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18 Mar 15 Debt/equity: indirect investment in debt interest by non-resident – TD 2015/2

On 18 March 2015 the ATO issued a taxation determination which deals with the question whether s 974-80(1)(d) of the Income Tax Assessment Act 1997 (Cth) would be satisfied merely because a non-resident entity has chosen to invest indirectly in a debt interest issued by an Australian resident company and there is one or more equity interests interposed between the non-resident entity and the entity holding the debt interest: Taxation Determination TD 2015/2 (18 March 2015).

The determination answers the question in the negative. The fact that a non-resident entity has decided to invest indirectly in an Australian resident company through one or more interposed entities and the final leg in the chain is a debt interest will not of itself be sufficient to form a conclusion under s 974-80(1)(d)1 that there is a scheme, or a series of schemes, designed to operate so that the returns on the debt interest are used to fund returns on what is in substance equity held by another person (the “ultimate recipient”).

This determination was previously issued in draft as TD 2014/D18.

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