Document ID: chunk:federal_register_of_legislation:C2025C00029:section:4:p6
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 4 (pt 6/30)
Character Range: 7795690–7798252

arising from related schemes
 (1) If:
 (a) a *scheme, or schemes, give rise to a *debt interest in an entity or an *equity interest in a company; and
 (b) the entity or company pays a return, or undertakes any other transaction, in respect of any of the following (the component element):
 (i) the scheme; or
 (ii) a part of the scheme; or
 (iii) one of those schemes; or
 (iv) a part of one of those schemes;
then, for the purposes of the provisions that subsection (2) covers, the return is taken to be paid, or the transaction to have been undertaken, in respect of the debt interest or equity interest and not in respect of the component element.
Example: Company A issues a convertible note to Company B. Company C, a connected entity of Company B, provides a binding collateral undertaking to Company A that Company B will exercise the option to convert the note into shares in Company A. The convertible note and the undertaking are related schemes that may give rise to an equity interest in Company A if their combined effect satisfies section 974‑70. If so, the returns on the note are taken to be returns in respect of the equity interest.
 (2) This subsection covers:
 (a) the provisions of this Division (other than this section); and
 (b) any other provision of this Act whose operation depends on an expression whose meaning is given by this Division.

974‑110  Effect of material change

Change to existing scheme—general rule
 (1) If:
 (a) a *scheme or schemes give rise to a *debt interest (or an *equity interest) in a company; and
 (b) the scheme, or one or more of the schemes, are subsequently changed, including where one or more (but not all) of the schemes cease to exist; and
 (c) the scheme or schemes as they exist immediately after the change would give rise to an equity interest (or a debt interest) in the company if they came into existence when the change occurred; and
 (d) subsection (1A) does not apply to the change;
this Division applies after the change as if the scheme or schemes as they exist immediately after the change came into existence when the change occurred.
Note 1: This will mean that the characterisation of the interest will change at that time.
Note 2: This section can apply to an interest a number of times so that, for example, an interest that is equity when issued may change to debt because of one subsequent change and then back to equity because of a later change.
Note 3: There will be an adjustment to the company's non‑share capital account when the change occurs (see subsections 164‑15(2) and