is to be or may be redeemed, repaid or satisfied by the issue, whether by the same company or by another company, of an instrument or a series of instruments; and
(b) that instrument, or any instrument in that series of instruments, is to provide, whether in pursuance of or by virtue of a trust deed or otherwise, as mentioned in paragraph (a) or (b) of the definition of convertible note in subsection (1);
that note and the instrument, or that note and each of the instruments in the series of instruments, shall, for the purposes of this Division, be deemed to be a convertible note.
(4) For the purposes of this Division, a convertible note issued by a company applies to a loan to a company if it evidences, acknowledges or creates the loan.
(5) A reference in this Division to the terms, or a term, applicable to a convertible note shall be read as including a reference to terms, or a term, that so apply or applies in pursuance of or by virtue of a trust deed or otherwise.
82M New loans and replacement loans
(1) Where:
(a) a loan to a company is made, and is wholly made, by money being paid to the company at the time when the loan is made; and
(b) the loan is not part of or related to a transaction, or is not one of a series of related transactions, under which the person making the loan is to receive or has received, for the purpose of enabling him or her to make, or of assisting him or her in making, the loan, any money or other property from the company, or from another company or person as a result of arrangements made with that other company or person by the first‑mentioned company;
the loan shall, for the purposes of this Division, be treated as a new loan.
(2) Where:
(a) a loan to a company is, under subsection (1), to be treated as a new loan for the purposes of this Division;
(b) the loan is not evidenced, acknowledged or created by a convertible note or is not a loan to which a convertible note otherwise applies;
(c) the loan is for a fixed period;
(d) the rate of interest payable in respect of the loan is the same in respect of all periods occurring before the date by which the whole of the loan is to be repaid, redeemed or satisfied; and
(e) the loan is, in whole or in part, converted into another loan to the company or to another company, or the loan is, in whole or in part, converted into a part of another loan to the company or to another company and the remainder of the other loan:
(i) is made by money being paid to the company or other company at the time when the loan is made; and
(ii) would, if it were a separate loan, be a loan that, under subsection (1), is to be treated as a new loan for the purposes of this Division;
that other loan shall, for the purposes of this Division, be treated as an approved replacement loan.
82P Bonus share allotments
(1) For the purposes of this section, the making of a bonus share allotment by a company is the allotment by the company of shares (in this section referred to as bonus shares) in the capital of the company (being shares all of which are of the same class as each other) to persons who are the holders of other shares (in this section referred to as qualifying shares) in the capital of the company or in the capital of another company (being shares all of which are of the same class as each other but which are not necessarily of the same class as the bonus shares), being an allotment made to the holders of all shares of the same class as the qualifying shares or an allotment made in pursuance of applications for the allotment of the bonus shares by the holders of the qualifying shares in accordance with an invitation to apply for the allotment of shares given to the holders of the qualifying shares and the holders of all other shares of the same class as the qualifying shares.
(2) Where:
(a) the option to convert that exists under a convertible note is an option to have shares allotted to the holder or owner of the note; and
(b) the terms applicable to the note are such that, if a bonus share allotment is made by the company that issued the note or by another company in respect of qualifying shares that are of the same class as the shares that are to be allotted to the holder or owner of the note upon the exercise of the option to convert, the holder or owner of the note is to have the right to have allotted to him or her shares in the capital of the company or of that other company, as the case may be, of the same class as the bonus shares on terms and conditions that are the same as or correspond with, or are no more favourable to him or her than, the terms and conditions on which bonus shares are allotted to any holder of qualifying shares;
that right shall, for the purposes of subparagraph 82SA(1)(d)(ii), be deemed to be an approved right relating to the allotting or transfer of bonus shares to the holder or owner of the convertible note.
(3) Where:
(a) the option to convert that exists under a convertible note is an option to have shares transferred to the holder or owner of the note; and
(b) the terms applicable to the note are such that, if a bonus share allotment is made by the company that issued the note or by another company, being an allotment the qualifying shares relating to which include the shares that are to be transferred to the holder or owner of the note upon the exercise of the option to convert, and bonus shares allotted in respect of the qualifying shares to be so transferred are allotted to the holder of those shares on terms and conditions that are the same as or correspond with, or are no more favourable to him or her than, the terms and conditions on which bonus shares are allotted to any other holder of qualifying shares, the holder or owner of the note is to have the right to have the bonus shares allotted to that person transferred to him or her upon the payment by him or her, where a consideration was paid or is payable in respect of the allotment of the bonus shares to the other person, of a consideration not less than that consideration;
that right shall, for the purposes of subparagraphs 82S(1)(d)(ii) and 82SA(1)(d)(ii), be deemed to be an approved right relating to the allotting or transfer of bonus shares to the holder or owner of the convertible note.
82Q Classes of shares
(1) Shares in the capital of a company to which there are attached the same rights, including the following rights:
(a) rights in respect of voting;
(b) rights in respect of dividends;
(c) rights in respect of distribution of share capital in consequence of a reduction of share capital;
(d) rights in respect of distribution of the property of the company in the event of the winding up of the company;
constitute a class of shares for the purposes of this Division, and no other shares in the capital of the company constitute a class of shares for such purposes.
(2) Notwithstanding anything contained in subsection (1), a share in the capital of a company to be allotted upon the exercise of the option to convert given under the terms applicable to a convertible note shall not, for the purposes of this Division, be deemed to be a share of a different class from a share in the capital of the company already allotted by reason only that during the period of one year after the allotment of the first‑mentioned share, any dividend payable in respect of the share will or may be less than any dividend payable in respect of the second‑mentioned share.
82R Interest on certain convertible notes not to be an allowable deduction
(1) Subject to section 82SA, this section applies to a convertible note issued by a company, not being:
(a) a convertible note issued on or before 15 November 1960; or
(b) a convertible note:
(i) the terms of the issue of which were announced by the company on or before that date; or
(ii) that the company was, in pursuance of an agreement made on or before that date, bound to issue.
(2) Where, in pursuance of the terms upon which any convertible notes were issued by a company, a person was entitled to have a convertible note issued to him or her by that company, the company shall, for the purposes of subsection (1), be deemed to have issued the convertible note to that person at the time when the person first became entitled to have the convertible note issued to him or her.
(3) An outgoing consisting of interest, or a payment in the nature of interest, under a convertible note to which this section applies shall be deemed not to be an allowable deduction from the assessable income of the company.
(4) Where a payment has been made by a person (whether under a guarantee or otherwise) that represents, in effect, a payment of interest under a convertible note to which this section applies and the company has incurred an outgoing by way of making good the first‑mentioned payment to that person, whether by way of indemnification or otherwise, the amount of that outgoing shall, for the purposes of this section, be deemed to be an outgoing consisting of interest under the convertible note.
(5) Section 25‑25 (Borrowing expenses) of the Income Tax Assessment Act 1997 does not apply to the expenditure incurred by the company in borrowing money by means of convertible notes to which this section applies.
82SA Interest on certain convertible notes to be an allowable deduction—where loan made on or after 1 January 1976
(1) Subject to the succeeding provisions of this section, section 82R does not apply in relation to a convertible note issued by a company where:
(a) the loan to the company to which the note applies is, under section 82M, to be treated as a new loan or an approved replacement loan for the purposes of this Division;
(b) the loan was made on or after 1 January 1976;
(c) the convertible note was issued before the expiration of 2 months after the loan was made; and
(d) the terms applicable to the convertible note are, at the time the note was issued and at all subsequent times, such that:
(i) an option is given to the holder or owner of the convertible note (in this Division referred to as the option to convert) to have allotted or transferred to him or her shares in the capital of the company or of another company;
(ii) no provision is made for the allotting or transferring of shares in the capital of the company or of another company to the holder or owner of the convertible note except in pursuance of the exercise of the option to convert or except in pursuance of a right that, under section 82P, is an approved right relating to the allotting or transfer of bonus shares to the holder or owner of the note;
(iii) the convertible note would not, but for the option to convert and any right of the kind referred to in subparagraph (ii), be a convertible note;
(iv) the earliest date on which the option to convert may be exercised is a date not later than 2 years after the date of offer;
(v) the latest date on which the option to convert may be exercised is a date not later than the maturity date of the loan or, if the date of offer is more than 10 years earlier than the maturity date, a date not later than 10 years after the date of offer;
(vi) the rate of interest payable in respect of the loan is, subject to subsection (5), the same in respect of all periods occurring before the maturity date of the loan;
(vii) subject to subsection (6), the obligations and rights of the holder or owner of the convertible note (including, but without limiting the generality of the foregoing, obligations and rights with respect to the amount payable on repayment, redemption or satisfaction of the loan and the terms on which shares are to be allotted or transferred in pursuance of the exercise of the option to convert) do not vary in his or her favour by reason that he or she exercises the option, or he, she or the company exercises any other right in relation to the note, at a later rather than at an earlier time after the issue of the note;
(viii) the rights of the holder or owner of the convertible note with respect to the amount payable on repayment, redemption or satisfaction of the loan do not vary according to whether or not he or she exercises the option to convert;
(ix) the shares to be allotted or transferred upon the exercise of the option to convert:
(A) are to be allotted or transferred within 2 months after the exercise of the option;
(B) in the case of shares to be allotted, are, upon payment of the amount payable in respect of the allotment, to be fully paid shares or, in the case of shares to be transferred, are, at the time of transfer, to be fully paid shares; and
(C) are to be shares of the same class as shares in the capital of the company that, not later than 6 weeks before the date that is the date of offer in relation to the loan, had been allotted and were fully paid;
(x) the shares to be allotted or transferred upon the exercise of the option to convert are to be shares with respect to which no provision is made (whether by the memorandum, or memorandum and articles, of the company, or other instrument constituting or defining the constitution of the company, or otherwise) for changing or converting them into shares of another class, except for the purpose of enabling, in accordance with any law relating to companies, the consolidation and division of all or any of the share capital of the company or of another company or the sub‑division of all or any of the shares in the capital of the company or of another company; and
(xi) the amount payable in respect of the allotment or transfer of a share in pursuance of the exercise of the option to convert is to be paid not later than 1 month after the allotment or transfer, and is to be not less than 90% of the amount that, in accordance with section 82T, is the value as at the valuation date of a fully paid share included in the class of shares in which the share to be allotted or transferred will be, or is, included.
(2) Where subsection (1) ceases to have effect in relation to a convertible note by reason of a change in the terms applicable to the note (not being a change resulting from a compromise or arrangement approved by a court), subsection (1) shall be deemed never to have had effect in relation to the note.
(3) Where a note is a convertible note in relation to which subsection (1) has effect and the right to exercise the option to convert relating to the note becomes exercisable by a person other than the holder or owner of the note by reason of an assignment of that right, the assignment shall, for the purposes of this section, be disregarded.
(4) Where, in relation to a convertible note issued by a company, the company or a director of the company does any act or thing for the purpose of, or purposes that include the purpose of, and having the effect of, causing the amount that, for the purposes of subsection (1), is the minimum amount applicable to a share to be allotted or transferred in pursuance of the exercise of the option to convert relating to the note, to be less than it would otherwise have been, subsection (1) does not have effect in relation to the note.
(5) Where, under the terms applicable to a convertible note, the rate of interest payable in respect of the loan to which the note applies is to be varied from time to time (otherwise than with retrospective effect) in accordance with changes, or changes exceeding a specified percentage, in the rate of interest prevailing from time to time:
(a) where the loan is a foreign loan, at a specified place outside Australia in respect of a specified class of transactions; or
(b) where the loan is not a foreign loan, in respect of a specified class of securities issued under an Act;
the term shall, for the purposes of subparagraph (1)(d)(vi), be deemed not to be a term providing for a variation in the rate of interest payable in respect of the loan.
(6) For the purposes of subparagraph (1)(d)(vii), the obligations and rights of the holder or owner of a convertible note shall not be deemed to vary in a manner referred to in that subparagraph by reason only that any dividend payable in respect of a share in the capital of a company to be allotted upon the exercise of the option to convert relating to the note, being a dividend payable during the period of 1 year after the allotment of the share, will or may vary according to the time when, in relation to the period to which the dividend relates, the option to convert is exercised.
82T Value of shares
(1) For the purposes of section 82SA, the value of a fully paid share as at the valuation date is:
(a) where:
(i) the share is included in a class of shares that, during the whole of the relevant valuation period, was listed for quotation in the official list of a stock exchange that was a prescribed stock exchange during the whole of that period, or in the official lists of 2 or more stock exchanges each of which was a prescribed stock exchange during the whole of that period; and
(ii) fully paid shares included in that class of shares were recorded by that stock exchange, or by one or more of those stock exchanges, as the case may be, as having been sold during that period;
an amount ascertained by dividing the total consideration paid or payable in respect of those sales by the total number of shares so recorded as having been sold; and