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04 Dec 08 Taxation of Financial Arrangements Bill 2008 introduced

On 4 December 2008, Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008 was introduced into the House of Representatives. The following is extracted from the Explanatory Memorandum.

This Bill amends the ITAA 1997 by inserting Division 230. Division 230 defines ‘financial arrangement’ and sets out the methods under which gains and losses from financial arrangements will be brought to account for tax purposes. These methods - accruals, realisation, fair value, retranslation, hedging and financial reports - determine the tax-timing treatments of all financial arrangements covered by Division 230. This Bill establishes criteria that determine how different financial arrangements are assigned to, and treated under, the different tax-timing methods. The Bill also effectively removes the capital/revenue distinction for most financial arrangements by treating the gains and losses on revenue account, except where specific rules apply. Date of effect: These amendments will apply to income years commencing on or after 1 July 2010, unless a taxpayer elects to apply the amendments to income years commencing on or after 1 July 2009.

In a media release issued on 4 December 2008, the Assistant Treasurer, Chris Bowen, said that the Bill brings to a conclusion a process that was first announced in the 1992 Budget and which was confirmed as important by the Ralph Review of Taxation in 1999.

"Since the 2007 TOFA Stages 3 and 4 Bill lapsed following the calling of the 2007 Federal election, the legislation has undergone a number of amendments, including the addition of consolidation interaction rules and changes to the accruals rules to better reflect commercial practices," Mr Bowen said. "There has been substantial consultation on this Bill over the last 12 months. The Bill also includes integrity rules to address value shifting and non-arm's length dealings in relation to financial arrangements."

For a copy of the Bill, go here.

For a copy of the Explanatory Memorandum, go here.

For a copy of the Assistant Treasurer's media release, No 2008/103, 4 December 2008, go here.

The Financial Services Taxation Conference incorporates specialist TOFA workshops. Click here to download the full program.


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