Income Tax Assessment Act 1997

A *scheme is a financing arrangement for an entity if it is entered into or undertaken:

to raise finance for the entity (or a *connected entity of the entity); or

to fund another scheme, or a part of another scheme, that is a *financing arrangement under paragraph (a); or

to fund a return, or a part of a return, payable under or provided by or under another scheme, or a part of another scheme, that is a financing arrangement under paragraph (a).

The following are examples of *schemes that are generally entered into or undertaken to raise finance:

a bill of exchange;

income securities;

a *convertible interest that will convert into an *equity interest.

Paragraph (a) is likely to be relevant for debt interests, paragraph (b) for equity interests and paragraph (c) for both.

The following are examples of *schemes that are generally not entered into or undertaken to raise finance:

a derivative that is used solely for managing financial risk;

a contract for personal services entered into in the ordinary course of a business.

These may be relevant for both debt interests and equity interests.

For the purposes of subsection (1), the following *schemes are taken not to be entered into or undertaken to raise finance:

a lease or bailment that satisfies all of the following:

the property leased or bailed is not property to which Division 16D of Part III of the Income Tax Assessment Act 1936 (arrangements relating to the use of property) applies;

the lease or bailment is not a relevant agreement for the purposes of section 128AC of that Act (deemed interest in respect of hire‑purchase and certain other arrangements);

the lease or bailment is not an *arrangement to which Division 240 of this Act (about arrangements treated as a sale and loan), or Division 242 of this Act (about luxury car leases), applies;

the lessee or bailee, or a *connected entity of the lessee or bailee, is not to, and does not have an obligation (whether contingent or not) or a right to, acquire the leased or bailed property;

Division 250 of this Act does not apply to a person and the property leased or bailed;

a securities lending arrangement under section 26BC of the Income Tax Assessment Act 1936;

a life insurance or general insurance contract undertaken as part of the issuer’s ordinary course of business;

a scheme for the payment of royalties (within the meaning of the Income Tax Assessment Act 1936) other than:

a qualifying arrangement for the purposes of Division 16D of Part III of the Income Tax Assessment Act 1936; or

a relevant agreement for the purposes of section 128AC of that Act; or

a scheme or arrangement for the payment of royalties in relation to an asset if Division 250 of this Act applies to a person and the asset.

The regulations may:

specify that particular *schemes are not financing arrangements; and

specify circumstances in which a scheme will not be a financing arrangement.