Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) This section provides for some payments to a private company in relation to a loan the private company made to an entity not to be taken into account for the purpose of working out:
(a) how much of the loan has been repaid for the purposes of sections 109D and 109E (which treat amounts of loans that have not been repaid as dividends); or
(b) the minimum yearly repayment for the loan under subsection 109E(5).
(2) A payment must not be taken into account if:
(a) a reasonable person would conclude (having regard to all the circumstances) that, when the payment was made, the entity intended to obtain a loan or loans from the private company of a total amount similar to, or larger than, the payment; or
(b) both of the following subparagraphs apply:
(i) the entity obtained, before the payment was made, a loan or loans from the private company of a total amount similar to, or larger than, the amount of the payment;
(ii) a reasonable person would conclude (having regard to all the circumstances) that the entity obtained the loan or loans in order to make the payment.
(3) Subsection (2) does not apply to a payment made by setting off against an amount payable in relation to the loan:
(a) a dividend payable by the private company to the entity; or
(b) work and income support related withholding payments and benefits payable by the private company to the entity; or
(ba) payments covered by section 12 - 55 in Schedule 1 to the Taxation Administration Act 1953 ; or
(c) if the entity has transferred property to the private company--an amount equalling the difference between:
(i) the amount that a party at arm's length from the entity would have paid for the transfer of the property to the party; and
(ii) the amount that the private company has already paid the entity (by way of set - off or otherwise) for the transfer.
(4) Nor does subsection (2) apply to a payment made on behalf of the entity (the borrower ) by another entity paying to the private company an amount that:
(a) is payable by the other entity to the borrower; and
(b) is assessable income of the borrower for the year of income in which the payment was made or an earlier year of income.
(5) Subsection (2) does not apply to a payment if:
(a) the payment is made to refinance the loan mentioned in subsection (1) (the old loan ); and
(b) the entity to which the old loan was made has another loan (the primary loan) from another entity; and
(c) the old loan becomes subordinated to the primary loan; and
(d) the refinancing of the old loan mentioned in paragraph (a) took place in connection with that subordination; and
(e) that subordination arose as a result of circumstances beyond the control of the entity to which the old loan was made; and
(f) the entity to which the old loan was made and the other entity dealt with each other at arm's length in relation to that subordination; and
(g) the private company and the other entity dealt with each other at arm's length in relation to that subordination.
(6) Subsection (2) does not apply to a payment if:
(a) the payment is made to refinance the loan mentioned in subsection (1) (the old loan ); and
(b) the refinancing results in another loan (the new loan ); and
(c) the maximum term of the old loan under subsection 109N(3) was 7 years; and
(d) the maximum term of the new loan under subsection 109N(3) is 25 years (reduced in accordance with subsection 109N(3B)).
(7) Subsection (2) does not apply to a payment if:
(a) the payment is made to refinance the loan mentioned in subsection (1) (the old loan ); and
(b) the refinancing results in another loan (the new loan ); and
(c) the maximum term of the old loan under subsection 109N(3) was 25 years; and
(d) the maximum term of the new loan under subsection 109N(3) is:
(i) unless subparagraph (ii) applies--7 years; or
(ii) if subsection 109N(3D) applies--7 years reduced in accordance with that subsection.