Document ID: chunk:federal_register_of_legislation:C2025C00014:section:159gqd:p1
Version: federal_register_of_legislation:C2025C00014
Segment Type: section
Provision Reference: s 159GQD (pt 1/3)
Character Range: 1429088–1431558

159GQD  Implicit interest rate for variable return security

Implicit interest rate to be recalculated each year etc.
 (1) For the purposes of the formula component Implicit interest rate in subsection 159GQB(1), the rate of interest for a variable return security must be worked out in accordance with subsection (2) separately for each year of income during the taxpayer's maximum term. If there are 2 accrual periods of 6 months in the year of income, the rate is the same for both periods. It is possible for the rate to be negative.

Rate
 (2) The rate applicable in relation to a year of income is the rate of compound interest per period of 6 months in the calculation period (see subsection (3)) at which:
 (a) the sum of the present values of all amounts payable under the security during the calculation period;
equals:
 (b) the opening balance, mentioned in subsection 159GQB(1), for the accrual period that begins the calculation period.

Calculation period
 (3) The calculation period means the part of the taxpayer's maximum term that occurs after the beginning of the year of income.

Where amount payable is not known
 (4) For the purposes of paragraph (2)(a), if by the end of the year of income it is not possible to determine whether an amount will be payable, or the size of the amount that will be payable, after the end of the year of income, the determination is to be made by applying subsection (5), (7) or (11), or a combination of those subsections.

Assumption of constant level
 (5) Subject to subsection (7), if an amount payable is worked out to any extent by reference to the amount or level, at a particular time, of a rate, price, index or other thing, it is to be assumed that the rate, price, index or thing will be the same at all times after the end of the year of income as it was at the end of the year of income (or, if it was not available at the end of the year of income, at the time when it was last available in the year of income).

Examples
 (6) For the purposes of subsection (5):
 (a) an example of an amount worked out wholly by reference to the amount of a rate at a particular time is an interest payment under a floating rate note. The amount payable is the product of an interest rate indicator (such as the prevailing bank bill rate) and the face or par value of the note; and
 (b) an example of an amount worked out wholly by reference to the amount of a price at a particular time is a redemption payment under a