INCOME TAX ASSESSMENT ACT 1997 - SECT 230.165 Portfolio treatment of premiums and discounts for acquiring portfolio

INCOME TAX ASSESSMENT ACT 1997 - SECT 230.165

  (1)   This section applies in relation to a * financial arrangement if:

  (a)   you have made an election under section   230 - 150 in an income year; and

  (b)   you start to have the financial arrangement in that income year or a later income year; and

  (c)   the financial arrangement is part of a portfolio of similar financial arrangements; and

  (d)   a gain or loss to which subsection   230 - 130(3) applies arises in part from a premium or discount in starting to have the portfolio; and

  (e)   the gain or loss is not expected to be significant relative to the amount of the gain or loss on the portfolio.

  (2)   For the purposes of this Division, split the gain or loss mentioned in paragraph   (1)(d) as follows:

  (a)   to the extent that it arises from the premium or discount, treat it as a gain or loss from the * financial arrangement (the premium/discount gain or loss ) to which subsection   230 - 130(3) applies;

  (b)   to the extent that it does not arise from the premium or discount, treat it as a separate gain or loss from the financial arrangement to which subsection   230 - 130(3) applies.

Note:   The separate gain or loss mentioned in paragraph   (b) may itself be split under subsection   230 - 160(2) (portfolio fees gain or loss).

Determination of period for premium/discount gain or loss

  (3)   The period over which the premium/discount gain or loss is to be spread is the period that you determine to be the expected life of the portfolio, if:

  (a)   the basis on which you determine the period accords with the spreading of the premium/discount gain or loss for the purposes of the profit or loss statement of the financial report mentioned in paragraph   230 - 150(1)(a); and

  (b)   the basis on which you determine the period is set and recorded before you start to have the * financial arrangement; and

  (c)   the period can be justified objectively; and

  (d)   the period is reasonable in the circumstances.

Spreading the premium/discount gain or loss

  (4)   The method by which the premium/discount gain or loss is to be spread is the method that you determine, if:

  (a)   the basis on which you determine the method accords with the spreading of the premium/discount gain or loss for the purposes of the profit or loss statement of the financial report mentioned in paragraph   230 - 150(1)(a); and

  (b)   the method is determined before you start to have the * financial arrangement; and

  (c)   the method can be justified objectively; and

  (d)   the method is reasonable in the circumstances.

  (5)   To avoid doubt, subsections   (3) and (4) apply despite sections   230 - 130 and 230 - 135.