Draft Taxation Determination TD 2008/D5 was released on 22 October 2008. Its full title is: "Income tax: (a) are credits for United Kingdom interest withholding tax paid allowable under Article 22.1(a) of the 2003 United Kingdom Convention to an Australian resident financial institution which enters into an arrangement of the kind described in Taxpayer Alert TA 2007/3; and (b) would the Commissioner consider the application of Part IVA of the Income Tax Assessment Act 1936 to the arrangement?" The ATO's response to question (a) is No and its response to question (b) is Yes.
Taxpayer Alert TA 2007/3 describes an arrangement where an Australian resident taxpayer seeks to enhance its return on a bond investment, through access to foreign tax credits for withholding tax claimed to be payable under the arrangement. The desired net effect of the arrangement is that neither the bond issuer group, nor the Australian resident taxpayer, bears the economic cost of the tax withheld: see 2007 TAXVINE No 19 (20) (18 May 2007).
For a copy of TD 2008/D15 go here