Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p11
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 11/22)
Character Range: 7754369–7757235

equity); and
(b) allow a deduction (but not franking) for a "dividend" in relation to a scheme that has the legal form of an ordinary share if the economic substance of the rights and obligations arising under the relevant scheme gives the dividend characteristics that are the same as or similar to those of deductible interest on an ordinary loan (and thereby prevent frankable returns on debt).
 This will not happen if a provision in this Act specifically provides for a different treatment for the interest or dividend.
 (3) Another object of this Division is that the combined effect of *related schemes be taken into account in appropriate cases:
 (a) to ensure that the test operates effectively on the basis of the economic substance of the rights and obligations arising under the schemes rather than merely on the basis of the legal form of the schemes; and
 (b) to prevent the test being circumvented by entities merely entering into a number of separate schemes instead of a single scheme.
 (4) Another object of this Division is to identify the distributions and credits made in respect of *non‑share equity interests in a company that are to be treated as *dividends (non‑share dividends) and those that are to be treated as returns of capital (non‑share capital returns).
Note: Non‑share dividends will generally be included in the recipient's assessable income and may be frankable.
 (5) The Commissioner must have regard to the objects stated in subsections (1) to (3) in exercising the power to make a determination under any of the following provisions:
 (a) subsection 974‑15(4);
 (b) subsection 974‑60(3), (4) or (5);
 (c) section 974‑65;
 (d) subsection 974‑70(4);
 (e) subsection 974‑150(1).
Note: An entity can apply to the Commissioner to have a determination made and can object under Part IVC of the Taxation Administration Act 1953 if it is dissatisfied with a determination (see section 974‑112).
 (6) Regulations may also be made under the provisions of this Division:
 (a) to clarify the meaning of certain words and phrases in the light of emerging commercial practices, conditions and products; and
 (b) to give guidance on the detailed operation of particular provisions.
The regulations must be consistent with the objects stated in subsections (1) to (3).
 (7) Without limiting subsection 13(3) of the Legislation Act 2003, the regulations made for the purposes of this Division may specify different rules for different classes of circumstances.

Subdivision 974‑B—Debt interests

Table of sections
974‑15 Meaning of debt interest
974‑20 The test for a debt interest
974‑25 Exceptions to the debt test
974‑30 Providing a financial benefit
974‑35 Valuation of financial benefit—general rules
974‑40 Valuation of financial benefits—rights and options to terminate early
974‑45 Valuation of financial benefits—convertible interests