(iv) wholly or partly in respect of the mode of application of money by the taxpayer; or
(v) wholly or partly in relation directly or indirectly to the mode of application of money by the taxpayer; and
(c) if a cash payment had been provided by the investment body to the taxpayer instead of that chance, the payment would constitute, to any extent, a return on an investment held by the taxpayer in or with the investment body;
the mode of application of money is taken to be an investment held by the taxpayer with the investment body.
(10) If a ballot is held to determine the order in which loans are to be made by a Starr‑Bowkett building society to its members, then the making of a loan in accordance with the ballot is not covered by paragraph (1)(b).
(11) In this section:
arm’s length value, in relation to property or services, means:
(a) the amount that the recipient could reasonably have been expected to have been required to pay to obtain the property or services from the provider under a transaction where the parties to the transaction are dealing with each other at arm’s length in relation to the transaction; or
(b) if such an amount cannot be practically determined—such amount as represents a reasonable valuation of the property or services.
arrangement means:
(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.
associate has the same meaning in relation to a person as that expression has in relation to a person in section 318.
benchmark amount of interest, in relation to a loan, in relation to a year of income, means the amount of interest that would have accrued on the loan in respect of the year of income if the interest was calculated on the daily balance of the loan at the benchmark interest rate in relation to the year of income.
benchmark interest rate, in relation to a year of income, means the predominant per cent per annum interest rate on new, variable interest rate housing loans to individuals for owner‑occupation that is specified, for the June immediately preceding the financial year to which the year of income relates, in the “Interest Rates and Yields: Banks” table in the Statistical Directory of the Reserve Bank of Australia Bulletin dated July in that financial year.
deferred interest loan means a loan in respect of which interest is payable at a rate exceeding nil, other than:
(a) a loan where the whole of the interest is due for payment within 6 months after the loan is made; or
(b) a loan where:
(i) the interest is payable by instalments; and
(ii) the intervals between instalments do not exceed 6 months; and
(iii) the first instalment is due for payment within 6 months after the loan is made.
investment means any mode of application of money for the purpose of gaining a return.
loan includes:
(a) an advance of money; and
(b) the provision of credit or any other form of financial accommodation; and
(c) the payment of an amount for, on account of, on behalf of or at the request of a person where there is an obligation (whether express or implied) to repay the amount; and
(d) a transaction (whatever its terms or form) which in substance effects a loan of money.
loan benefit has the meaning given by subsection (4).
person means any of the following:
(a) a company;
(b) a partnership;
(c) a person in the capacity of trustee;
(d) any other person.
provide:
(a) in relation to property—includes dispose of (whether by assignment, declaration of trust or otherwise); and
(b) in relation to services—includes allow, confer, give, grant or perform.
recipient’s contribution, in relation to property or services, means the amount of any consideration paid to the provider by the recipient in respect of the provision of the property or services, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration.
return, in relation to an investment, includes interest, income or profit.
services includes any benefit, right (including a right in relation to, and an interest in, real or personal property), privilege or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:
(a) an arrangement for or in relation to:
(i) the performance of work (including work of a professional nature), whether with or without the provision of property; or
(ii) the provision of, or the use of facilities for, entertainment, recreation or instruction; or
(iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or
(b) a contract of insurance; or
(c) an arrangement for or in relation to the lending of money.
unreimbursed expenditure means expenditure no part of which has been reimbursed.
unreimbursed interest means interest no part of which has been reimbursed.
26BB Assessability of gain on disposal or redemption of traditional securities
(1) In this section:
acquire, in relation to a security, means acquire, on issue, purchase, transfer, assignment or otherwise, the security or the right to receive payment of the amount or amounts payable under the security.
connected entity has the same meaning as in the Income Tax Assessment Act 1997.
dispose, in relation to a security, means sell, transfer, assign or dispose of in any way the security or the right to receive payment of the amount or amounts payable under the security.
eligible return has the same meaning as in Division 16E.
periodic interest has the same meaning as in Division 16E.
security has the same meaning as in Division 16E.
traditional security, in relation to a taxpayer, means a security held by the taxpayer that:
(a) is or was acquired by the taxpayer after 10 May 1989;
(b) either:
(i) does not have an eligible return; or
(ii) has an eligible return, where:
(A) the precise amount of the eligible return is able to be ascertained at the time of issue of the security; and
(B) that amount is not greater than 11/2 % of the amount calculated in accordance with the formula:
Start formula Payments times Term end formula
where:
Payments is the amount of the payment or of the sum of the payments (excluding any periodic interest) liable to be made under the security when held by any person; and
Term is the number (including any fraction) of years in the term of the security; and
(d) is not trading stock of the taxpayer.
(2) Where a taxpayer disposes of a traditional security or a traditional security of a taxpayer is redeemed, the amount of any gain on the disposal or redemption shall be included in the assessable income of the taxpayer of the year of income in which the disposal or redemption takes place.
(3) Where the Commissioner, having regard to any connection between the parties to the transaction by which the taxpayer disposed of the traditional security or by which it was redeemed, or by which the taxpayer acquired the traditional security, is satisfied that the parties were not dealing with each other at arm’s length in relation to the transaction, then, for the purposes of determining under subsection (2) the amount of any gain on the disposal or redemption, the consideration for the transaction shall be taken to be:
(a) the amount that might reasonably be expected for the transaction if the parties were independent parties dealing at arm’s length with each other; or
(b) where, for any reason it is not possible or practicable for the Commissioner to ascertain that amount—such amount as the Commissioner determines.
(4) Subsection (2) does not apply to a gain on the disposal or redemption of a traditional security if:
(a) the disposal or redemption occurs because the traditional security is converted into ordinary shares in a company that is:
(i) the issuer of the traditional security; or
(ii) a connected entity of the issuer of the traditional security; and
(b) the traditional security was issued on the basis that it will or may convert into ordinary shares in:
(i) the issuer of the traditional security; or
(ii) the connected entity.
(5) Subsection (2) does not apply to a gain on the disposal or redemption of a traditional security if:
(a) the disposal or redemption is in exchange for ordinary shares in a company that is neither:
(i) the issuer of the traditional security; nor
(ii) a connected entity of the issuer of the traditional security; and
(b) in the case of a disposal—the disposal is to:
(i) the issuer of the traditional security; or
(ii) a connected entity of the issuer of the traditional security; and
(c) the traditional security was issued on the basis that it will or may be:
(i) disposed of to the issuer of the traditional security or to the connected entity; or
(ii) redeemed;
in exchange for ordinary shares in the company.
26BC Securities lending arrangements
(1) In this section:
convertible note:
(a) in relation to a company—has the same meaning as in Division 3A; or
(b) in relation to a unit trust—means a note issued by the trustee of the unit trust, being a note that, if the unit trust were a company, would be a convertible note issued by the company, and includes a note that would be a convertible note within the meaning of Division 3A if:
(i) references in that Division to a company were references to a unit trust, or to the trustee of the unit trust, as the context requires; and
(ii) references in that Division to shares were references to units.
debenture, in relation to a unit trust, means an instrument issued by the trustee of the unit trust, being an instrument that, if the unit trust were a company, would be a debenture issued by the company.
distribution includes:
(a) interest; or
(b) a dividend; or
(c) a share issued by a company to a shareholder in the company where the share is issued:
(i) as a bonus share; or
(ii) in the circumstances mentioned in subsection 6BA(1); or
(d) an amount credited by the trustee of a unit trust to a unit holder as a unit holder; or
(e) a unit issued by the trustee of a unit trust to which section 130‑20 of the Income Tax Assessment Act 1997 applies (apart from subsection (4) of that section).
eligible security means:
(a) a share, bond, debenture, convertible note, right, option or similar financial instrument issued by a public company; or
(b) a unit, bond, debenture, convertible note, right, option or similar financial instrument issued by the trustee of:
(i) a listed unit trust; or
(ii) a unit trust any of the units of which were offered to the public; or
(c) a bond, debenture, right, option or similar financial instrument issued by a government or by an authority of a government.
government means:
(a) the Commonwealth, a State or a Territory; or
(b) the government of, or of a part of, a foreign country.
listed company means a company any of the shares of which are listed for quotation in the official list of a stock exchange in Australia or elsewhere.
listed unit trust means a unit trust any of the units of which are listed for official quotation in the official list of a stock exchange in Australia or elsewhere.
option:
(a) in relation to a company—means an option to acquire shares in the company; or
(b) in relation to a unit trust—means an option to acquire units in the unit trust; or
(c) in relation to a government or an authority of a government—means an option to acquire a bond, debenture or similar financial instrument issued by the government or by the authority.
public company means:
(a) a listed company; or
(b) a mutual life assurance company; or
(c) a company in which a government or an authority of a government has a controlling interest; or
(d) a company that is a 100% subsidiary of a company covered by paragraph (a), (b) or (c).
right:
(a) in relation to a company—means a right to acquire shares in the company or to acquire an option; or
(b) in relation to a unit trust—means a right to acquire units in the unit trust or to acquire an option; or
(c) in relation to a government or an authority of a government—means a right to acquire a bond, debenture or similar financial instrument issued by the government or by the authority or to acquire an option.
(2) If an eligible security is held by a person as trustee for another person who is absolutely entitled to the eligible security as against the trustee, this section applies as if the eligible security were vested in the other person and any acts of the trustee were the acts of that other person.
(3) This section applies where:
(a) under a written agreement of the kind known as a securities lending arrangement, being an agreement that was entered into after 9 May 1990:
(i) at a particular time (in this section called the original disposal time), a taxpayer (in this section called the lender) disposed of an eligible security (in this section called the borrowed security) to another taxpayer (in this section called the borrower); and
(ii) at a later time (in this section called the re‑acquisition time), being less than 12 months after the original disposal time, the lender:
(A) re‑acquired the borrowed security (which re‑acquired security is in this section called the replacement security) from the borrower; or
(B) acquired an identical security (which acquired security is in this section also called the replacement security) from the borrower; and
(b) both the borrower and the lender were dealing with each other at arm’s length in relation to each of the transactions mentioned in paragraph (a); and
(c) if any of the following events occurred during the period (in this section called the borrowing period) commencing at the original disposal time and ending at the re‑acquisition time:
(i) the making or payment of a distribution (whether in property or money) in respect of the borrowed security;
(ii) the issue, by the company, trustee, government or government authority concerned, of a right or option in respect of the borrowed security;
(iii) if the borrowed security is a right or option:
(A) the giving of a direction by the lender to the borrower to exercise the right or option; or
(B) the giving of a direction by the lender to the borrower to exercise an identical right or option;
then (even if the event occurred after the borrowed security was disposed of by the borrower to a third party), the lender receives from the borrower, under the agreement:
(iv) if subparagraph (i) applies:
(A) the distribution; or
(B) if the distribution is in property—identical property; or
(C) a payment (in this section called the compensatory payment) equal to the value to the lender of the distribution; or
(v) if subparagraph (ii) applies:
(A) the right or option; or
(B) an identical right or option; or
(C) a payment (in this section also called the compensatory payment) equal to the value to the lender of the right or option; or
(vi) if subparagraph (iii) applies:
(A) the shares, units, bonds, debentures or financial instruments that resulted from exercising the right or option; or
(B) shares, units, bonds, debentures or financial instruments that are identical to those that resulted from, or that would have resulted from, exercising the right or option; or
(C) a payment (in this section also called the compensatory payment) equal to the value to the lender of the shares, units, bonds, debentures or financial instruments that resulted from, or would have resulted from, exercising the right or option; and
(d) if the total consideration payable or to be given by the borrower under the agreement consists of:
(i) the transfer of, or the promise to transfer, the replacement security or replacement securities concerned; and
(ii) other consideration (in this paragraph called the notifiable consideration);
the agreement contains:
(iii) if the notifiable consideration is wholly covered by one of the following categories:
(A) a fee;
(B) an adjustment for variations in the market value of eligible securities;
(C) other consideration;
a statement specifying the category concerned and setting out such information as will enable the amount or value of the notifiable consideration to be readily ascertained; or
(iv) if the notifiable consideration is covered by 2 or more of the following categories:
(A) a fee;
(B) an adjustment for variations in the market value of eligible securities;
(C) other consideration;
a statement dissecting the notifiable consideration into those categories in such a manner as will enable the amount or value of each category to be readily ascertained; and
(e) the lender does not dispose of (by transfer, declaration of trust or otherwise) the right to receive any part of the total consideration payable or to be given by the borrower under the agreement.
(3A) For the purposes of paragraph (3)(c), if, apart from this subsection, either of the following events occurred after the commencement of the borrowing period:
(a) the making or payment of a distribution (whether in property or money) in respect of the borrowed security;
(b) the issue, by the company, trustee, government or government authority concerned, of a right or option in respect of the borrowed security;