies if: (a) you prepare a financial report for a year (the first year ); and (b) you prepare a financial report for the subsequent year (the second year ); and (c) your income year starts in the first year and ends in the second year; and (d) both the financial report for the first year and the financial report for the second year are: (i) prepared in accordance with paragraph 230 ‑ 150(1)(a); and (ii) audited in accordance with paragraph 230 ‑ 150(1)(b); and (e) the auditor’s reports are unqualified for both the financial report for the first year and the financial report for the second year. (2) Treat yourself as eligible to make an election for the income year under subsection 230 ‑ 150(1). (3) Work out the gain or loss you make from the arrangement for the income year as follows: (a) firstly, work out the gain or loss you make from the arrangement for the first year in accordance with subsections 230 ‑ 160(3) and (4) or 230 ‑ 165(3) and (4) (treating the first year as an income year); (b) next, work out how much of the gain or loss mentioned in paragraph (a) is attributable to the income year in accordance with subsection (4); (c) next, work out the gain or loss you make from the arrangement for the second year in accordance with subsections 230 ‑ 160(3) and (4) or 230 ‑ 165(3) and (4) (treating the second year as an income year); (d) next, work out how much of the gain or loss mentioned in paragraph (c) is attributable to the income year in accordance with subsection (4); (e) next: (i) if the amounts worked out under paragraphs (b) and (d) are both gains—add them together to work out the gain from the arrangement for the income year; or (ii) if the amounts worked out under paragraphs (b) and (d) are both losses—add them together to work out the loss from the arrangement for the income year; or (iii) if one of the amounts worked out under paragraphs (b) and (d) is a loss and the other is a gain—subtract the loss from the gain. If the result is positive, this is the gain from the arrangement for the income year. If the result is negative, this is the loss from the arrangement for the income year. (4) For the purposes of paragraphs (3)(b) and (d), work out how much of the gain or loss is attributable to the income year by: (a) using a methodology that is reasonable; and (b) using the same methodology for the first and second years.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-160 — Portfolio treatment of fees

(1) This section applies in relation to a * financial arrangement if: (a) you have made an election under section 230 ‑ 150 in an income year; and (b) you start to have the financial arrangement in that income year or a later income year; and (c) the financial arrangement is part of a portfolio of similar financial arrangements; and (d) a gain or loss to which subsection 230 ‑ 130(3) applies arises in part from fees in respect of the * financial arrangement; and (e) the fees play an integral role in determining the amount of the gain or loss; and (f) the net amount of the fees is not expected to be significant relative to an overall gain or loss from the arrangement. (2) For the purposes of this Division, split the gain or loss mentioned in paragraph (1)(d) as follows: (a) to the extent that it arises from the fees, treat it as a gain or loss from the * financial arrangement (the fees gain or loss ) to which subsection 230 ‑ 130(3) applies; (b) to the extent that it does not arise from the fees, treat it as a separate gain or loss from the financial arrangement to which subsection 230 ‑ 130(3) applies. Note: The separate gain or loss mentioned in paragraph (b) may itself be split under subsection 230 ‑ 165(2) (premium/discount gain or loss). Determination of period for fees gain or loss (3) The period over which the fees gain or loss is to be spread is the period that you determine to be the expected life of the portfolio, if: (a) the basis on which you determine the period accords with the spreading of the fees gain or loss for the purposes of the profit or loss statement of the financial report mentioned in paragraph 230 ‑ 150(1)(a); and (b) the basis on which you determine the period is set and recorded before any fees in respect of the * financial arrangement fall due; and (c) the period can be justified objectively; and (d) the period is reasonable in the circumstances. Spreading the fees gain or loss (4) The method by which the fees gain or loss is to be spread is the method that you determine, if: (a) the basis on which you determine the method accords with the spreading of the fees gain or loss for the purposes of the profit or loss statement of the financial report mentioned in paragraph 230 ‑ 150(1)(a); and (b) the method is determined before any fees in respect of the * financial arrangement fall due; and (c) the method can be justified objectively; and (d) the method is reasonable in the circumstances. (5) To avoid doubt, subsections (3) and (4) apply despite sections 230 ‑ 130 and 230 ‑ 135.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-165 — Portfolio treatment of premiums and discounts for acquiring portfolio

(1) This section applies in relation to a * financial arrangement if: (a) you have made an election under section 230 ‑ 150 in an income year; and (b) you start to have the financial arrangement in that income year or a later income year; and (c) the financial arrangement is part of a portfolio of similar financial arrangements; and (d) a gain or loss to which subsection 230 ‑ 130(3) applies arises in part from a premium or discount in starting to have the portfolio; and (e) the gain or loss is not expected to be significant relative to the amount of the gain or loss on the portfolio. (2) For the purposes of this Division, split the gain or loss mentioned in paragraph (1)(d) as follows: (a) to the extent that it arises from the premium or discount, treat it as a gain or loss from the * financial arrangement (the premium/discount gain or loss ) to which subsection 230 ‑ 130(3) applies; (b) to the extent that it does not arise from the premium or discount, treat it as a separate gain or loss from the financial arrangement to which subsection 230 ‑ 130(3) applies. Note: The separate gain or loss mentioned in paragraph (b) may itself be split under subsection 230 ‑ 160(2) (portfolio fees gain or loss). Determination of period for premium/discount gain or loss (3) The period over which the premium/discount gain or loss is to be spread is the period that you determine to be the expected life of the portfolio, if: (a) the basis on which you determine the period accords with the spreading of the premium/discount gain or loss for the purposes of the profit or loss statement of the financial report mentioned in paragraph 230 ‑ 150(1)(a); and (b) the basis on which you determine the period is set and recorded before you start to have the * financial arrangement; and (c) the period can be justified objectively; and (d) the period is reasonable in the circumstances. Spreading the premium/discount gain or loss (4) The method by which the premium/discount gain or loss is to be spread is the method that you determine, if: (a) the basis on which you determine the method accords with the spreading of the premium/discount gain or loss for the purposes of the profit or loss statement of the financial report mentioned in paragraph 230 ‑ 150(1)(a); and (b) the method is determined before you start to have the * financial arrangement; and (c) the method can be justified objectively; and (d) the method is reasonable in the circumstances. (5) To avoid doubt, subsections (3) and (4) apply despite sections 230 ‑ 130 and 230 ‑ 135.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-170 — Allocating gain or loss to income years

(1) You are taken, for the purposes of section 230 ‑ 15, to make, for an income year, a gain or loss equal to a part of a gain or loss if: (a) that part of the gain or loss is allocated to an interval under section 230 ‑ 135; and (b) that interval falls wholly within that income year. (2) If: (a) a part of a gain or loss is allocated to an interval under section 230 ‑ 135; and (b) that interval straddles 2 income years; you are taken, for purposes of section 230 ‑ 15, to make a gain or loss equal to so much of that part of the gain or loss as is allocated between those income years on a reasonable basis. (2A) Subsections (1) and (2) do not apply to a part of a gain or loss if: (a) subsection 230 ‑ 100(3A) or 230 ‑ 130(4A) applies to the gain or loss; and (b) that part of the gain or loss is allocated to an interval under section 230 ‑ 135; and (c) that interval ends before or during the income year during which the gain or loss becomes sufficiently certain (as mentioned in paragraph 230 ‑ 100(3A)(b) or 230 ‑ 130(4A)(f), whichever is applicable). Instead, you are taken, for the purposes of section 230 ‑ 15, to make, for that income year, a gain or loss equal to that part of that gain or loss. (3) If: (a) a * head company of a * consolidated group or * MEC group has a * financial arrangement; and (b) a subsidiary member of the group ceases to be a member of the group at a particular time (the leaving time ); and (c) immediately after the leaving time, the head company no longer has the arrangement because the subsidiary member ceased to be a member of the group; an income year of the group is taken, for the purposes of applying this section to the group and the arrangement, to end at the leaving time.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-172 — Applying accruals method to loss resulting from impairment

(1) This section applies if: (a) there is an impairment (within the meaning of the * accounting principles) of: (i) a * financial arrangement; or (ii) a financial asset or financial liability that forms part of a financial arrangement; and (b) you make a loss from the financial arrangement as a result of the impairment; and (c) the accruals method applies to the loss. (2) You cannot deduct a loss you make for an income year under section 230 ‑ 15, to the extent that the loss results from the impairment (including as affected by any later reversal of the impairment loss (within the meaning of the * accounting principles) that resulted from the impairment). (3) Disregard subsection (2) for the purposes of paragraph (c) of step 1 of the method statement in subsection 230 ‑ 445(1).

Amendment history: Inserted by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-175 — Running balancing adjustments

Overestimate of financial benefit to be received (1) You are taken for the purposes of this Division to make a loss from a * financial arrangement if: (a) a provision of this Subdivision has applied on the basis that you were sufficiently certain, at a particular time, to receive a * financial benefit of, or of at least, a particular amount under the arrangement; and (b) when you receive the benefit (or the time comes for you to receive the benefit), the amount you receive (or are to receive) is nil or is less than the amount estimated. The amount of the loss is equal to the difference between the amount estimated and the amount you receive (or are to receive). You are taken to have made the loss for the income year in which you receive the benefit (or in which the time comes for you to receive the benefit). (1A) Subsection (1) does not apply to the extent that the difference results from: (a) an impairment (within the meaning of the * accounting principles) of: (i) the * financial arrangement; or (ii) a financial asset or financial liability that forms part of the arrangement; or (b) you writing off, as a bad debt, a right to a * financial benefit (or a part of a financial benefit). Underestimate of financial benefit to be received (2) You are taken for the purposes of this Division to make a gain from a * financial arrangement if: (a) a provision of this Subdivision has applied on the basis that you were sufficiently certain at a particular time to receive a * financial benefit of, or of at least, a particular amount under the arrangement; and (b) when you receive the benefit, or the time comes for you to receive the benefit, the amount you receive, or are to receive, is more than the amount estimated. The amount of the gain is equal to the difference between the amount estimated and the amount you receive or are to receive. You are taken to have made that gain in the income year in which you receive the benefit or in which the time comes for you to receive the benefit. (2A) Subsection (2) does not apply to the extent that the difference results from the reversal of an impairment loss (within the meaning of the * accounting principles) that resulted from an impairment (within the meaning of the accounting principles) of: (a) the * financial arrangement; or (b) a financial asset or financial liability that forms part of the arrangement. Overestimate of financial benefit to be provided (3) You are taken for the purposes of this Division to make a gain from a * financial arrangement if: (a) a provision of this Subdivision has applied on the basis that you were sufficiently certain at a particular time to provide a * financial benefit of, or of at least, a particular amount under the arrangement; and (b) when you provide the benefit, or the time comes for you to provide the benefit, the amount you provide, or are to provide, is nil or is less than the amount estimated. The amount of the gain is equal to the difference between the amount estimated and the amount you provide or are to provide. You are taken to have made that gain in the income year in which you provide the benefit or in which the time comes for you to provide the benefit. Underestimate of financial benefit to be provided (4) You are taken for the purposes of this Division to make a loss from a * financial arrangement if: (a) a provision of this Subdivision has applied on the basis that you were sufficiently certain at a particular time to provide a * financial benefit of, or of at least, a particular amount under the arrangement; and (b) when you provide the benefit, or the time comes for you to provide the benefit, the amount you are to provide is more than the estimated amount referred to in paragraph (a). The amount of the loss is equal to the difference between the amount estimated and the amount you are to provide. You are taken to have made that loss in the income year in which you provide the benefit or in which the time comes for you to provide the benefit.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-180 — Realisation method

(1) If a gain or loss is to be taken into account using the realisation method, you are taken, for the purposes of section 230 ‑ 15, to make the gain or loss for the income year in which the gain or loss occurs. Note: Sections 230 ‑ 70 and 230 ‑ 75 allow you to apportion financial benefits provided and financial benefits received in working out the amount of the gain or loss. (2) For the purposes of subsection (1), a gain or loss from a * financial arrangement is taken to occur at: (a) if the last of the * financial benefits, rights and obligations taken into account in determining the amount of the gain or loss is a financial benefit—the time the financial benefit: (i) is provided; or (ii) if the financial benefit is not provided at the time when it is due to be provided under the arrangement and it is reasonable to expect that the financial benefit will be provided—is due to be provided; or (b) if the last of the financial benefits, rights and obligations taken into account in determining the amount of the gain or loss is a right to receive a financial benefit or an obligation to provide a financial benefit—the time: (i) if the right or obligation ceases before the financial benefit is provided—the right or obligation ceases; or (ii) otherwise—the financial benefit is provided. This subsection has effect subject to subsection (3). (3) For the purposes of subsection (1), you make a loss from a * financial arrangement from writing off, as a bad debt, a right to a * financial benefit (or a part of a financial benefit) if: (a) the financial benefit was taken into account in working out the amount of a gain from the arrangement and the gain has been included in your assessable income under this Division; or (b) the right is one in respect of money that you lent in the ordinary course of your * business of lending money; or (c) the right is one that you bought in the ordinary course of your business of lending money. (4) The loss referred to in subsection (3) occurs when you write off the right to the * financial benefit (or the part of the financial benefit) as a bad debt. (5) The amount of the loss referred to in subsection (3) is: (a) if paragraph (3)(a) applies—so much of the gain referred to in that paragraph as is reasonably attributable to the * financial benefit (or the part of the financial benefit); or (b) if paragraph (3)(b) applies—the amount of the financial benefit (or the part of the financial benefit); or (c) if paragraph (3)(c) applies—the amount of the financial benefit (or the part of the financial benefit) but only up to the value of the financial benefit you provided to acquire the right to the financial benefit (or the part of the financial benefit). (6) For the purposes of this Act, a deduction for the loss referred to in subsection (3) is to be treated as a deduction of a bad debt. Note: Various provisions in this Act and the Income Tax Assessment Act 1936 restrict the availability of deductions for bad debts and make provision in relation to the recoupment of amounts in relation to bad debts that have been written off. These provisions are set out in subsection 25 ‑ 35(5).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-185 — Reassessment

(1) You must make a fresh assessment of which gains and losses from a * financial arrangement the accruals method should apply to, and which gains and losses from that arrangement the realisation method should apply to, if: (a) the accruals method, or the realisation method, provided for in this Subdivision applies to gains and losses from the arrangement; and (b) there is a material change to: (i) the terms and conditions of the arrangement; or (ii) circumstances that affect the arrangement. (2) Without limiting subsection (1), the following changes are material changes to the terms and conditions of, or circumstances that affect, the * financial arrangement: (a) a change to the terms or conditions of the arrangement in a way that alters the essential nature of the arrangement (for example, by altering it from a * debt interest to an * equity interest or from an equity interest to a debt interest); (b) a change to the terms or conditions of the arrangement in a way that materially affects the contingencies on which significant obligations and rights under the arrangement are dependent (for example, by introducing such a contingency or removing such a contingency); (c) a change in circumstances that makes something that: (i) materially affects significant obligations and rights under the arrangement; and (ii) was previously dependent on a contingency; no longer dependent on a contingency (because, for example, only one of a number of previously possible contingencies is realised); (d) a change to: (i) the terms on which credit is to be provided to an entity that is not a party to the arrangement; or (ii) the credit rating of an entity that is not a party to the arrangement; if a significant obligation or right under the arrangement is dependent on that credit being provided or that rating being maintained; (e) if the arrangement is, or includes, a financial asset or financial liability and you prepare your financial reports in accordance with: (i) the * accounting principles; or (ii) if the accounting principles do not apply to the preparation of the financial report—comparable standards for accounting made under a * foreign law that apply to the preparation of the financial report under a foreign law; a change to the terms or conditions of, or circumstances that affect, the arrangement that are sufficient for the financial asset or financial liability to be treated as impaired for the purposes of those principles or standards. (3) You do not need to make a reassessment under this section merely because of a change in the fair value of the * financial arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-190 — Re ‑ estimation

When re ‑ estimation necessary (1) You re ‑ estimate a gain or loss from a * financial arrangement under subsection (5) if: (a) the accruals method applies to the gain or loss; and (b) circumstances arise that materially affect: (i) the amount or value; or (ii) the timing; of * financial benefits that were taken into account in working out the amount of the gain or loss; and (c) the circumstances do not give rise to a re ‑ estimation under section 230 ‑ 200. (2) You must re ‑ estimate the gain or loss as soon as reasonably practicable after you become aware of the circumstances referred to in paragraph (1)(b), if subsection (1) applies. (3) Without limiting subsection (1), the following are circumstances of the kind referred to in paragraph (1)(b): (a) a material change in market conditions that are relevant to the amount or value of the * financial benefits to be received or provided under the * financial arrangement; (b) cash flows that were previously estimated becoming known and the difference between the cash flows that become known and the cash flows that were previously estimates is not insignificant; (c) a right to, or a part of a right to, a financial benefit under the arrangement is written off as a bad debt; (d) you have made a reassessment under section 230 ‑ 185 in relation to gains or losses under the arrangement and you have determined on the reassessment under that section that the accruals method should continue to apply to those gains or losses. (3A) You also re ‑ estimate a gain or loss from a * financial arrangement under subsection (5) if: (a) the gain or loss is spread using the method referred to in paragraph 230 ‑ 135(2)(b) in accordance with section 230 ‑ 140 (effective interest method); and (b) you recalculate the effective interest rate in accordance with that method; and (c) the terms and conditions of the arrangement provide for reset dates to occur no more than 12 months apart; and (d) the maximum life of the arrangement (as determined under the terms and conditions of the arrangement) is more than 12 months. (3B) You must re ‑ estimate the gain or loss at the relevant reset date if subsection (3A) applies. (4) You do not re ‑ estimate the gain or loss from a * financial arrangement under subsection (5) merely because of a change in the credit rating, or the creditworthiness, of a party or parties to the arrangement. Nature of re ‑ estimation (5) Making a re ‑ estimation in relation to a gain or loss under this subsection involves: (a) a fresh determination of the amount of the gain or loss; and (b) a reapplication of the accruals method to the redetermined gain or loss to make a fresh allocation of the part of the redetermined gain or loss that has not already been allocated to intervals ending before the re ‑ estimation is made to intervals ending after the re ‑ estimation is made. Basis for re ‑ estimation (6) You may make the fresh allocation of the gain or loss under subsection (5) on these bases: (a) if you satisfy subsection (7) in relation to the * financial arrangement—by maintaining the rate of return being used and adjusting the amount to which you apply the rate of return to the present value of the estimated future cash flows discounted at the maintained rate of return; (b) in any case—by adjusting the rate of return and maintaining the amount to which the adjusted rate of return is to be applied. The object to be achieved by both bases is to allow you to bring the remainder of the gain or loss based on the new estimates properly to account over the remainder of the period over which you spread the gain or loss. Note: The amount referred to in paragraph (b) is the amount to which the previous rate of return was being applied immediately before the re ‑ estimation. (7) You satisfy this subsection in relation to a * financial arrangement if every re ‑ estimation you make under subsection (5) in relation to a gain or loss from the arrangement is made in accordance with: (a) financial reports of the kind referred to in paragraph 230 ‑ 395(2)(a) that are audited as referred to in paragraph 230 ‑ 395(2)(b) (regardless of whether Subdivision 230 ‑ F (reliance on financial reports method) is to apply to a particular financial arrangement); and (b) * accounting standard AASB 139 (or another accounting standard prescribed by the regulations for the purposes of this paragraph).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-192 — Re ‑ estimation—impairments and reversals

(1) This section applies if the re ‑ estimation mentioned in section 230 ‑ 190 arises because of: (a) an impairment (within the meaning of the * accounting principles) of: (i) the * financial arrangement; or (ii) a financial asset or financial liability that forms part of the arrangement; or (b) a reversal of an impairment loss (within the meaning of the accounting principles) that resulted from such an impairment. (2) Despite paragraph 230 ‑ 190(6)(a), you must make the fresh allocation in accordance with paragraph 230 ‑ 190(6)(b). Losses non ‑ deductible (3) You cannot deduct a loss you make for an income year under section 230 ‑ 15, to the extent that the loss results from: (a) the impairment (including as affected by any later reversal of the impairment loss that resulted from the impairment); or (b) the operation of subsection (7). (4) Disregard subsection (3) for the purposes of paragraph (c) of step 1 of the method statement in subsection 230 ‑ 445(1). Reversals (5) Subsections (7) and (8) apply to the part of the gain or loss that is to be reallocated in accordance with paragraph 230 ‑ 190(6)(b), if: (a) the fresh determination under paragraph 230 ‑ 190(5)(a) that arose because of the reversal resulted in that part being a gain; and (b) there are losses that: (i) resulted from the impairment; and (ii) you could have deducted apart from subsection 230 ‑ 172(2) or subsection (3) of this section. (6) Paragraph (5)(b) does not apply to a loss to the extent that: (a) the loss reflects the amount of a loss you make under paragraph 230 ‑ 195(1)(b) or (c); and (b) the loss you make under paragraph 230 ‑ 195(1)(b) or (c) relates to you writing off, as a bad debt, a right to receive a * financial benefit (or a part of a financial benefit). (7) Treat the fresh determination as having resulted in that part being a loss, if the total of the losses mentioned in paragraph (5)(b) of this section exceeds the amount of the gain mentioned in paragraph (5)(a). The amount of the loss is equal to the amount of the excess. (8) Otherwise, reduce the amount of that gain by the total of those losses.

Amendment history: Inserted by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-195 — Balancing adjustment if rate of return maintained on re ‑ estimation

(1) If you make a fresh allocation of the gain or loss on the basis referred to in paragraph 230 ‑ 190(6)(a), you must make the following balancing adjustment: (a) if you re ‑ estimate a gain and the amount to which you apply the rate of return increases—you make a gain from the * financial arrangement, for the income year in which you make the re ‑ estimation, equal to the amount of the increase; (b) if you re ‑ estimate a gain and the amount to which you apply the rate of return decreases—you make a loss from the arrangement, for the income year in which you make the re ‑ estimation, equal to the amount of the decrease; (c) if you re ‑ estimate a loss and the amount to which you apply the rate of return increases—you make a loss from the arrangement, for the income year in which you make the re ‑ estimation, equal to the amount of the increase; (d) if you re ‑ estimate a loss and the amount to which you apply the rate of return decreases—you make a gain from the arrangement, for the income year in which you make the re ‑ estimation, equal to the amount of the decrease. (2) Subsection (3) applies if: (a) the re ‑ estimation is made wholly or partly on the basis that you have written off, as a bad debt, a right to receive a * financial benefit (or a part of a financial benefit); and (b) the right: (i) is not one in respect of money that you lent in the ordinary course of your * business of lending money; and (ii) is not one that you bought in the ordinary course of your business of lending money. (3) The balancing adjustment to be made under paragraph (1)(b), to the extent that it relates to the writing off of the bad debt, must not exceed so much of the gain in relation to the * financial arrangement as: (a) has been assessed under this Division; and (b) is reasonably attributable to the * financial benefit (or the part of the financial benefit). (4) Subsection (5) applies if: (a) the re ‑ estimation is made wholly or partly on the basis that you have written off, as a bad debt, a right to receive a * financial benefit; and (b) the right is one that you bought in the ordinary course of your * business of lending money. (5) The balancing adjustment to be made under paragraph (1)(b), to the extent that it relates to the writing off of the bad debt, must not exceed the value of the * financial benefit you provided to acquire the right to the financial benefit (or the part of the financial benefit). (6) For the purposes of this Act, a deduction for the balancing adjustment referred to in subsection (3) is to be treated as a deduction of a bad debt. Note: Various provisions in this Act and the Income Tax Assessment Act 1936 restrict the availability of deductions for bad debts and make provision in relation to the recoupment of amounts in relation to bad debts that have been written off. These provisions are set out in subsection 25 ‑ 35(5).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-200 — Re ‑ estimation if balancing adjustment on partial disposal

Re ‑ estimation if balancing adjustment on partial disposal (1) You also re ‑ estimate a gain or loss from a * financial arrangement under subsection (2) if: (a) the accruals method applies to the gain or loss; and (b) a balancing adjustment is made in relation to the arrangement under Subdivision 230 ‑ G because you transfer to another entity: (i) a proportionate share of all of your rights and/or obligations under the arrangement; or (ii) a right or obligation that you have under the arrangement to a specifically identified * financial benefit; or (iii) a proportionate share of a right or obligation that you have under the arrangement to a specifically identified financial benefit. You must re ‑ estimate the gain or loss as soon as reasonably practicable after the transfer occurs. Nature of re ‑ estimation (2) Making a re ‑ estimation in relation to a gain or loss under this subsection involves: (a) a fresh determination of the amount of the gain or loss disregarding: (i) * financial benefits; and (ii) amounts of the gain or loss that have already been allocated to intervals ending before the re ‑ estimation is made; to the extent to which they are reasonably attributable to the proportionate share, or the right or obligation, referred to in paragraph (1)(b); and (b) a reapplication of the accruals method to the redetermined gain or loss to make a fresh allocation of the part of that gain or loss that has not already been allocated to intervals ending before the re ‑ estimation is made to intervals ending after the re ‑ estimation is made. Basis for re ‑ estimation (3) You make the fresh allocation of the gain or loss under subsection (2) by maintaining the rate of return being used and adjusting the amount to which you apply the rate of return to the present value of the estimated future cash flows discounted at the maintained rate of return. The object to be achieved by the fresh allocation is to allow you to bring the redetermined gain or loss properly to account over the remainder of the period over which you spread the gain or loss.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-205 — Objects of this Subdivision

The objects of this Subdivision are: (a) to allow you to align the tax treatment of gains and losses from * financial arrangements with the accounting treatment that applies where assets and liabilities are classified or designated as at fair value through profit or loss; and (b) to facilitate efficient price ‑ making; and (c) to achieve the above objects without allowing you to obtain an inappropriate tax benefit.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-210 — Fair value election

Election (1) You may make a fair value election under this section if you are eligible under subsection (2) to make the election for the income year in which you make the election. Eligibility to make fair value election for an income year (2) You are eligible to make a fair value election for an income year if: (a) you prepare a financial report for that income year in accordance with: (i) the * accounting principles; or (ii) if the accounting principles do not apply to the preparation of the financial report—comparable standards for accounting made under a * foreign law that apply to the preparation of the financial report under a foreign law; and (b) the financial report is audited in accordance with: (i) the * auditing principles; or (ii) if the auditing principles do not apply to the auditing of the financial report—comparable standards for auditing made under a foreign law. Note: Section 230 ‑ 500 allows regulations to be made specifying particular foreign accounting and auditing standards as ones that are to be treated as comparable with Australian accounting and auditing principles for the purposes of this Division. Election irrevocable (3) A * fair value election is irrevocable. Note: The election may cease to have effect, or cease to apply to a particular financial arrangement, under section 230 ‑ 240.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-215 — Fair value election where differing income and accounting years

(1) This section applies if: (a) you prepare a financial report for a year (the first year ); and (b) you prepare a financial report for the subsequent year (the second year ); and (c) your income year starts in the first year and ends in the second year; and (d) both the financial report for the first year and the financial report for the second year are: (i) prepared in accordance with paragraph 230 ‑ 210(2)(a); and (ii) audited in accordance with paragraph 230 ‑ 210(2)(b); and (e) the auditor’s reports are unqualified for both the financial report for the first year and the financial report for the second year. (2) Treat yourself as eligible to make an election for the income year under subsection 230 ‑ 210(2). (3) Work out the gain or loss you make from the * financial arrangement for the income year as follows: (a) firstly, work out the gain or loss you make from the arrangement for the first year in accordance with section 230 ‑ 230 (treating the first year as an income year); (b) next, work out how much of the gain or loss mentioned in paragraph (a) is attributable to the income year in accordance with subsection (4); (c) next, work out the gain or loss you make from the arrangement for the second year in accordance with section 230 ‑ 230 (treating the second year as an income year); (d) next, work out how much of the gain or loss mentioned in paragraph (c) is attributable to the income year in accordance with subsection (4); (e) next: (i) if the amounts worked out under paragraphs (b) and (d) are both gains—add them together to work out the gain from the arrangement for the income year; or (ii) if the amounts worked out under paragraphs (b) and (d) are both losses—add them together to work out the loss from the arrangement for the income year; or (iii) if one of the amounts worked out under paragraphs (b) and (d) is a loss and the other is a gain—subtract the loss from the gain. If the result is positive, this is the gain from the arrangement for the income year. If the result is negative, this is the loss from the arrangement for the income year. (4) For the purposes of paragraphs (3)(b) and (d), work out how much of the gain or loss is attributable to the income year by: (a) using a methodology that is reasonable; and (b) using the same methodology for the first and second years. (5) For the purposes of paragraph (4)(a), treat a methodology that attributes the gain or loss on a pro ‑ rata basis as not being reasonable.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-220 — Financial arrangements to which fair value election applies

(1) A * fair value election applies in relation to * financial arrangements that: (a) are * Division 230 financial arrangements; and (b) are recognised in financial reports of the kind referred to in paragraph 230 ‑ 210(2)(a) that are audited, or required to be audited, as referred to in paragraph 230 ‑ 210(2)(b); and (c) are assets or liabilities that you are required (whether or not as a result of a choice you make) by: (i) the * accounting principles; or (ii) if the accounting principles do not apply to the preparation of the financial report—comparable standards for accounting that apply to the preparation of the financial report under a * foreign law; to classify, designate or (in whole or in part) otherwise treat, in the financial reports, as at fair value through profit or loss; and (d) you start to have in the income year in which you make the election or in a later income year. This subsection has effect subject to section 230 ‑ 225. (2) If, but for this subsection, paragraphs (1)(b) and (c) would not be satisfied in relation to a * financial arrangement because the arrangement is an intra ‑ group transaction for the purposes of: (a) * accounting standard AASB 127 (or another accounting standard prescribed by the regulations for the purposes of this paragraph); or (b) if that standard does not apply to the preparation of the financial report—a comparable accounting standard that applies to the preparation of the financial report under a * foreign law; paragraphs (1)(b) and (c) are taken to be satisfied in relation to the arrangement. Note: Financial arrangements between members of a consolidated group or MEC group are not covered by this subsection because the single entity rule in subsection 701 ‑ 1(1) operates to treat them as not being financial arrangements for the purposes of this Division. (3) If: (a) the * financial arrangement would not be a financial arrangement if the following provisions were disregarded: (i) Division 9A of Part III of the Income Tax Assessment Act 1936 (which deals with offshore banking units); (ii) Part IIIB of that Act (which deals with Australian branches of foreign banks etc.); and (b) paragraphs (1)(b) and (c) would be satisfied in relation to the financial arrangement if the arrangement had been between 2 separate entities; and (c) the * fair value election is made by: (i) if section 121EB of the Income Tax Assessment Act 1936 applies—the OBU mentioned in that section (disregarding the operation of that section); or (ii) if section 160ZZW of that Act applies—the bank mentioned in that section (disregarding the operation of that section); paragraphs (1)(b) and (c) are taken to be satisfied in relation to the arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-225 — Financial arrangements to which election does not apply

(1) A * fair value election does not apply to a * financial arrangement if: (a) the arrangement is an * equity interest; and (b) you are the issuer of the equity interest. (2) A * fair value election does not apply to a * financial arrangement if: (a) you are: (i) an individual; or (ii) an entity (other than an individual) that satisfies subsection 230 ‑ 455(2), (3) or (4) for the income year in which you start to have the arrangement; and (b) the arrangement is a * qualifying security; and (c) you have not made an election under subsection 230 ‑ 455(7). (3) A * fair value election does not apply to a * financial arrangement if: (a) the election is made by the * head company of a * consolidated group or * MEC group; and (b) the election specifies that the election is not to apply to financial arrangements in relation to * life insurance business carried on by a member of the consolidated group or MEC group; and (c) the arrangement is one that relates to the life insurance business carried on by a member of the consolidated group or MEC group. (4) A * fair value election does not apply to a * financial arrangement if the arrangement is associated with a business of a kind specified in regulations made for the purposes of this subsection.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-230 — Applying fair value method to gains and losses

(1) You make a gain or loss for an income year from a * financial arrangement to which a * fair value election applies if: (a) the principles or standards mentioned in paragraph 230 ‑ 210(2)(a) require you to recognise a gain or loss in profit or loss for the income year from the asset or liability mentioned in paragraph 230 ‑ 220(1)(c); or (b) in the case of an arrangement to which subsection 230 ‑ 220(2) applies—the principles or standards referred to in paragraph 230 ‑ 220(1)(c) would have required you to recognise a gain or loss in profit or loss for the year from the asset or liability mentioned in paragraph 230 ‑ 220(1)(c) if the arrangement had not been an intra ‑ group transaction for the purposes of the standard referred to in paragraph 230 ‑ 220(2)(b); or (c) in the case of an arrangement to which subsection 230 ‑ 220(3) applies—the principles or standards referred to in paragraph 230 ‑ 220(1)(c) would have required you to recognise a gain or loss in profit or loss for the year from the asset or liability mentioned in paragraph 230 ‑ 220(1)(c) if the arrangement had been between 2 separate entities. Note: Subsection 230 ‑ 40(7) provides that an election under Subdivision 230 ‑ E (hedging financial arrangements method) or Subdivision 230 ‑ F (method of relying on financial reports) may override a fair value election. (1A) The gain or loss you make is the gain or loss the principles or standards require, or would have required, you to recognise in profit or loss as mentioned in subsection (1). (2) Subsection (3) applies if: (a) a * head company of a * consolidated group or * MEC group has a * financial arrangement; and (b) a * fair value election applies to the arrangement; and (c) a subsidiary member of the group ceases to be a member of the group at a particular time (the leaving time ); and (d) immediately after the leaving time, the head company no longer has the arrangement because the subsidiary member ceased to be a member of the group. (3) The gain or loss the group makes from the arrangement for the income year in which the leaving time occurs is taken to be the gain or loss that the principles or standards referred to in paragraph 230 ‑ 210(2)(a) would require the group to recognise as at fair value through profit or loss for the income year from the asset or liability mentioned in paragraph 230 ‑ 220(1)(c) if: (a) the circumstances that existed in relation to the arrangement (including its value) immediately before the leaving time had continued to exist until the end of the income year; and (b) any circumstances that arise in relation to the financial arrangement after the leaving time were disregarded. Subdivision does not apply to extent gains or losses not recognised as at fair value (4) This Subdivision does not apply to a gain or loss you make from the * financial arrangement, to the extent: (a) you are required, as mentioned in paragraph 230 ‑ 220(1)(c), to otherwise treat as at fair value through profit and loss the assets or liabilities that the financial arrangement is; and (b) the principles or standards referred to in paragraph 230 ‑ 210(2)(a) do not require you to recognise the gain or loss as at fair value through profit or loss. Note: See also subsection 230 ‑ 40(5).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-235 — Splitting financial arrangements into 2 financial arrangements

(1) If: (a) a * financial arrangement is constituted only in part by an asset or liability mentioned in paragraph 230 ‑ 220(1)(c); and (b) a * fair value election would apply to the arrangement if it were constituted solely by that asset or liability; the provisions of this Division (other than this section) apply to the arrangement as if it were instead 2 separate financial arrangements. (2) The 2 separate * financial arrangements are: (a) one consisting of the part referred to in paragraph (1)(a); and (b) one consisting of the remaining part.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-240 — When election ceases to apply

(1) A * fair value election ceases to have effect from the start of an income year if you cease to be eligible under subsection 230 ‑ 210(2) to make the fair value election for that income year. (2) Subsection (1) does not prevent you from making a new * fair value election at a later time if you become, at that later time, eligible under subsection 230 ‑ 210(2) to make a fair value election for an income year. Note: The new election will only apply to financial arrangements you start to have after the start of the income year in which the new election is made. (3) A * fair value election ceases to apply to a particular * financial arrangement from the start of an income year if the arrangement ceases to satisfy a requirement of paragraph 230 ‑ 220(1)(b) or (c) during that income year. (4) If the election ceases to apply to a particular * financial arrangement under subsection (3), the election cannot subsequently reapply to that arrangement (even if the requirements of paragraphs 230 ‑ 220(1)(b) and (c) are satisfied once more in relation to the arrangement).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-245 — Balancing adjustment if election ceases to apply

(1) You must make balancing adjustments under subsection (2) if a * fair value election ceases to have effect under subsection 230 ‑ 240(1). (2) The balancing adjustments under this subsection are the balancing adjustments you would make under Subdivision 230 ‑ G for each of the * financial arrangements to which the election applied if you disposed of the arrangement for its fair value when the election ceases to have effect. (3) You must make a balancing adjustment under subsection (4) if a * fair value election ceases to apply to a particular * financial arrangement under subsection 230 ‑ 240(3). (4) The balancing adjustment under this subsection is the balancing adjustment you would make under Subdivision 230 ‑ G if you disposed of the * financial arrangement for its fair value when the election ceases to apply to the arrangement. (5) If a balancing adjustment is made under subsection (2) or (4) in relation to a * financial arrangement, you are taken, for the purposes of this Division, to have reacquired the arrangement at its fair value immediately after the election ceased to have effect or ceased to apply to the arrangement. (6) In determining, for the purposes of the balancing adjustment under subsection (2) or (4) or for the purposes of subsection (5), the fair value of the * financial arrangement at a time, disregard any changes in the fair value to the extent that: (a) you are required, as mentioned in paragraph 230 ‑ 220(1)(c), to otherwise treat the financial arrangement as at fair value through profit and loss; and (b) the principles or standards referred to in paragraph 230 ‑ 210(2)(a) do not require you to recognise the changes as at fair value through profit or loss.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-250 — Objects of this Subdivision

The objects of this Subdivision are: (a) to allow you to align the tax treatment of gains and losses from foreign exchange rate changes with the accounting treatment of profits and losses from such changes; and (b) to achieve this without allowing you to obtain an inappropriate tax benefit.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-255 — Foreign exchange retranslation election

General election (1) You may make a foreign exchange retranslation election under this subsection if you are eligible under subsection (2) to make the election for the income year in which you make the election. Eligibility to make election (2) You are eligible to make a * foreign exchange retranslation election for an income year if: (a) you prepare a financial report for that income year in accordance with: (i) the * accounting principles; or (ii) if the accounting principles do not apply to the preparation of the financial report—comparable standards for accounting made under a * foreign law that apply to the preparation of the financial report under a foreign law; and (b) the financial report is audited in accordance with: (i) the * auditing principles; or (ii) if the auditing principles do not apply to the auditing of the financial report—comparable standards for auditing made under a foreign law. Note: Section 230 ‑ 500 allows regulations to be made specifying particular foreign accounting and auditing standards as ones that are to be treated as comparable with Australian accounting and auditing principles for the purposes of this Division. Election in relation to qualifying forex accounts (3) You may make a foreign exchange retranslation election under this subsection in relation to a * financial arrangement if: (a) the arrangement is a * qualifying forex account; and (b) you have not made a * foreign exchange retranslation election under subsection (1) that applies to the account. You may make the election even if you start to have the arrangement before you make the election. Financial arrangements to which election in relation to qualifying forex accounts applies (4) The election under subsection (3) applies to the * financial arrangement: (a) from the time when you start to have the arrangement if the election is made before you start to have the arrangement; or (b) from the start of the income year in which the election is made if you make the election after you start to have the arrangement. Election irrevocable (5) A * foreign exchange retranslation election is irrevocable. Note: The election may cease to apply under section 230 ‑ 285.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-260 — Foreign exchange retranslation election where differing income and accounting years

(1) This section applies if: (a) you prepare a financial report for a year (the first year ); and (b) you prepare a financial report for the subsequent year (the second year ); and (c) your income year starts in the first year and ends in the second year; and (d) both the financial report for the first year and the financial report for the second year are: (i) prepared in accordance with paragraph 230 ‑ 255(2)(a); and (ii) audited in accordance with paragraph 230 ‑ 255(2)(b); and (e) the auditor’s reports are unqualified for both the financial report for the first year and the financial report for the second year. (2) Treat yourself as eligible to make an election for the income year under subsection 230 ‑ 255(2). (3) Work out the gain or loss you make from the arrangement for the income year as follows: (a) firstly, work out the gain or loss you make from the arrangement for the first year in accordance with section 230 ‑ 280 (treating the first year as an income year); (b) next, work out how much of the gain or loss mentioned in paragraph (a) is attributable to the income year in accordance with subsection (4); (c) next, work out the gain or loss you make from the arrangement for the second year in accordance with section 230 ‑ 280 (treating the second year as an income year); (d) next, work out how much of the gain or loss mentioned in paragraph (c) is attributable to the income year in accordance with subsection (4); (e) next: (i) if the amounts worked out under paragraphs (b) and (d) are both gains—add them together to work out the gain from the arrangement for the income year; or (ii) if the amounts worked out under paragraphs (b) and (d) are both losses—add them together to work out the loss from the arrangement for the income year; or (iii) if one of the amounts worked out under paragraphs (b) and (d) is a loss and the other is a gain—subtract the loss from the gain. If the result is positive, this is the gain from the arrangement for the income year. If the result is negative, this is the loss from the arrangement for the income year. (4) For the purposes of paragraphs (3)(b) and (d), work out how much of the gain or loss is attributable to the income year by: (a) using a methodology that is reasonable; and (b) using the same methodology for the first and second years. (5) For the purposes of paragraph (4)(a), treat a methodology that attributes the gain or loss on a pro ‑ rata basis as not being reasonable.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-265 — Financial arrangements to which general election applies

(1) A * foreign exchange retranslation election under subsection 230 ‑ 255(1) applies to each of your * financial arrangements: (a) that are * Division 230 financial arrangements; and (b) that are recognised in financial reports of a kind referred to in paragraph 230 ‑ 255(2)(a) that are audited, or required to be audited, as referred to in paragraph 230 ‑ 255(2)(b); and (c) in relation to which you are required by: (i) * accounting standard AASB 121 (or another accounting standard prescribed by the regulations for the purposes of this paragraph); or (ii) if that standard does not apply to the preparation of the financial report—a comparable accounting standard that applies to the preparation of the financial report under a * foreign law; to recognise, in the financial reports, amounts in profit or loss (if any) that are attributable to changes in currency exchange rates; and (d) that you start to have in the income year in which you make the election or in a later income year. This subsection has effect subject to section 230 ‑ 270. Note: The election also has consequences under Subdivision 775 ‑ F for arrangements that are not Division 230 financial arrangements. (2) If, but for this subsection, paragraphs (1)(b) and (c) would not be satisfied in relation to a * financial arrangement because the arrangement is an intra ‑ group transaction for the purposes of: (a) * accounting standard AASB 127 (or another accounting standard prescribed by the regulations for the purposes of this paragraph); or (b) if that standard does not apply to the preparation of the financial report—a comparable accounting standard that applies to the preparation of the financial report under a * foreign law; paragraphs (1)(b) and (c) are taken to be satisfied in relation to the arrangement. Note: Financial arrangements between members of a consolidated group or MEC group are not covered by this subsection because the single entity rule in subsection 701 ‑ 1(1) operates to treat them as not being financial arrangements for the purposes of this Division. (3) If: (a) the * financial arrangement would not be a financial arrangement if the following provisions were disregarded: (i) Division 9A of Part III of the Income Tax Assessment Act 1936 (which deals with offshore banking units); (ii) Part IIIB of that Act (which deals with Australian branches of foreign banks etc.); and (b) paragraphs (1)(b) and (c) would be satisfied in relation to the financial arrangement if the arrangement had been between 2 separate entities; and (c) the * foreign exchange retranslation election under subsection 230 ‑ 255(1) is made by: (i) if section 121EB of the Income Tax Assessment Act 1936 applies—the OBU mentioned in that section (disregarding the operation of that section); or (ii) if section 160ZZW of that Act applies—the bank mentioned in that section (disregarding the operation of that section); paragraphs (1)(b) and (c) are taken to be satisfied in relation to the arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-270 — Financial arrangements to which general election does not apply

(1) For the purposes of this Division, a * foreign exchange retranslation election under subsection 230 ‑ 255(1) does not apply to a * financial arrangement if the arrangement is a financial arrangement under section 230 ‑ 50 (equity interests etc.). (2) For the purposes of this Division, a * foreign exchange retranslation election under subsection 230 ‑ 255(1) does not apply to a * financial arrangement if: (a) you are: (i) an individual; or (ii) an entity (other than an individual) that satisfies subsection 230 ‑ 455(2), (3) or (4) for the income year in which you start to have the arrangement; and (b) the arrangement is a * qualifying security; and (c) you have not made an election under subsection 230 ‑ 455(7). (3) A * foreign exchange retranslation election under subsection 230 ‑ 255(1) does not apply to a * financial arrangement if: (a) the election is made by the * head company of a * consolidated group or * MEC group; and (b) the election specifies that the election is not to apply to financial arrangements in relation to * life insurance business carried on by a member of the consolidated group or MEC group; and (c) the arrangement is one that relates to the life insurance business carried on by a member of the consolidated group or MEC group. (4) A * foreign exchange retranslation election does not apply to a * financial arrangement if the arrangement is associated with a business of a kind specified in regulations made for the purposes of this subsection.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-275 — Balancing adjustment for election in relation to qualifying forex accounts

(1) If you make a * foreign exchange retranslation election under subsection 230 ‑ 255(3) in relation to a * financial arrangement after you start to have the arrangement, you must make a balancing adjustment under subsection (2). (2) The balancing adjustment under this subsection is the balancing adjustment you would make under Subdivision 230 ‑ G if you ceased to have the arrangement for its fair value at the time when the election started to apply to the arrangement (but only to the extent to which the balancing adjustment is reasonably attributable to a * currency exchange rate effect).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-280 — Applying foreign exchange retranslation method to gains and losses

General election (1) You make a gain or loss from a * financial arrangement for an income year if: (a) a * foreign exchange retranslation election under subsection 230 ‑ 255(1) applies to the arrangement; and (b) any of the following subparagraphs apply: (i) the standard referred to in paragraph 230 ‑ 265(1)(c) requires you to recognise a particular amount in profit or loss in relation to that arrangement for that income year; (ii) if subsection 230 ‑ 265(2) applies to the arrangement—the standard referred to in paragraph 230 ‑ 265(1)(c) would have required you to recognise a particular amount in profit or loss in relation to that arrangement for that income year if the arrangement had not been an intra ‑ group transaction for the purposes of the standard referred to in paragraph 230 ‑ 265(2)(b); (iii) if subsection 230 ‑ 265(3) applies to the arrangement—the standard referred to in paragraph 230 ‑ 265(1)(c) would have required you to recognise a particular amount in profit or loss for the year that is attributable to currency exchange rates mentioned in paragraph 230 ‑ 265(1)(c) if the arrangement had been between 2 separate entities. The amount of the gain or loss is the amount the standard requires, or would have required, you to recognise. Note: See subsection 230 ‑ 40(6). Election in relation to qualifying forex accounts (2) You make a gain or loss from a * financial arrangement for an income year if: (a) a * foreign exchange retranslation election under subsection 230 ‑ 255(3) applies to the arrangement; and (b) the standard referred to in paragraph 230 ‑ 265(1)(c): (i) requires you to recognise a particular amount in profit or loss in relation to that arrangement for that income year; or (ii) would require you to recognise a particular amount in profit or loss in relation to that arrangement for that income year if that standard applied to the arrangement; or (iii) would require you to recognise a particular amount in profit or loss in relation to that arrangement for that income year if the arrangement had not been an intra ‑ group transaction for the purposes of the standard referred to in paragraph 230 ‑ 265(2)(b); or (iv) would require you to recognise a particular amount in profit or loss in relation to that arrangement for that income year if the arrangement had not been an intra ‑ group transaction for the purposes of the standard referred to in paragraph 230 ‑ 265(2)(b) and if that standard applied to the arrangement. The amount of the gain or loss is the amount the standard requires, or would require, you to recognise. Subsidiary leaving group (3) Subsection (4) applies if: (a) a * head company of a * consolidated group or * MEC group has a * financial arrangement; and (b) a * foreign exchange retranslation election under subsection 230 ‑ 255(1) or (3) applies to the arrangement; and (c) a subsidiary member of the group ceases to be a member of the group at a particular time (the leaving time ); and (d) immediately after the leaving time, the head company no longer has the arrangement because the subsidiary member ceased to be a member of the group. (4) The gain or loss the group makes from the * financial arrangement for the income year in which the leaving time occurs is taken to be the gain or loss that the standard referred to in paragraph 230 ‑ 265(1)(c) would require the group to recognise in profit or loss in relation to the arrangement for that income year if: (a) the circumstances that existed in relation to the arrangement (including its value) immediately before the leaving time had continued to exist until the end of the income year; and (b) any circumstances that arise in relation to the arrangement after the leaving time were disregarded.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-285 — When election ceases to apply

General election (1) A * foreign exchange retranslation election under subsection 230 ‑ 255(1) ceases to have effect from the start of an income year if you cease to be eligible under subsection 230 ‑ 255(2) to make a foreign exchange retranslation election under subsection 230 ‑ 255(1) for that income year. (2) Subsection (1) does not prevent you from making a new * foreign exchange retranslation election at a later time if you become, at that later time, eligible under subsection 230 ‑ 255(2), to make a foreign exchange retranslation election under subsection 230 ‑ 255(1) for that income year. Note: The new election will only apply to financial arrangements you start to have after the start of the income year in which the new election is made. (3) A * foreign exchange retranslation election under subsection 230 ‑ 255(1) ceases to apply to a * financial arrangement from the start of an income year if the arrangement ceases to satisfy a requirement of paragraph 230 ‑ 265(1)(b) or (c) during that income year. (4) If the election ceases to apply to a particular * financial arrangement under subsection (3), the election cannot subsequently reapply to that arrangement (even if the requirements of paragraphs 230 ‑ 265(1)(b) and (c) are satisfied once more in relation to the arrangement). Election in relation to qualifying forex accounts (5) A * foreign exchange retranslation election under subsection 230 ‑ 255(3) ceases to apply to a * financial arrangement from the start of an income year if the arrangement ceases to satisfy a requirement of subsection 230 ‑ 255(3) during that income year. (6) If the election ceases to apply to a particular * financial arrangement under subsection (5), the election cannot subsequently reapply to that arrangement (even if the requirements of subsection 230 ‑ 255(3) are satisfied once more in relation to the arrangement).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-290 — Balancing adjustment if election ceases to apply

(1) You must make balancing adjustments under subsection (2) if a * foreign exchange retranslation election ceases to have effect under subsection 230 ‑ 285(1). (2) The balancing adjustments under this subsection are the balancing adjustments you would make under Subdivision 230 ‑ G for each of the * financial arrangements to which the election applied if you disposed of the arrangement for its fair value when the election ceases to have effect (but only to the extent to which the balancing adjustment is reasonably attributable to a * currency exchange rate effect). (3) You must make a balancing adjustment under this section if a * foreign exchange retranslation election ceases to apply to a particular * financial arrangement under subsection 230 ‑ 285(3) or (5). (4) The balancing adjustment under this subsection is the balancing adjustment you would make under Subdivision 230 ‑ G if you disposed of the * financial arrangement for its fair value when the election ceases to apply to the arrangement (but only to the extent to which the balancing adjustment is reasonably attributable to a * currency exchange rate effect). (5) If a balancing adjustment is made under subsection (2) or (4) in relation to a * financial arrangement, you are taken, for the purposes of this Division, to have reacquired the arrangement at its fair value immediately after the election ceased to have effect or ceased to apply to the arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-295 — Objects of this Subdivision

The objects of this Subdivision are: (a) to facilitate the efficient management of financial risk by reducing after ‑ tax mismatches and better aligning tax treatment where hedging takes place; and (b) to minimise tax deferral and tax motivated practices (including tax deferral arising from such practices as tax advantaged selection from among possible hedges and inappropriate selection of tax treatment).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-300 — Applying hedging financial arrangement method to gains and losses

(1) If you have a * hedging financial arrangement to which a * hedging financial arrangement election applies, the gain or loss you make for an income year from the arrangement is worked out under this section and section 230 ‑ 310 instead of under Subdivision 230 ‑ B, 230 ‑ C, 230 ‑ D, 230 ‑ F or 230 ‑ G. (2) Except where subsection (5) applies, the gain or loss you make from the * hedging financial arrangement is equal to the overall gain or loss you make from the arrangement. (3) The gain or loss you make from the * hedging financial arrangement is allocated over income years according to the determination referred to in subsection 230 ‑ 360(1). Note 1: The allocation is capable of extending to income years after you cease to have the hedging financial arrangement (see subsection 230 ‑ 360(3)). Note 2: The determination must be included in the record made under section 230 ‑ 355. (4) If the * hedging financial arrangement is a * foreign currency hedge and is a * debt interest, split a gain or loss you make from the arrangement as follows: (a) to the extent to which the gain or loss represents a * currency exchange rate effect attributable to the outstanding balance in relation to the debt interest, treat it as a separate gain or loss to which subsections (1) and (2) apply; (b) to the extent that it does not represent that effect, treat it as a separate gain or loss from the financial arrangement that is allocated under Subdivision 230 ‑ B, 230 ‑ F or 230 ‑ G. (5) If an event listed in the table in subsection 230 ‑ 305(1) occurs: (a) the gain or loss you make from the * hedging financial arrangement is equal to any gain or loss that you would have made: (i) while the arrangement was hedging the * hedged item or items; and (ii) on ceasing to have the arrangement; if you ceased to have the arrangement for its fair value at the time of the event; and (b) this Division further applies as if, just after the event, you had acquired the arrangement for its fair value at the time of the event. Despite subsection (3), the gain or loss referred to in paragraph (a) is allocated over income years according to the table. (7) Subsection (8) applies if the * hedging financial arrangement: (a) is a * financial arrangement under section 230 ‑ 50 (equity interests etc.); and (b) is a * foreign currency hedge; and (c) is one that you issue. (8) Split a gain or loss you make from the arrangement as follows: (a) to the extent to which the gain or loss represents a * currency exchange rate effect, treat it as a separate gain or loss to which subsections (1) and (2) apply; (b) to the extent that it does not represent that effect, treat it as a separate gain or loss from the financial arrangement to which this Division does not apply. (9) Subsections (10) and (11) apply if: (a) a * head company of a * consolidated group or * MEC group has a * hedging financial arrangement; and (b) a * hedging financial arrangement election applies to the arrangement; and (c) a subsidiary member of the group ceases to be a member of the group at a particular time (the leaving time ); and (d) immediately after the leaving time: (i) the head company no longer has the arrangement because the subsidiary member ceased to be a member of the group; and (ii) the head company no longer has the * hedged item (or all of the hedged items) because the subsidiary member ceased to be a member of the group. (10) The gain or loss the group makes from the arrangement for the income year in which the leaving time occurs is taken to be the gain or loss that would be allocated to the group in accordance with this section (disregarding subsection (5)) if: (a) the circumstances that existed in relation to the arrangement (including its value) immediately before the leaving time had continued to exist until the end of the income year; and (b) any circumstances that arise in relation to the * financial arrangement after the leaving time were disregarded. (11) For the purposes of applying paragraph (5)(a) to the * head company of the group at the leaving time, disregard item 2 of the table in subsection 230 ‑ 305(1).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-305 — Table of events and allocation rules

(1) For the purposes of paragraph 230 ‑ 300(5)(a), the following table lists events and their consequences: Table of events and allocation rules Item If this event occurs … Your gain or loss is allocated … 1 (a) you revoke the hedging designation; or (b) you redesignate your * hedging financial arrangement; or (c) you cease to meet the requirement of section 230 ‑ 365 in relation to your hedging financial arrangement over income years according to the basis determined under subsection 230 ‑ 360(1). 2 (a) you cease to have the * hedged item or all of the hedged items; or (b) you cease to expect that the hedged item or items will come into existence; or (c) you cease to expect that you will have the hedged item or items to the income year in which the event occurs. 2A (a) you cease to have one or more (but not all) of the * hedged items; or (b) you cease to expect that one or more (but not all) of the hedged items will come into existence; or (c) you cease to expect that you will have one or more (but not all) of the hedged items (a) to the extent to which the gain or loss is reasonably attributable to those one or more hedged items—to the income year in which the event occurs; and (b) to the extent to which the gain or loss is reasonably attributable to the remaining hedged item or items—over income years according to the basis determined under subsection 230 ‑ 360(1). 3 a risk being hedged by your * hedging financial arrangement ceases to exist to the income year in which the risk ceases to exist. (2) For the purposes of item 2A of the table in subsection (1), determine the extent to which the gain or loss is reasonably attributable to a particular * hedged item having regard to the following: (a) the fair value of the hedged item; (b) the length of the period over which you have held the hedged item; (c) commercially accepted valuation principles; (d) any other relevant factors.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-310 — Aligning tax classification of gain or loss from hedging financial arrangement with tax classification of hedged item

(1) The object of this section is to better align, in particular circumstances, the tax classification of a gain or loss you make from a * hedging financial arrangement with the tax classification of the * hedged item. (2) This section applies if: (a) you make a gain or loss from a * hedging financial arrangement for an income year; and (b) a * hedging financial arrangement election applies to the arrangement. (3) Subject to subsection (4): (a) if you make a gain from the arrangement—your assessable income includes the gain in accordance with subsection 230 ‑ 15(1); and (b) if you make a loss from the arrangement—you may deduct the loss in accordance with subsections 230 ‑ 15(2) and (3). Note: Section 230 ‑ 300 tells you how to allocate the gain or loss to an income year or years. (4) A gain or loss you make from a * hedging financial arrangement, to the extent to which it is reasonably attributable to a * hedged item referred to in the following table, is dealt with in the way indicated in that item: Special tax classification for gains and losses Item For a hedged item that is or produces … the gain … the loss … 1 a * CGT asset any * net capital gain in relation to which would be assessable under Parts 3 ‑ 1 and 3 ‑ 3 in relation to which a * CGT event (the hedged item CGT event ) occurs is treated as a * capital gain from a CGT event (but only to the extent to which the gain is reasonably attributable to the hedged item CGT event) is treated as a * capital loss from a CGT event (but only to the extent to which the loss is reasonably attributable to the hedged item CGT event) 2 a * CGT asset that is * taxable Australian property is treated as a * capital gain from a * CGT event for a CGT asset that is taxable Australian property is treated as a * capital loss from a CGT event for a CGT asset that is taxable Australian property 3 a * CGT asset your capital gains and losses in relation to which are disregarded, or reduced by a particular percentage, under Division 855 is disregarded or reduced by the same percentage is disregarded or reduced by the same percentage 4 * exempt income is treated as exempt income is not deductible 5 * non ‑ assessable non ‑ exempt income of an Australian resident is treated as non ‑ assessable non ‑ exempt income is not deductible 6 a share in a company that is a foreign resident if the capital gain or loss you make from a * CGT event that happens to the share is reduced by a particular percentage under Subdivision 768 ‑ G is treated as a * capital gain from a CGT event that is reduced by the same percentage is treated as a * capital loss from a CGT event that is reduced by the same percentage 7 * ordinary income or * statutory income from an * Australian source is treated as ordinary income or statutory income from an Australian source is treated as a loss incurred in gaining or producing ordinary income or statutory income from an Australian source 8 * ordinary income or * statutory income from a source out of Australia is treated as ordinary income or statutory income from a source out of Australia is treated as a loss incurred in gaining or producing ordinary income or statutory income from a source out of Australia 9 a loss or outgoing incurred in gaining or producing * ordinary income or * statutory income from a source out of Australia is treated as ordinary income or statutory income from a source out of Australia is treated as a loss incurred in gaining or producing ordinary income or statutory income from a source out of Australia 10 a loss or outgoing incurred in gaining or producing * ordinary income or * statutory income from an * Australian source is treated as ordinary income or statutory income from an Australian source is treated as a loss incurred in gaining or producing ordinary income or statutory income from an Australian source 11 a loss or outgoing that is not allowed as a deduction is treated as * non ‑ assessable non ‑ exempt income is treated as a loss that is not allowed as a deduction 12 a net investment in a foreign operation (within the meaning of the * accounting principles) that is not carried on through: (a) a company in which you hold shares; or (b) a company that is a subsidiary of yours (within the meaning of the Corporations Act 2001 ). (a) to the extent that the net investment would give rise to income that is * non ‑ assessable non ‑ exempt income under section 23AH of the Income Tax Assessment Act 1936 —is treated as non ‑ assessable non ‑ exempt income; and (b) otherwise—is treated in accordance with the item or items in this table that are applicable to the gain. (a) to the extent that the net investment would give rise to income that is non ‑ assessable non ‑ exempt income under section 23AH of the Income Tax Assessment Act 1936 —is not deductible; and (b) otherwise—is treated in accordance with the item or items in this table that are applicable to the loss. (5) Subsection (6) applies if: (a) a * hedged item is your net investment in a foreign operation (within the meaning of the * accounting principles); and (b) the foreign operation is carried on through: (i) a company in which you hold * shares; or (ii) a company that is a subsidiary of yours (within the meaning of the Corporations Act 2001 ). (6) The table in subsection (4) has effect as if: (a) to the extent that the * hedging financial arrangement hedges a risk or risks in relation to * shares you hold in the company—the reference in that table to the * hedged item were a reference to your interest in those shares; and (b) to the extent that the hedging financial arrangement hedges a risk or risks in relation to another interest you have in the company—the reference in that table to the hedged item were a reference to that interest.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-315 — Hedging financial arrangement election

Election (1) You can make a hedging financial arrangement election if you are eligible under subsection (2) to make the election for the income year in which you make the election. Eligibility to make hedging financial arrangement election for an income year (2) You are eligible to make a hedging financial arrangement election for an income year if: (a) you prepare a financial report for that income year in accordance with: (i) the * accounting principles; or (ii) if the accounting principles do not apply to the preparation of the financial report—comparable standards for accounting made under a * foreign law that apply to the preparation of the financial report under a foreign law; and (b) the financial report is audited in accordance with: (i) the * auditing principles; or (ii) if the auditing principles do not apply to the auditing of the financial report—comparable standards for auditing made under a foreign law. Note: Section 230 ‑ 500 allows regulations to be made specifying particular foreign accounting and auditing standards as ones that are to be treated as comparable with Australian accounting and auditing principles for the purposes of this Division. Election irrevocable (3) The * hedging financial arrangement election is irrevocable. Note: The election may cease to apply under section 230 ‑ 385.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-320 — Hedging financial arrangement election where differing income and accounting years

(1) This section applies if: (a) you prepare a financial report for a year (the first year ); and (b) you prepare a financial report for the subsequent year (the second year ); and (c) your income year starts in the first year and ends in the second year; and (d) both the financial report for the first year and the financial report for the second year are: (i) prepared in accordance with paragraph 230 ‑ 315(2)(a); and (ii) audited in accordance with paragraph 230 ‑ 315(2)(b); and (e) the auditor’s reports are unqualified for both the financial report for the first year and the financial report for the second year. (2) Treat yourself as eligible to make an election for the income year under subsection 230 ‑ 315(2).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-325 — Hedging financial arrangements to which election applies

A * hedging financial arrangement election applies to a * hedging financial arrangement: (a) that you start to have in the income year in which you make the election or in a later income year; and (b) that is not excluded from the application of the election by section 230 ‑ 330. Note: Subject to a determination by the Commissioner, the hedging financial arrangement election does not apply to a financial arrangement you start to have after you fail to comply with the requirements in sections 230 ‑ 355 and 230 ‑ 360 and paragraph 230 ‑ 365(c) in relation to a hedging financial arrangement to which the election does apply: see section 230 ‑ 385. See also subsection 230 ‑ 305(1).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Repealed and substituted by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-330 — Hedging financial arrangements to which election does not apply

(1) A * hedging financial arrangement election does not apply to a * financial arrangement if the arrangement is a financial arrangement under section 230 ‑ 50 (equity interests etc.). (2) Subsection (1) does not apply to a * hedging financial arrangement if: (a) the hedging financial arrangement is a * foreign currency hedge; and (b) you issue the hedging financial arrangement. (3) A * hedging financial arrangement election does not apply to a * financial arrangement if: (a) you are: (i) an individual; or (ii) an entity (other than an individual) that satisfies subsection 230 ‑ 455(2), (3) or (4) for the income year in which you start to have the arrangement; and (b) the arrangement is a * qualifying security; and (c) you have not made an election under subsection 230 ‑ 455(7). (4) A * hedging financial arrangement election does not apply to a * financial arrangement if: (a) the election is made by the * head company of a * consolidated group or * MEC group; and (b) the election specifies that the election is not to apply to financial arrangements in relation to * life insurance business carried on by a member of the consolidated group or MEC group; and (c) the arrangement is one that relates to the life insurance business carried on by a member of the consolidated group or MEC group. (5) A * hedging financial arrangement election does not apply to a * financial arrangement if the arrangement is associated with a business of a kind specified in regulations made for the purposes of this subsection.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-335 — Hedging financial arrangement and hedged item

Hedging financial arrangement (1) A * financial arrangement that you have that is a * derivative financial arrangement, or is not a derivative financial arrangement but is a * foreign currency hedge, is a hedging financial arrangement if: (a) you create, acquire or apply the arrangement for the purpose of hedging a risk or risks in relation to a * hedged item or items; and (b) at the time you create, acquire or apply the arrangement, the arrangement satisfies the requirements of the principles or standards referred to in paragraph 230 ‑ 315(2)(a) to be a hedging instrument; and (c) the arrangement is recorded as a hedging instrument in: (i) your financial report (including documents and records on which the report is based); or (ii) if the arrangement hedges a risk in relation to * foreign currency—your financial report or the financial report of a consolidated entity in which you are included (including documents and records on which the report is based); for the income year in which the rights and/or obligations are created, acquired or applied. Note: For document and record , see section 2B of the Acts Interpretation Act 1901 . (2) If: (a) the * financial arrangement would not be a financial arrangement if the following provisions were disregarded: (i) Division 9A of Part III of the Income Tax Assessment Act 1936 (which deals with offshore banking units); (ii) Part IIIB of that Act (which deals with Australian branches of foreign banks etc.); and (b) paragraphs (1)(b) and (c) would be satisfied in relation to the financial arrangement if the arrangement had been between 2 separate entities; paragraphs (1)(b) and (c) are taken to be satisfied in relation to the arrangement. (3) A * financial arrangement that is a * derivative financial arrangement, or is not a derivative financial arrangement but is a * foreign currency hedge, is a hedging financial arrangement if: (a) you create, acquire or apply the arrangement for the purpose of hedging a risk or risks in relation to something; and (b) one or more of subsections (4), (5), (6) or (7) is satisfied; and (c) the requirements of paragraphs (1)(b) or (c) are not able to be satisfied: (i) because of the requirements of the principles or standards referred to in paragraph 230 ‑ 315(2)(a); and (ii) not because of any act or omission on your part to deliberately fail to satisfy those requirements; and (d) in a case in which none of subsections (5), (6) and (7) are satisfied—you satisfy the additional recording requirements of subsection 230 ‑ 355(5); and (e) in any case—you satisfy the requirements (if any) prescribed by the regulations for the purposes of this paragraph. (3A) Disregard paragraph (3)(d) if subsection (4) is satisfied and: (a) a * hedging financial arrangement election applies to the * financial arrangement (because you previously satisfied the additional recording requirements mentioned in that paragraph at a time when the election applied); or (b) all of the following subparagraphs apply: (i) a hedging financial arrangement election would apply to the financial arrangement if you satisfied the additional recording requirements mentioned in paragraph (3)(d); (ii) the election and subsection (3) apply to another financial arrangement; (iii) subsection (4) is or was satisfied in relation to that other arrangement at a time when the election applied to that other arrangement. (4) This subsection is satisfied if: (a) the * financial arrangement hedges a foreign currency risk in relation to an anticipated * foreign equity distribution from a * connected entity; and (b) the distribution is * non ‑ assessable non ‑ exempt income under section 768 ‑ 5. (5) This subsection is satisfied if: (a) you enter into a * financial arrangement with a * connected entity; and (b) the principles or standards referred to in paragraph 230 ‑ 315(2)(a) require that a consolidated financial report be prepared that deals with both your affairs and the affairs of the connected entity; and (c) the report properly reflects your affairs; and (d) the arrangement satisfies the requirements of paragraph (1)(a); and (e) the arrangement would satisfy the requirements of paragraph (1)(b) or (c) but for the fact that the consolidated report disregards the arrangement. (6) This subsection is satisfied if: (a) the period for which the risk or risks are hedged does not straddle 2 or more income years; and (b) the * financial arrangement satisfies the requirements of paragraph (1)(a); and (c) the arrangement would satisfy the requirements of paragraph (1)(c) if the period for which the risk or risks that are hedged did straddle 2 or more income years. (7) This subsection is satisfied if the requirements prescribed by the regulations for the purposes of this subsection are satisfied. Financial arrangement hedging more than one type of risk (8) A * financial arrangement that hedges more than one type of risk may only be a hedging financial arrangement if the principles or standards referred to in paragraph (1)(b) allow the arrangement to be designated as a hedge of those risks. More than one financial arrangement hedging the same risk or risks (9) If 2 or more * financial arrangements hedge the same risk or risks, each of the arrangements may only be a hedging financial arrangement if the principles or standards referred to in paragraph (1)(b) allow those arrangements to be viewed in combination and jointly designated as hedging that risk or those risks. Hedged item (10) If a * financial arrangement that you have hedges a risk in relation to: (a) an asset or a part of an asset; or (b) a liability or a part of a liability; or (c) a firm commitment (within the meaning of the * accounting principles) or a part of such a commitment; or (d) a highly probable forecast transaction (within the meaning of the accounting principles) or a part of such a transaction; or (e) a net investment in a foreign operation (within the meaning of the accounting principles) or a part of such an investment; or (f) something prescribed by the regulations for the purposes of this paragraph; the asset (or that part of the asset), the liability (or that part of the liability), the commitment (or that part of the commitment), the transaction (or that part of the transaction) or the investment (or that part of the investment) is a hedged item for the arrangement. (11) If a * financial arrangement is a * hedging financial arrangement because of paragraph (4)(a), the anticipated dividend referred to in that subparagraph is a hedged item for the arrangement even if subsection (10) is not satisfied in relation to the anticipated dividend.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13) | Amended by No 46 of 2011, effective Schedule 2 (items 693–697) and Schedule 3 (items 10, 11): 27 Dec 2011 | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11) | Amended by No 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7)

s 230-340 — Generally whole arrangement must be hedging financial arrangement

(1) Subject to subsections (2), (3) and (4), the whole of a * financial arrangement must satisfy the requirements of subsection 230 ‑ 335(1) or (3) for the arrangement to be a hedging financial arrangement . Partial hedges (2) If a * financial arrangement: (a) is an options contract; and (b) hedges risk only in part by reference to changes in the intrinsic value of the options contract; the arrangement may be treated as a hedging financial arrangement to the extent to which the part of the arrangement referred to in paragraph (b) satisfies the requirements of subsection 230 ‑ 335(1) or (3). (3) If a * financial arrangement: (a) is a forward contract; and (b) has a spot price element and an interest element; the arrangement may be treated as a hedging financial arrangement to the extent to which the spot price element satisfies the requirements of subsection 230 ‑ 335(1) or (3). Proportionate hedges (4) A specified proportion of a * financial arrangement may be treated as a hedging financial arrangement to the extent to which that proportion of the arrangement satisfies the requirements of subsection 230 ‑ 335(1) or (3). Separate financial arrangements if partial or proportionate hedge (5) If a part (or parts), or a proportion (or proportions), of a * financial arrangement is (or are) treated as a * hedging financial arrangement under subsection (2), (3) or (4): (a) the part (or each of the parts), or the proportion (or each of the proportions), of the arrangement that is (or are) treated as a hedging financial arrangement is taken to be a separate financial arrangement for the purposes of this Division; and (b) the remaining part or proportion (if any) of the arrangement is taken to be a separate financial arrangement for the purposes of this Division. (6) Subsection (5) has effect even if there would not be separate * arrangements under subsection 230 ‑ 55(4).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-345 — Requirements not satisfied because of honest mistake or inadvertence

If a * derivative financial arrangement, or a * foreign currency hedge, that you have would not be a * hedging financial arrangement only because the requirements of paragraph 230 ‑ 335(1)(b) or (c), or both, are not satisfied because of an honest mistake or inadvertence, it is nevertheless a hedging financial arrangement if the Commissioner considers this appropriate having regard to: (a) your documented risk management practices and policies; and (b) your record keeping practices; and (c) your accounting systems and controls; and (d) your internal governance processes; and (e) the circumstances surrounding the mistake or inadvertence (including the steps (if any) taken to correct or address the mistake or inadvertence and the steps (if any) taken to prevent a recurrence); and (f) the extent to which the requirements of paragraphs 230 ‑ 335(1)(b) and (c) have been met; and (g) the objects of this Subdivision.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-350 — Derivative financial arrangement and foreign currency hedge

Derivative financial arrangement (1) A derivative financial arrangement is a * financial arrangement that you have where: (a) its value changes in response to changes in a specified variable or variables; and (b) there is no requirement for a net investment, or there is such a requirement but the net investment is smaller than would be required for other types of financial arrangement that would be expected to have a similar response to changes in market factors. Note: Paragraph (a)—a specified variable includes an interest rate, foreign exchange rate, credit rating, index or commodity or financial instrument price. Foreign currency hedge (2) A foreign currency hedge is a * financial arrangement that you have if: (a) paragraph (1)(a) is satisfied but paragraph (1)(b) is not; and (b) the arrangement hedges a risk in relation to movements in currency exchange rates.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-355 — Recording requirements

(1) The requirement of this section is that you must make, or have in place, a record that: (a) contains a description of the following: (i) the * hedging financial arrangement in relation to which the election is made; (ii) the nature of the risk or risks being hedged; (iii) the * hedged item or items; (iv) how you will assess the effectiveness of hedging the risk in reducing your exposure to changes in the fair value of the hedged item or items or cash flows or foreign currency exposure attributable to them; (v) the risk management objective for, and the risk management strategy to be followed in, acquiring, creating or applying the arrangement; and (b) contains any further details that the * accounting principles require, by way of documentation, for an arrangement to be recorded in a financial report as a hedging instrument; and (c) sets out the terms of the determinations you make under section 230 ‑ 360. To avoid doubt, paragraph (b) applies even if the arrangement is not recorded in your financial report as a hedging instrument. (2) To avoid doubt, the record may consist of a single document or 2 or more documents. (3) The record must be made or in place: (a) at, or soon after, the time when you create, acquire or apply the * hedging financial arrangement; or (b) at such other time as is provided for in the regulations for the purposes of this paragraph. (4) The description must be sufficiently precise and detailed that the following are clear: (a) that the risk in respect of the particular * hedged item or items was the one hedged by the * hedging financial arrangement; (b) the extent to which the risk was hedged; (c) that the rights and/or obligations comprising the hedging financial arrangement were in fact those created, acquired or applied for the purpose of hedging the risk. (5) If a * financial arrangement is a * hedging financial arrangement under subsection 230 ‑ 335(2) or (3), the following requirements must be met in addition to the requirements of subsections (1), (3) and (4): (a) you must make or have in place, at, or soon before or soon after, the time when you create, acquire or apply the arrangement, a record that sets out: (i) a statement of why, and the way in which, the arrangement operates commercially or economically as a hedge of the * hedged item or items; and (ii) the reasons why the arrangement does not satisfy the requirements of the principles or standards referred to in paragraph 230 ‑ 315(2)(a) to be a hedging instrument; (b) you must, at the end of each income year during which you have the arrangement, make a record of the accumulated gains and/or losses (whether realised or unrealised) as at the end of that income year from the arrangement or arrangements relating to the hedged item or items that are yet to be included in your assessable income or allowed to you as deductions; (c) you must have, at the time when you create, acquire or apply the arrangement, a record that sets out your risk management policies and practices; (d) you must have in place, at the time when you create, acquire or apply the arrangement, internal risk management systems and controls that record the arrangement and the hedged item or items. (6) For the purposes of paragraph (5)(b), you must assume that: (a) all the gains from the * financial arrangement would be assessable income; and (b) all the losses from the financial arrangement would be allowed to you as deductions.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-360 — Determining basis for allocating gain or loss

(1) A requirement of this section is that you must determine the basis on which your gain or loss from the * hedging financial arrangement is to be allocated to an income year, or over 2 or more income years, for the purposes of this Division. (2) It is also a requirement of this section that the basis that you determine must: (a) fairly and reasonably correspond with the basis on which gains, losses or other amounts in relation to the * hedged item or items are recognised or allocated under this Act; and (b) be objective; and (c) be sufficiently precise and detailed that, when your gain, loss or other amount from the * hedged item or items is taken into account for the purposes of this Act, the following will be clear from the record made under section 230 ‑ 355: (i) the time at which the gain or loss from the * hedging financial arrangement is to be taken into account for the purposes of this Division; (ii) the way in which that gain or loss will be dealt with under section 230 ‑ 310. Note: Paragraph (a) refers to an amount in relation to the hedged item or items being recognised or allocated under this Act. This would include an amount being allowed as a deduction or an amount being included in assessable income. If the hedged item were an asset, an amount referable to a part of the cost of the asset might, for example, be allowed as a deduction for a particular income year. (3) To avoid doubt, the income years over which your gain or loss is to be allocated may include an income year that starts after you cease to have the * hedging financial arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-365 — Effectiveness of the hedge

The requirement of this section is that: (a) hedging the risk must be expected to be effective (within the meaning of the principles or standards referred to in paragraph 230 ‑ 315(2)(a)), for the period for which you expect to have the * hedging financial arrangement, in reducing your exposure to changes in the fair value of the * hedged item or items or cash flows attributable to your hedged risk; and (b) the fair value of the hedged item or items or cash flows relating to them and the fair value of the arrangement must be able to be reliably measured; and (c) you must assess the hedging of the risk by the arrangement: (i) on a regular basis in accordance with the * accounting principles; and (ii) at least once in each 12 month period; and (d) your assessment must be that the hedging of the risk will be effective (within the meaning of the principles or standards referred to in paragraph 230 ‑ 315(2)(a)) in reducing your exposure to changes in the fair value of the hedged item or items or cash flows attributable to the hedged risk throughout the remainder of the period for which you expect to have the arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11) | Amended by No 141 of 2020, effective Sch 1 (item 1) and Sch 4 (items 82–101): 1 Jan 2021 (s 2(1) items 2, 7) Sch 4 (item 146): 18 Dec 2020 (s 2(1) item 16)

s 230-370 — When election ceases to apply

(1) A * hedging financial arrangement election ceases to have effect from the start of an income year if you cease to be eligible under subsection 230 ‑ 315(2) to make the election for that income year. (2) Subsection (1) does not prevent you from making a new * hedging financial arrangement election at a later time if you become, at that later time, eligible under subsection 230 ‑ 315(2) to make an election for an income year. Note: The new election will only apply to financial arrangements you start to have after the start of the income year in which the new election is made.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-375 — Balancing adjustment if election ceases to apply

(1) This section applies if a * hedging financial arrangement election ceases to have effect under subsection 230 ‑ 370(1). (2) You are taken, for the purposes of this Division, to have: (a) disposed of each * hedging financial arrangement to which the election applies for its fair value immediately before the election ceases to have effect; and (b) reacquired the arrangement at its fair value immediately after the election ceases to have effect. (3) To avoid doubt, this Subdivision applies, for the purposes of working out the consequences of the disposal referred to in paragraph (2)(a), as if the * hedging financial arrangement were one to which the * hedging financial arrangement election applied at the time of the disposal.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-380 — Commissioner may determine that requirement met

Commissioner may determine that requirement met (1) If (apart from this section) the requirements of sections 230 ‑ 355 to 230 ‑ 365 are not met in relation to a * hedging financial arrangement that you have, treat those requirements as having been so met if the Commissioner makes a determination under subsection (1A) in relation to the arrangement. (1A) The Commissioner may make the determination if the Commissioner considers that this is appropriate, having regard to: (a) the respects in which the arrangement does not meet those requirements; and (b) the extent to which it does not meet those requirements; and (c) the reasons why it does not meet those requirements; and (d) if the Commissioner is considering whether to impose conditions under subsection (2)—the likelihood that you will comply with those conditions; and (e) the objects of this Subdivision. Commissioner may impose additional record keeping requirements (2) The Commissioner may make a determination under subsection (1A) conditional on your keeping records in addition to those required by section 230 ‑ 355. (3) A determination under subsection (1A) ceases to have effect if you breach a condition imposed under subsection (2). (4) Subsection (3) ceases to apply to you if the Commissioner determines that that subsection ceases to apply to you. The determination takes effect from the date specified in the determination. (5) In deciding whether to make the determination under subsection (4), the Commissioner must have regard to: (a) your record keeping practices; and (b) your compliance history; and (c) any changes that have been made to: (i) your accounting systems and controls; and (ii) your internal governance processes; to ensure that breaches of the kind referred to in subsection (3) do not happen again; and (d) any other relevant matter. Commissioner may determine matter under section 230 ‑ 360 (6) If: (a) the Commissioner makes a determination under subsection (1A) in relation to a * hedging financial arrangement; and (b) either or both of the following applies: (i) you fail to determine a matter in relation to the arrangement under section 230 ‑ 360; (ii) you determine a matter in relation to the arrangement under section 230 ‑ 360 but the determination does not satisfy the requirements of subsection 230 ‑ 360(2); the Commissioner may determine that matter, in a way that satisfies the requirements of section 230 ‑ 360. The Commissioner’s determination has effect as if you had made the determination and recorded it under that section.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13) | Amended by No 12 of 2012, effective s 4, Sch 2 (items 1–23), Sch 5 and Sch 6 (items 3–6, 11–20, 25, 26, 35–67, 74–83, 94–96, 117–142, 157–178, 183, 200–203, 214–217, 235–240, 248): 21 Mar 2012 (s 2(1) items 1, 3, 5, 6, 10, 14, 18, 19, 27, 31) Sch 6 (item 7): 1 July 2007 (s 2(1) item 7) Sch 6 (item 10): 1 July 2010 (s 2(1) item 9) Sch 6 (items 106–116): 22 Mar 2012 (s 2(1) items 16, 17) Sch 6 (item 143): 22 Jan 2013 (s 2(1) item 20) Sch 6 (items 146–148): never commenced (s 2(1) item 23) Sch 6 (items 179, 181): 3 Oct 2008 (s 2(1) items 28, 30) Sch 6 (item 180): 3 June 2010 (s 2(1) item 29) | Amended by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-385 — Consequences of failure to meet requirements

When this section applies (1) This section applies if: (a) your * hedging financial arrangement election applies to a * hedging financial arrangement; and (b) you do not meet a requirement of section 230 ‑ 355 or 230 ‑ 360 or paragraph 230 ‑ 365(c) in relation to the arrangement. (2) For the purposes of paragraph (1)(b), treat the requirement in paragraph 230 ‑ 365(c) as being met even if you do not assess the hedging of the risk mentioned in that paragraph, but you can demonstrate that you intend to do so. Commissioner may determine matter under section 230 ‑ 360 (3) If: (a) you fail to determine a matter in relation to the * hedging financial arrangement under section 230 ‑ 360; or (b) you determine a matter in relation to the arrangement under section 230 ‑ 360 but the determination does not satisfy the requirements of subsection 230 ‑ 360(2); the Commissioner may determine that matter, in a way that satisfies the requirements of section 230 ‑ 360. A reference in this Division to a determination made under that section is treated as including a reference to a determination under this subsection. Election does not apply to hedging financial arrangements you start to have after failing to comply with requirements (4) Your * hedging financial arrangement election does not apply to a * hedging financial arrangement you start to have: (a) after you fail to meet the requirement mentioned in paragraph (1)(b) in relation to the arrangement mentioned in that paragraph; and (b) before a date (if any) determined by the Commissioner. (5) The Commissioner may make a determination under paragraph (4)(b) only if satisfied that you are unlikely to fail again to meet a requirement of section 230 ‑ 355 or 230 ‑ 360 or paragraph 230 ‑ 365(c) in relation to a * hedging financial arrangement. (6) In deciding whether to make a determination under paragraph (4)(b), the Commissioner must have regard to: (a) your record keeping practices; and (b) your compliance history; and (c) any changes that have been made to: (i) your accounting systems and controls; and (ii) your internal governance processes; to ensure that failures of the kind mentioned in paragraph (1)(b) do not happen again; and (d) any other relevant matter. Commissioner may still exercise powers under section 230 ‑ 380 (7) This section does not prevent the Commissioner from exercising the Commissioner’s powers under section 230 ‑ 380 in relation to the * hedging financial arrangement mentioned in subsection (1).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Repealed and substituted by No 85 of 2013, effective s 4, Sch 1, Sch 2 (items 1–3), Sch 4 (items 1–11) and Sch 7 (items 1, 7–10): 28 June 2013 (s 2(1) items 1–3, 7, 10) Sch 2 (item 6): 1 July 2016 (s 2(1) item 4) Sch 2 (items 7–9): 1 July 2017 (s 2(1) item 5) Sch 4 (items 12, 13): 1 July 2022 (s 2(1) item 8) Sch 4 (items 14, 15): 1 July 2023 (s 2(1) item 9) Sch 8 (items 1–48, 55–64): 26 Mar 2009 (s 2(1) item 11)

s 230-390 — Objects of this Subdivision

The objects of this Subdivision are: (a) to reduce administration and compliance costs by allowing you to align the tax treatment of your gains and losses from a * financial arrangement with the accounting treatment that applies to the arrangement; and (b) to achieve those objects without your obtaining inappropriate tax benefits.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-395 — Election to rely on financial reports

Election (1) You may make an election to rely on financial reports if you are eligible under subsection (2) to make the election for the income year in which you make the election. Eligibility to make election (2) You are eligible to make an election to rely on financial reports for an income year if: (a) you prepare a financial report for that income year in accordance with: (i) the * accounting principles; or (ii) if the accounting principles do not apply to the preparation of the financial report—comparable standards for accounting made under a * foreign law that apply to the preparation of the financial report under a foreign law; and (b) the financial report is audited in accordance with: (i) the * auditing principles; or (ii) if the auditing principles do not apply to the auditing of the financial report—comparable standards for auditing made under a foreign law; and (c) your auditor has not qualified the auditor’s report on your financial report for that income year or any of the last 4 financial years in a respect that is relevant to the taxation treatment of * financial arrangements; and (d) your accounting systems and controls and your internal governance processes are reliable; and (e) no report of an audit or review conducted in the income year, or any of the preceding 4 income years, has included an adverse assessment of your accounting systems in a respect that is relevant to the taxation treatment of financial arrangements. Note 1: Paragraph (b)—section 230 ‑ 500 allows regulations to be made specifying particular foreign accounting and auditing standards as ones that are to be treated as comparable with Australian accounting and auditing principles for the purposes of this Division. Note 2: For the purposes of paragraphs (c) and (e), a qualification or assessment may be relevant to the taxation treatment of financial arrangements even though it does not deal with the amount or timing of recognition of gains or losses (but relates, for example, to the reliability of the accounting systems through which information about financial arrangements is recorded). (3) Paragraph (2)(e) does not apply to a report of: (a) an internal audit or review that you conduct; or (b) an audit or review of a kind prescribed by the regulations for the purposes of this paragraph. Election irrevocable (4) An election under subsection (1) is irrevocable. Note: The election may cease to apply under section 230 ‑ 425.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-400 — Financial reports election where differing income and accounting years

(1) This section applies if: (a) you prepare a financial report for a year (the first year ); and (b) you prepare a financial report for the subsequent year (the second year ); and (c) your income year starts in the first year and ends in the second year; and (d) both the financial report for the first year and the financial report for the second year are: (i) prepared in accordance with paragraph 230 ‑ 395(2)(a); and (ii) audited in accordance with paragraph 230 ‑ 395(2)(b); and (e) the auditor’s reports are unqualified for both the financial report for the first year and the financial report for the second year. (2) Treat yourself as eligible to make an election for the income year under subsection 230 ‑ 395(2). (3) Work out the gain or loss you make from the arrangement for the income year as follows: (a) firstly, work out the gain or loss you make from the arrangement for the first year in accordance with section 230 ‑ 420 (treating the first year as an income year); (b) next, work out how much of the gain or loss mentioned in paragraph (a) is attributable to the income year in accordance with subsection (4); (c) next, work out the gain or loss you make from the arrangement for the second year in accordance with section 230 ‑ 420 (treating the second year as an income year); (d) next, work out how much of the gain or loss mentioned in paragraph (c) is attributable to the income year in accordance with subsection (4); (e) next: (i) if the amounts worked out under paragraphs (b) and (d) are both gains—add them together to work out the gain from the arrangement for the income year; or (ii) if the amounts worked out under paragraphs (b) and (d) are both losses—add them together to work out the loss from the arrangement for the income year; or (iii) if one of the amounts worked out under paragraphs (b) and (d) is a loss and the other is a gain—subtract the loss from the gain. If the result is positive, this is the gain from the arrangement for the income year. If the result is negative, this is the loss from the arrangement for the income year. (4) For the purposes of paragraphs (3)(b) and (d), work out how much of the gain or loss is attributable to the income year by: (a) using a methodology that is reasonable; and (b) using the same methodology for the first and second years. (5) For the purposes of paragraph (4)(a), treat a methodology that attributes the gain or loss on a pro ‑ rata basis as not being reasonable.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-405 — Commissioner discretion to waive requirements in paragraphs 230 ‑ 395(2)(c) and (e)

(1) Paragraph 230 ‑ 395(2)(c) or (e) does not apply in relation to your * election to rely on financial reports for a particular income year or income years if the Commissioner determines that the paragraph does not apply to the election for that income year or those income years. (2) In deciding whether to make the determination under subsection (1), the Commissioner must have regard to: (a) the reasons for the non ‑ compliance with the principles or standards concerned; and (b) the remedial action (if any) that you have undertaken to ensure that non ‑ compliance with those principles or standards does not occur in future (such as changes to your accounting systems and controls or to your internal governance structures); and (c) if you, or your activities, are subject to regulatory oversight or review—any opinions expressed by the regulator about the adequacy of remedial action of the kind referred to in paragraph (b); and (d) any other relevant matter.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-410 — Financial arrangements to which the election applies

(1) An * election to rely on financial reports applies in relation to a * financial arrangement that you have if: (a) the arrangement is a * Division 230 financial arrangement; and (b) you start to have the arrangement in the income year in which you make the election or in a later income year; and (c) the arrangement is recognised in financial reports of the kind referred to in paragraph 230 ‑ 395(2)(a) that are audited as referred to in paragraph 230 ‑ 395(2)(b); and (d) if the arrangement is a financial arrangement under section 230 ‑ 50—the arrangement is an asset or liability that you are required (whether or not as a result of a choice you make) by: (i) the * accounting principles; or (ii) if the accounting principles do not apply to the preparation of the financial report—comparable standards for accounting that apply to the preparation of the financial report under a * foreign law; to classify or designate, in the financial reports, as at fair value through profit or loss; and (e) it is reasonably expected that the following is, or will be, the same: (i) the amount of the overall gain or loss you make from the arrangement (as determined in accordance with the financial reports); (ii) the amount of the overall gain or loss you make from the arrangement (as determined in accordance with the provisions of this Division if the election under this subsection did not apply to the arrangement); and (f) the differences between the results of the following methods would reasonably be expected not to be substantial: (i) the method used in your financial reports to work out the amounts of the gain or loss you make from the arrangement for each income year; (ii) the method that would be applied by this Division to work out the amounts of those gains or losses if the election did not apply to the arrangement. This subsection has effect subject to section 230 ‑ 415. (2) In applying paragraph (1)(f) at the time when you start to have the * financial arrangement, disregard any differences between the results of the methods referred to in subparagraphs (1)(f)(i) and (ii) that are attributable solely to the provision for the possible impairment of debts required by the principles or standards referred to in paragraph 230 ‑ 395(2)(a). (3) Subsections (4), (5) and (6) apply if, but for this subsection, paragraphs (1)(c) and (d) would not be satisfied in relation to a * financial arrangement because the arrangement is an intra ‑ group transaction for the purposes of: (a) * accounting standard AASB 127 (or another accounting standard prescribed by the regulations for the purposes of this paragraph); or (b) if that standard does not apply to the preparation of the financial report—a comparable accounting standard that applies to the preparation of the financial report under a * foreign law. Note: Financial arrangements between members of a consolidated group or MEC group are not covered by this subsection because the single entity rule in subsection 701 ‑ 1(1) operates to treat them as not being financial arrangements for the purposes of this Division. (4) Paragraphs (1)(c) and (d) are taken to be satisfied in relation to the * financial arrangement. (5) Paragraph (1)(e) applies as if the reference in subparagraph (1)(e)(i) to the amount of the overall gain or loss you make from the * financial arrangement (as determined in accordance with the financial reports) were a reference to the amount of that overall gain or loss (as would be determined in accordance with the financial reports if the arrangement had not been an intra ‑ group transaction for the purposes of the standard referred to in subsection (3)). (6) Paragraph (1)(f) applies as if the reference in subparagraph (1)(f)(i) to the method used in your financial reports to work out the amounts of the gain or loss you make from the arrangement for each income year were a reference to the method that would be used in your financial reports to work out those amounts if the arrangement had not been an intra ‑ group transaction for the purposes of the standard referred to in subsection (3). (7) For the purposes of applying subparagraphs (1)(e)(ii) and (f)(ii) to a * financial arrangement, assume that you had made any election that: (a) you could make under Subdivision 230 ‑ C or 230 ‑ D; and (b) could apply to the arrangement. (8) If: (a) the * financial arrangement would not be a financial arrangement if the following provisions were disregarded: (i) Division 9A of Part III of the Income Tax Assessment Act 1936 (which deals with offshore banking units); (ii) Part IIIB of that Act (which deals with Australian branches of foreign banks etc.); and (b) paragraphs (1)(c) and (d) would be satisfied in relation to the financial arrangement if the arrangement had been between 2 separate entities; and (c) the * election to rely on financial reports is made by: (i) if section 121EB of the Income Tax Assessment Act 1936 applies—the OBU mentioned in that section (disregarding the operation of that section); or (ii) if section 160ZZW of that Act applies—the bank mentioned in that section (disregarding the operation of that section); paragraphs (1)(c) and (d) are taken to be satisfied in relation to the arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-415 — Financial arrangements not covered by election

(1) An * election to rely on financial reports does not apply to a * financial arrangement if: (a) the arrangement is an * equity interest; and (b) you are the issuer of the equity interest. (2) An * election to rely on financial reports does not apply to a * financial arrangement if: (a) you are: (i) an individual; or (ii) an entity (other than an individual) that satisfies subsection 230 ‑ 455(2), (3) or (4) for the income year in which you start to have the arrangement; and (b) the arrangement is a * qualifying security; and (c) you have not made an election under subsection 230 ‑ 455(7). (3) An * election to rely on financial reports does not apply to a * financial arrangement if: (a) the election is made by the * head company of a * consolidated group or * MEC group; and (b) the election specifies that the election is not to apply to financial arrangements in relation to * life insurance business carried on by a member of the consolidated group or MEC group; and (c) the arrangement is one that relates to the life insurance business carried on by a member of the consolidated group or MEC group. (4) An * election to rely on financial reports does not apply to a * financial arrangement if the arrangement is associated with a business of a kind specified in regulations made for the purposes of this subsection.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-420 — Effect of election to rely on financial reports

(1) If an * election to rely on financial reports applies to a * financial arrangement, the gain or loss you make from the arrangement for an income year is: (a) the gain or loss that the principles or standards referred to in paragraph 230 ‑ 395(2)(a) require you to recognise in profit or loss from that arrangement for that income year; or (b) if subsection 230 ‑ 410(3) applies to the arrangement—the gain or loss that the principles or standards referred to in paragraph 230 ‑ 395(2)(a) would have required you to recognise in profit or loss from that arrangement for that income year if the arrangement had not been an intra ‑ group transaction for the purposes of the standard referred to in paragraph 230 ‑ 410(3)(b); or (c) if subsection 230 ‑ 410(8) applies to the arrangement—the gain or loss that the principles or standards referred to in paragraph 230 ‑ 410(1)(d) would have required you to recognise in profit or loss for the year from the asset or liability mentioned in paragraph 230 ‑ 410(1)(d) if the arrangement had been between 2 separate entities. Note: Subsection 230 ‑ 40(7) provides that this Subdivision does not apply to a gain or loss from a financial arrangement to the extent to which Subdivision 230 ‑ E (hedging financial arrangements method) applies to the arrangement. (2) Subsection (3) applies if: (a) a * head company of a * consolidated group or * MEC group has a * financial arrangement; and (b) an * election to rely on financial reports applies to the arrangement; and (c) a subsidiary member of the group ceases to be a member of the group at a particular time (the leaving time ); and (d) immediately after the leaving time, the subsidiary member has the arrangement. (3) The gain or loss the group makes from the * financial arrangement for the income year in which the leaving time occurs is taken to be the gain or loss that the principles or standards referred to in paragraph 230 ‑ 395(2)(a) would require the group to recognise in profit or loss from the arrangement for that income year if: (a) the circumstances that existed in relation to the arrangement (including its value) immediately before the leaving time had continued to exist until the end of the income year; and (b) any circumstances that arise in relation to the arrangement after the leaving time were disregarded.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-425 — When election ceases to apply

(1) An election under subsection 230 ‑ 395(1) ceases to have effect from the start of an income year if you cease to be eligible to make an * election to rely on financial reports for that income year. (2) Subsection (1) does not prevent you from making a new election under subsection 230 ‑ 395(1) at a later time if you become, at that later time, eligible to make an * election to rely on financial reports for an income year. Note: The new election will only apply to financial arrangements you start to have after the start of the income year in which the new election is made. (3) An election under subsection 230 ‑ 395(1) ceases to apply to a * financial arrangement from the start of an income year if the arrangement ceases to satisfy a requirement of paragraph 230 ‑ 410(1)(c), (d), (e) or (f) during that income year. (4) If the election ceases to apply to a particular * financial arrangement under subsection (3), the election cannot subsequently apply to that arrangement (even if the requirements of paragraphs 230 ‑ 410(1)(c), (d), (e) and (f) are satisfied once more in relation to the arrangement).

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-430 — Balancing adjustment if election ceases to apply

(1) You must make balancing adjustments under subsection (2) if an election under subsection 230 ‑ 395(1) ceases to have effect under subsection 230 ‑ 425(1). (2) The balancing adjustments under this subsection are the balancing adjustments you would make under Subdivision 230 ‑ G in relation to each of the * financial arrangements to which the election applied if you disposed of the arrangement for its fair value when the election ceases to have effect. (3) You must make balancing adjustments under subsection (5) if an election under subsection 230 ‑ 395(1) ceases to apply to a particular * financial arrangement under subsection 230 ‑ 425(3). (4) Subsection (3) does not apply to a * financial arrangement if: (a) the arrangement is not one that you are required (whether or not as a result of a choice you make) by the principles or standards referred to in paragraph 230 ‑ 395(2)(a) to classify or designate, in your financial reports, as at fair value through profit or loss; and (b) the election under subsection 230 ‑ 395(1) ceases to apply to the arrangement because the arrangement fails to satisfy the requirements of paragraph 230 ‑ 410(1)(e) or (f); and (c) the arrangement ceases to satisfy the requirements of that paragraph because the arrangement becomes impaired for the purposes of those principles or standards. (5) The balancing adjustment under this subsection is the balancing adjustment you would make under Subdivision 230 ‑ G if you disposed of the * financial arrangement for its fair value when the election ceases to apply to the arrangement. (6) If a balancing adjustment is made under subsection (2) or (5) in relation to a * financial arrangement, you are taken, for the purposes of this Division, to have reacquired the arrangement at its fair value immediately after the election ceased to have effect or ceased to apply to the arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-435 — When balancing adjustment made

When balancing adjustment made (1) A balancing adjustment is made under this Subdivision if: (a) you transfer to another entity all of your rights and/or obligations under a * financial arrangement; or (b) all of your rights and/or obligations under a financial arrangement otherwise cease; or (c) you transfer to another entity: (i) a proportionate share of all of your rights and/or obligations under a financial arrangement; or (ii) a right or obligation that you have under a financial arrangement to a specifically identified * financial benefit; or (iii) a proportionate share of a right or obligation that you have under a financial arrangement to a specifically identified financial benefit; or (d) an * arrangement that is a * Division 230 financial arrangement ceases to be a financial arrangement. (2) Paragraphs (1)(a), (b) and (c) do not apply to a right or obligation under a * financial arrangement unless that right or obligation is one of the rights or obligations that constitute the financial arrangement. Note: See subsections 230 ‑ 45(1) and 230 ‑ 50(1) and (2) for the rights and/or obligations that constitute a financial arrangement. Modifications for arrangements that are assets (3) If the * financial arrangement is an asset of yours at the time the event referred to in subsection (1) occurs, paragraphs (1)(a) and (c) do not apply unless the effect of the transfer is to transfer to the other entity substantially all the risks and rewards of ownership of the interest transferred. (4) If a * financial arrangement is an asset of yours, for the purposes of applying this Subdivision to the arrangement, you are treated as transferring a right under the arrangement to another entity if: (a) you retain the right but assume a new obligation; and (b) your assumption of the new obligation has the same effect, in substance, as transferring the right to another entity; and (c) the new obligation arises only to the extent to which the right to * financial benefits under the arrangement is satisfied; and (d) you cannot sell or pledge the right (other than as security in relation to the new obligation); and (e) you must, under the new obligation, provide financial benefits you receive in relation to the right to the entity to which you owe the new obligation without delay. Historic rate rollover of derivative financial arrangement (5) For the purposes of paragraph (1)(b), all of your rights and/or obligations under a * financial arrangement that is a * derivative financial arrangement are taken to cease if there is an historic rate rollover of the arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 136 of 2010, effective s. 4, Schedule 2, Schedule 3 (items 95, 135–149), Schedule 4, Schedule 6 (items 2–4, 6, 7) and Schedule 7 (items 1, 2, 4): Royal Assent Sch 3 (items 3–94, 96–130): 26 Mar 2009 (s 2(1) items 3, 5) Sch 3 (item 131): 1 July 2010 (s 2(1) item 6) Sch 6 (items 1, 5): 1 Apr 2010 (s 2(1) items 11, 13)

s 230-440 — Exceptions

Equity interests etc. (1) A balancing adjustment is not made under this Subdivision in relation to a * financial arrangement at a time if: (a) the arrangement is a financial arrangement under section 230 ‑ 50 (equity interests etc.); and (b) neither Subdivision 230 ‑ C nor Subdivision 230 ‑ F apply to the arrangement immediately before that time. Financial arrangements to which hedging financial arrangement elections apply (2) Balancing adjustments are not made under this Subdivision in relation to a * financial arrangement in relation to which a * hedging financial arrangement election applies. Bad debts, margining and conversion into, or exchange for, ordinary shares (3) A balancing adjustment is not made under this Subdivision in relation to the following events: (a) a * financial arrangement being written off in whole or part as a bad debt; (b) a financial arrangement that is a * derivative financial arrangement being settled or closed out for margining purposes; (c) the ceasing of obligations or rights under a financial arrangement that is a * traditional security if: (i) the ceasing occurs because the traditional security is converted into ordinary shares in, or transferred to, a company that is the issuer of the traditional security or a * connected entity; and (ii) the traditional security was issued on the basis that it will or may convert into ordinary shares in, or be transferred to, the issuer of the traditional security or the connected entity; (d) the ceasing of obligations or rights under a financial arrangement that is a traditional security if: (i) the ceasing occurs because the traditional security is exchanged for ordinary shares in a company that is neither the issuer of the traditional security nor a connected entity; and (ii) if the ceasing of the obligations or rights occurs because of a disposal—the disposal is to the issuer of the traditional security or a connected entity; and (iii) the traditional security was issued on the basis that it will or may be exchanged for ordinary shares in the company. Note: Paragraph (a)—for the treatment of bad debts, see paragraph 230 ‑ 190(3)(c). Subsidiary member leaving consolidated group or MEC group (4) A balancing adjustment is not made under this Subdivision in relation to a subsidiary member of a * consolidated group or * MEC group that has a * financial arrangement ceasing to be a member of the group.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-445 — Balancing adjustment

Complete cessation or transfer (1) Use the following method statement to make the balancing adjustment if paragraph 230 ‑ 435(1)(a), (b) or (d) applies: Method statement for balancing adjustment Step 1. Add up the following: (a) the total of all the * financial benefits you have received under the * financial arrangement; Note: This would include financial benefits you receive in relation to the transfer or cessation (see paragraph 230 ‑ 60(2)(c)). (b) the total of the amounts that have been allowed to you as deductions, because of circumstances that have occurred before the transfer or cessation, for losses from the arrangement; (c) the total of the other amounts that would have been allowed to you as deductions, because of circumstances that have occurred before the transfer or cessation, for losses from the arrangement if all your losses from the arrangement were allowable as deductions; Note: The losses from the arrangement here include losses made in gaining or producing exempt income or non ‑ assessable non ‑ exempt income. (d) the total of the amounts that will be allowed to you as deductions after the transfer or cessation because of a balancing adjustment under subitems 104(12) to (18) of the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 to the extent to which those amounts are attributable to the arrangement; (e) the total of the amounts that will be allowed to you as deductions after the transfer or cessation because of sections 230 ‑ 160 and 230 ‑ 165 to the extent to which those amounts are attributable to the arrangement. Step 2. Add up the following: (a) the total of all the * financial benefits you have provided under the * financial arrangement; Note: This would include financial benefits you provide in relation to the transfer or cessation (see paragraph 230 ‑ 60(1)(c)). (b) the total of the amounts that have been included in your assessable income, because of circumstances that have occurred before the transfer or cessation, as gains from the arrangement; (c) the total of the other amounts that would have been included in your assessable income, because of circumstances that have occurred before the transfer or cessation, as gains from the arrangement if all your gains from the arrangement were assessable; Note: The gains from the arrangement here include amounts of exempt income or non ‑ assessable non ‑ exempt income. (d) the total of the amounts that will be included in your assessable income after the transfer or cessation because of a balancing adjustment under subitems 104(12) to (18) of the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 to the extent to which those amounts are attributable to the arrangement. (e) the total of the amounts that will be included in your assessable income after the transfer or cessation because of sections 230 ‑ 160 and 230 ‑ 165 to the extent to which those amounts are attributable to the arrangement. Step 3. Compare the amount obtained under step 1 (the step 1 amount ) with the amount obtained under step 2 (the step 2 amount ). If the step 1 amount exceeds the step 2 amount, an amount equal to the excess is taken, as a balancing adjustment, to be a gain you make from the * financial arrangement for the purposes of this Division. If the step 2 amount exceeds the step 1 amount, an amount equal to the excess is taken, as a balancing adjustment, to be a loss that you make from the arrangement. If the step 1 amount and the step 2 amount are equal, no balancing adjustment is made. Proportionate transfer of all rights and/or obligations under financial arrangement (2) If subparagraph 230 ‑ 435(1)(c)(i) applies, you make the balancing adjustment by applying the method statement in subsection (1) but reduce: (a) the amounts referred to in step 1; and (b) the amounts referred to in step 2; by applying the proportion referred to in subparagraph 230 ‑ 435(1)(c)(i) to them. Transfer of specifically identified right or obligation under financial arrangement (3) If subparagraph 230 ‑ 435(1)(c)(ii) applies, you make the balancing adjustment by applying the method statement in subsection (1) as if the references to: (a) the amounts referred to in step 1; and (b) the amounts referred to in step 2; were references to those amounts to the extent to which they are reasonably attributable to the right or obligation referred to in subparagraph 230 ‑ 435(1)(c)(ii). Proportionate transfer of specifically identified right or obligation under financial arrangement (4) If subparagraph 230 ‑ 435(1)(c)(iii) applies, you make the balancing adjustment by applying the method statement: (a) as if the references to: (i) the amounts referred to in step 1; and (ii) the amounts referred to in step 2; were references to those amounts to the extent to which they are reasonably attributable to the right or obligation referred to in subparagraph 230 ‑ 435(1)(c)(iii); and (b) by reducing those amounts by applying the proportion referred to in subparagraph 230 ‑ 435(1)(c)(iii) to them. Attribution must reflect appropriate and commercially accepted valuation principles (5) Any attribution made under subsection (3) or paragraph (4)(a) must reflect appropriate and commercially accepted valuation principles that properly take into account: (a) the nature of the rights and obligations under the * financial arrangement; and (b) the risks associated with each * financial benefit, right and obligation under the arrangement; and (c) the time value of money. Income year for which gain or loss is made (6) The gain or loss you are taken to make under subsection (1), (2), (3) or (4) is a gain or loss for the income year in which the event referred to in subsection 230 ‑ 435(1) occurs. Treatment of bad debts in relation to financial arrangements (7) For the purposes of applying paragraph (b) of step 1 of the method statement in subsection (1) to a * financial arrangement, a bad debt deduction in relation to the arrangement to which subsection 230 ‑ 25(3) applies is taken to be a deduction for a loss from the arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)

s 230-450 — Short ‑ term arrangements where non ‑ money amount involved

This Division does not apply in relation to your gains and losses from a * financial arrangement if: (a) the arrangement is a financial arrangement under section 230 ‑ 45; and (b) either: (i) you acquired goods or other property (other than goods that are, or property that is, money or a * money equivalent) or services (other than services that are a money equivalent) from another entity and the * financial benefits you are to provide under the arrangement are consideration for those goods, that property or those services; or (ii) you provided goods or other property (other than goods that are, or other property that is, money or a money equivalent) or services (other than services that are a money equivalent) to another entity and the financial benefits you are to receive under the arrangement are consideration for those goods, that property or those services; and (c) the period between the following is not more than 12 months: (i) the time when you are to provide or receive the consideration (or a substantial proportion of it); (ii) the time when you acquired or provided the property, goods or services (or a substantial proportion of them); and (d) the arrangement is not a * derivative financial arrangement for any income year; and (e) a * fair value election does not apply to the arrangement.

Amendment history: Inserted by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3)