(1A) Subject to subsection (1B), for the purposes of this subsection and sections 128AA, 128AB, 128AD, 128C, 128NA and 128NBA:
(a) a reference to the reduced issue price of a security that has been partially redeemed on one or more occasions is a reference to the issue price of the security reduced by the amount of the partial redemption or the sum of the amounts of the partial redemptions, as the case may be;
(b) expressions used in this subsection or those sections that are also used in Division 16E have the same respective meanings as in that Division; and
(c) sections 159GV (other than subsection 159GV(2)) and 159GZ apply as if references in those sections to “this Division” were references to “subsection 128A(1A) and sections 128AA, 128AB, 128AD, 128C, 128NA and 128NBA”.
(1B) Subsection (1A) applies as if:
(a) paragraph (c) of the definition of qualifying security in subsection 159GP(1) were omitted; and
(b) paragraph (a) of the definition of security in that subsection included a reference to debt interests.
(2) For the purposes of this Division, interest or a royalty shall be deemed to have been paid by a person to another person although it is not actually paid over to the other person but is reinvested, accumulated, capitalized, carried to any reserve, sinking fund or insurance fund however designated, or otherwise dealt with on behalf of the other person or as the other person directs.
(3) For the purposes of this Division, a beneficiary who is presently entitled to a dividend, to interest or to a royalty included in the income of a trust estate shall be deemed to have derived income consisting of that dividend, interest or royalty at the time when he or she became so entitled.
(4) In section 260, income tax or tax includes withholding tax.
(5) For the purposes of this Division:
(a) the borrowing of moneys by a company by means of the issue of a number of debentures or debt interests in one borrowing operation shall be deemed to be the raising of a loan;
(b) subject to paragraph (a), each receipt of moneys by a borrower under a contract under which moneys are to be, or may be, advanced by way of loan shall be deemed to be the raising of a loan; and
(c) the moneys received by the raising of a loan, less the expenses of borrowing, shall be deemed to be the loan moneys in respect of the loan.
(6) A reference in this Division to beneficial interests in relation to an entity shall be read:
(a) in the case of an entity being a company or the partners in a partnership—as a reference to beneficial interests in respect of the capital of, and in respect of any profits or income of, the company or partnership;
(b) in the case of an entity being persons carrying on a joint venture—as a reference to beneficial interests in respect of the enterprise; and
(c) in the case of an entity being the trustees of a trust—as a reference to beneficial interests under the trust.
(7) A reference in this Division to the use of moneys for the purposes of an enterprise shall be read as not including use of those moneys in the course of carrying on an enterprise:
(a) by way of providing capital for another enterprise; or
(b) by way of the making of loans.
(9) For the purposes of this Division:
(a) a reference to particular loan moneys (including the reference in paragraph (b)) includes a reference to moneys that, in the opinion of the Commissioner, represent those loan moneys; and
(b) without limiting the generality of paragraph (a):
(i) moneys received by way of repayment of a loan made out of particular loan moneys; and
(ii) moneys received in respect of shares in the capital of a company, being shares purchased or subscribed for by the expenditure of particular loan moneys, upon a sale of the shares, a return of capital by the company or liquidation of the company;
shall be deemed to represent those loan moneys.
(10) For the purposes of this Division, the trustee of a provident, benefit, superannuation or retirement fund is a non‑resident at a particular time if, and only if, the fund is a foreign superannuation fund at that time.
(11) If, apart from this subsection, there is, in relation to a fund, no person who is a trustee of the fund for the purposes of this Division, the person, or each of the persons, who manages the fund is taken, for the purposes of this Division, to be the trustee, or a trustee, as the case requires, of the fund.
128AA Deemed interest in respect of transfers of certain securities
(1) Where:
(a) a person transfers a qualifying security; and
(b) the transfer price of the security exceeds the issue price or, where the security has been partially redeemed, the reduced issue price of the security;
so much of the transfer price as equals the excess referred to in paragraph (b) shall, for the purposes of this Division, be deemed to be income that consists of interest.
(2) For the purposes of references to the transfer price, issue price or reduced issue price of a qualifying security in subsection (1), any application of subsection 159GP(2) shall be disregarded.
128AB Certificates relating to issue price of certain securities
(1) Where:
(a) a qualifying security is or was transferred either before or after the commencement of this section; and
(b) at the time of transfer either:
(i) the transferor is or was a resident; or
(ii) the transferor is or was a non‑resident and the transfer price is or was derived from a source in Australia;
the transferee may at any time after the transfer (including a time after the transferee ceases to be the holder of the security) apply, in the approved form, to the Commissioner for the issue of a certificate under this section.
(3) Where the Commissioner is satisfied that the requirements of paragraph (1)(b) are satisfied in relation to the transfer of the qualifying security to which an application under subsection (1) relates and that the security was transferred on a particular date and for a particular consideration to the applicant, the Commissioner shall issue to the applicant a certificate that:
(a) is expressed to be issued under this section;
(b) identifies the security to which it relates;
(c) specifies that date as the date of transfer;
(d) specifies that consideration, or, where subsection 159GP(2) applies, the amount that is taken under that subsection to be the consideration for the transfer, as the transfer price; and
(e) specifies the name of the applicant as the transferee.
(4) Where the Commissioner issues a certificate under this section in relation to a qualifying security that has been transferred to a person, the following provisions have effect:
(a) for the purposes of the application of this Division in relation to the first subsequent transfer (if any) of the qualifying security by the person:
(i) the amount specified in the certificate shall be taken to be the issue price of the security; and
(ii) where the security was partially redeemed before the transfer to the person—any such partial redemption shall be taken not to have occurred;
(b) if the security is redeemed or partially redeemed without having been subsequently transferred by the person—in determining for the purposes of the application of this Division the extent (if any) to which the redemption payment comprises an amount that is interest by reason only of the definition of interest in subsection 128A(1AB):
(i) the amount specified in the certificate as the transfer price shall be taken to be the issue price of the security; and
(ii) where the security was partially redeemed before the transfer to the person—any such partial redemption shall be taken not to have occurred.
(5) If the Commissioner refuses an application under subsection (1), the Commissioner shall serve on the applicant, by post or otherwise, notice in writing that the application has been refused.
128AC Deemed interest in respect of hire‑purchase and certain other agreements
(1) In this section:
agreement means any agreement, arrangement or understanding, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.
attributable agreement payment, in relation to a relevant agreement, means so much of any payment made or liable to be made under the agreement as represents consideration for the use, sale or disposal of the relevant agreement property.
carry forward interest, in relation to an attributable agreement payment in relation to a relevant agreement, means so much (if any) of the notional interest in relation to the payment as exceeds the amount of the payment.
eligible value, in relation to the relevant agreement property in relation to a relevant agreement, means the market value of the property at the time at which the agreement commences or commenced to apply in relation to the property.
formula interest, in relation to an attributable agreement payment in relation to a relevant agreement, means the amount ascertained in accordance with the formula Start formula start fraction 2 times A times C over B open bracket B plus 1 close bracket end fraction end formula, where:
A is the total interest in relation to the relevant agreements.
B is the total number of attributable agreement payments liable to be made under the relevant agreements; and
C is the number that is B, reduced by the number of attributable agreement payments made under the relevant agreement before the attributable agreement payment concerned.
notional interest, in relation to an attributable agreement payment in relation to a relevant agreement, means the sum of the formula interest (if any) in relation to the payment and the carry forward interest (if any) in relation to the immediately preceding attributable agreement payment in relation to the relevant agreement.
relevant agreement means an agreement entered into after 16 December 1984, being:
(a) a hire‑purchase agreement; or
(b) a lease or any other agreement relating to the use by a person of property owned by another person, being a lease or agreement under which:
(i) the lessee or person using the property is entitled to purchase or require the transfer of the lease property or property subject to the agreement on the termination or expiration of the lease or agreement; or
(ii) the lease term or term of the agreement is for all, or substantially all, of the effective life of the lease property or property subject to the agreement.
relevant agreement property, in relation to a relevant agreement, means:
(a) in the case of a hire‑purchase agreement—the property that is the subject of the agreement; and
(b) in any other case—the property in relation to which subparagraph (b)(i) or (ii) of the definition of relevant agreement applies.
total interest, in relation to a relevant agreement, means the sum of all of the attributable agreement payments liable to be made under the relevant agreement, reduced by the eligible value of the relevant agreement property.
(2) Where an agreement (including a hire‑purchase agreement and a lease) relates to the use by a person of 2 or more items of property owned by another person, this section applies as if, instead of the single agreement, there were separate agreements relating to the use of each of the items of property having such of the terms of the first‑mentioned agreement as are relevant.
(3) Where a variation is or was made in the terms of, or liability to make payments under, a relevant agreement, then, for the purposes of the application of this section:
(a) the relevant agreement shall be taken to be, or to have been, terminated at the time at which the variation has effect; and
(b) a new relevant agreement shall be taken to be, or to have been, entered into at the time at which the variation has effect and on the terms of the first‑mentioned relevant agreement as so varied.
(4) Where any right or option under an agreement to extend the term of, or otherwise vary the effect of, the agreement is or was exercised, then, for the purposes of this section, the exercise of that right or option shall be taken to be a variation of the terms of the agreement to provide for the extension or other effect.
(5) Where an attributable agreement payment in relation to a relevant agreement is made, so much of the attributable agreement payment as does not exceed the notional interest in relation to the payment shall, for the purposes of this Division, be deemed to be income that consists of interest.
(6) Where:
(a) a relevant agreement is entered into after the commencement of this section; and
(b) at the time at which the relevant agreement is entered into, the total interest in relation to the relevant agreement exceeds the sum of all amounts that, if all of the attributable agreement payments liable to be made under the relevant agreement were made, would, disregarding this subsection, be deemed to be income that consists of interest under subsection (5) in relation to the relevant agreement;
the amount of the notional interest in relation to the first attributable agreement payment in relation to the relevant agreement shall, for the purposes of this section, be increased by an amount equal to the excess referred to in paragraph (b).
(7) For the purposes of section 128D, where withholding tax is payable on a part of an attributable agreement payment that is taken under subsection (5) of this section to be an amount of interest, the withholding tax shall be taken to be payable on the whole of the attributable agreement payment.
128AD Indemnification etc. agreements in relation to bills of exchange and promissory notes
(1) Where:
(a) the drawer of a bill of exchange issued after the day on which this section comes into operation pays an amount (in this subsection referred to as the indemnification amount) to the acceptor of the bill to indemnify, reimburse or otherwise compensate the acceptor in respect of the whole or a part of an amount (which whole or part is in this subsection referred to as the eligible presentment amount) that the acceptor has, or will, become liable to pay to the payee under the bill on presentment of the bill;
(b) no part of the indemnification amount is, or will be, included in the assessable income of the acceptor of any year of income; and
(c) the whole or a part (in this subsection referred to as the eligible presentment interest) of the eligible presentment amount consists or will consist of interest;
so much of the indemnification amount as indemnifies, reimburses or otherwise compensates the acceptor in respect of the eligible presentment interest shall, for the purposes of this Division, be deemed to be income that consists of interest.
(2) Where:
(a) a person (in this subsection referred to as the indemnifier) pays an amount (in this subsection referred to as the indemnification amount) to the issuer of a promissory note issued after the day on which this section comes into operation to indemnify, reimburse or otherwise compensate the issuer in respect of the whole or a part of an amount (which whole or part is in this subsection referred to as the eligible presentment amount) that the issuer has, or will, become liable to pay to the payee under the note on presentment of the note;
(b) no part of the indemnification amount is, or will be, included in the assessable income of the issuer of any year of income; and
(c) the whole or a part (in this subsection referred to as the eligible presentment interest) of the eligible presentment amount consists or will consist of interest;
so much of the indemnification amount as indemnifies, reimburses or otherwise compensates the issuer in respect of the eligible presentment interest shall, for the purposes of this Division, be deemed to be income that consists of interest.
128AE Interpretation provisions relating to offshore banking units
(1) In this Division, unless the contrary intention appears:
borrow includes raise finance by the issue of a security.
lend includes provide finance by the purchase of a security.
OB activity has the same meaning as in section 121D.
offshore banking unit has the meaning given by this section.
offshore borrowing means:
(a) a borrowing in any currency, by a person who is or has been an offshore banking unit, from a non‑resident who is not a related person (within the meaning of Division 9A); or
(b) a borrowing in a currency other than Australian currency, by a person who is or has been an offshore banking unit, from a resident or a related person (within the meaning of Division 9A).
offshore gold borrowing means borrowing gold from an offshore person within the meaning of section 121E.
prevailing borrowing rate, in relation to a person who is or has been an offshore banking unit, in relation to a particular time, means the effective annual interest rate that the Commissioner considers was payable by the person on borrowings at or about that time or, where there were none, by offshore banking units generally at or about that time.
prevailing borrowing term, in relation to a person who is or has been an offshore banking unit, in relation to a particular time, means the period that the Commissioner considers was the usual term of borrowings by the person at or about that time or, where there were none, by offshore banking units generally at or about that time.
security means a bond, debenture, debt interest, bill of exchange, promissory note or other security or similar instrument.
tax exempt gold means gold that is tax exempt gold under this section.
tax exempt loan money means an amount that is tax exempt loan money under this section.
transfer to a person includes apply an amount for the benefit of a person.