Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p13
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 13/22)
Character Range: 7759468–7762172

a determination under subsection (4), have regard to the following:
 (a) the purpose of the *schemes (considered both individually and in combination);
 (b) the effects of the schemes (considered both individually and in combination);
 (c) the rights and obligations of the parties to the schemes (considered both individually and in combination);
 (d) whether the schemes (when considered either individually or in combination) provide the basis for, or underpin, an interest issued to investors with the expectation that the interest can be assigned to other investors;
 (e) whether the schemes (when considered either individually or in combination) comprise a set of rights and obligations issued to investors with the expectation that it can be assigned to other investors;
 (f) any other relevant circumstances.
 (6) If:
 (a) 2 or more *related schemes give rise to a *debt interest in an entity; and
 (b) one or more of those schemes (the hedging scheme or schemes) are schemes for hedging or managing financial risk; and
 (c) the other scheme or schemes give rise to a debt interest in the entity even if the hedging scheme or schemes are disregarded;
the debt interest that arises from the schemes is taken, for the purposes of Division 820 (the thin capitalisation rules), not to include the hedging scheme or schemes.
Note: This means that in these circumstances the losses associated with the hedging scheme or schemes are not debt deductions under section 820‑40.

974‑20  The test for a debt interest

Satisfying the debt test
 (1) A *scheme satisfies the debt test in this subsection in relation to an entity if:
 (a) the scheme is a *financing arrangement for the entity; and
 (b) the entity, or a *connected entity of the entity, receives, or will receive, a *financial benefit or benefits under the scheme; and
 (c) the entity has, or the entity and a connected entity of the entity each has, an *effectively non‑contingent obligation under the scheme to provide a financial benefit or benefits to one or more entities after the time when:
 (i) the financial benefit referred to in paragraph (b) is received if there is only one; or
 (ii) the first of the financial benefits referred to in paragraph (b) is received if there are more than one; and
 (d) it is substantially more likely than not that the value provided (worked out under subsection (2)) will be at least equal to the value received (worked out under subsection (3)); and
 (e) the value provided (worked out under subsection (2)) and the value received (worked out under subsection (3)) are not both nil.
The scheme does not need to satisfy paragraph (a) if the entity is a company and the interest arising from the scheme