Document ID: chunk:federal_register_of_legislation:C2004A00975:clause:1_3:p11
Version: federal_register_of_legislation:C2004A00975
Segment Type: clause
Provision Reference: sch 1 cl 3 (pt 11/11)
Character Range: 113956–116235

on 13 May 1997.

207‑170  Interest payments—distributions that flow indirectly to a partner in a partnership

 (1) For the purposes of this Subdivision, a *franked distribution is treated as an interest payment if:
 (a) it *flows indirectly to an entity as partner in a *partnership; and
 (b) the entity's interest in the partnership:
 (i) was acquired, or was acquired for a period that was extended, at or after the commencing time; or
 (ii) was acquired as part of a *financing arrangement for the entity (including an arrangement extending to an earlier arrangement) entered into at or after the commencing time; and
 (c) having regard to the matters in subsection (2), the distribution could reasonably be regarded as equivalent to the payment of interest on a loan.

 (2) A *distribution that *flows indirectly to a partner in a *partnership can reasonably be regarded as equivalent to the payment of interest on a loan if:
 (a) either:
 (i) a share of the *net income of the partnership is included in the partner's assessable income, for the income year in which the distribution is made, under subsection 92(1) of the Income Tax Assessment Act 1936; or
 (ii) a share of the *partnership loss of the partnership is allowable as a deduction to the entity, for the income year in which the distribution is made, under subsection 92(2) of that Act; and
 (b) the whole or a part of that share is attributable to the distribution; and
 (c) having regard to the following matters, that amount could reasonably be regarded as equivalent to the payment of interest on a loan:
 (i) the way in which the amount was calculated;
 (ii) the conditions applying to the inclusion of the amount;
 (iii) any other relevant matters.

 (3) The commencing time, for the purposes of subsection (1), is 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997.

Division 215—Consequences of the debt/equity rules

215‑1  Application of the imputation system to non‑share equity interests

 (1) The *imputation system applies to a *non‑share equity interest in the same way as it applies to a *membership interest.

 (2) The *imputation system applies to an equity holder in an entity who is not a member of the entity in the same way as it applies to a member of the entity.