Document ID: chunk:federal_register_of_legislation:C2004A00898:clause:1_4:p5
Version: federal_register_of_legislation:C2004A00898
Segment Type: clause
Provision Reference: sch 1 cl 4 (pt 5/12)
Character Range: 66112–68726

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 974‑20. 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

 (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; 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;
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 164‑20(4)).

Entering into a new related scheme

 (2) If:
 (a) a *scheme or schemes give rise to a *debt interest (or an *equity interest) in a company; and
 (b) the company subsequently enters into, participates in or causes another entity to enter into or participate in a new *related scheme; and
 (c) the scheme or schemes, together with:
 (i) the new related scheme; and
 (ii) any other related scheme that the entity (or company) enters into, participates in or causes another entity to enter into or participate in before the new related scheme is entered into;
  would give rise to an equity