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03 Jul 08 Capital protected products - administrative treatment

As announced in the 2008-09 Budget, the benchmark interest rate in the capital protected borrowing rules will be changed to the Reserve Bank of Australia's indicator variable rate for standard housing loans. The amendment will apply to capital protected borrowing arrangements entered into after 7.30pm (AEST) on 13 May 2008. The current law, which applies the Reserve Bank of Australia's indicator variable rate for personal unsecured loans to determine the cost of capital protection, will continue to apply to existing capital protected borrowing arrangements for a period of five years or the life of the product, whichever is the shorter.

The ATO has advised that it will apply the existing law in the period between the announcement and enactment of the proposed law and will not undertake specific compliance activity to enforce the existing law during the period between the announcement and enactment of the proposed law.

For a copy of the ATO advice, go here


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