Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) You have a financial arrangement if you have, under an * arrangement:
(a) a * cash settlable legal or equitable right to receive a * financial benefit; or
(b) a cash settlable legal or equitable obligation to provide a financial benefit; or
(c) a combination of one or more such rights and/or one or more such obligations;
unless:
(d) you also have under the arrangement one or more legal or equitable rights to receive something and/or one or more legal or equitable obligations to provide something; and
(e) for one or more of the rights and/or obligations covered by paragraph (d):
(i) the thing that you have the right to receive, or the obligation to provide, is not a financial benefit; or
(ii) the right or obligation is not cash settlable; and
(f) the one or more rights and/or obligations covered by paragraph (e) are not insignificant in comparison with the right, obligation or combination covered by paragraph (a), (b) or (c).
The right, obligation or combination covered by paragraph (a), (b) or (c) constitutes the financial arrangement.
Note 1: Whether your rights and/or obligations under an arrangement constitute a financial arrangement can change over time depending on changes either to the terms of the arrangement or external circumstances (such as particular rights or obligations under the arrangement being satisfied by the parties). For example, a contract may provide for the transfer of a boat in 6 months time and payment of the contract price at the end of 2 years. Until the boat is delivered, there is no financial arrangement because of the operation of paragraphs (d), (e) and (f) above. Once the boat is delivered, there is a financial arrangement because those paragraphs are no longer applicable.
Note 2: The operative provisions of this Division do not apply to all financial arrangements, and only apply partially to some: see the exceptions in Subdivision 230 - H.
Note 3: There are some rules in this Division that tell you what happens if an arrangement ceases to be a financial arrangement (see Subdivision 230 - G and section 230 - 505).
(2) A right you have to receive, or an obligation you have to provide, a * financial benefit is cash settlable if, and only if:
(a) the benefit is money or a * money equivalent; or
(b) in the case of a right--you intend to satisfy or settle it by receiving money or a money equivalent or by starting to have, or ceasing to have, another * financial arrangement; or
(c) in the case of an obligation--you intend to satisfy or settle it by providing money or a money equivalent or by starting to have, or ceasing to have, another financial arrangement; or
(d) you have a practice of satisfying or settling similar rights or obligations as mentioned in paragraph (b) or (c) (whether or not you intend to satisfy or settle the right or obligation in that way); or
(e) you deal with the right or obligation, or with similar rights or obligations, in order to generate a profit from short - term fluctuations in price, from a dealer's margin, or from both; or
(f) none of paragraphs (a) to (e) applies but you satisfy subsection (3); or
(g) you are able to settle the right or obligation as mentioned in paragraph (b) or (c) (whether or not you intend to satisfy or settle the right or obligation in that way) and you do not have, as your sole or dominant purpose for entering into the arrangement under which you are to receive or provide the financial benefit, the purpose of receiving or delivering the financial benefit as part of your expected purchase, sale or usage requirements.
A reference in paragraph (b) or (c) to a financial arrangement does not include a reference to something that is a financial arrangement under section 230 - 50.
Note: Examples of dealing of the kind covered by paragraph (e) are:
(a) dealing with the right or obligation, or similar rights or obligations, on a frequent basis, a short - term basis or on a frequent and short - term basis; and
(b) acquiring the right or obligation, or similar rights or obligations, and managing the resulting risk by entering into offsetting arrangements that provide a profit margin.
(3) You satisfy this subsection if:
(a) the * financial benefit is readily convertible into money or a * money equivalent; and
(b) there is a market for the financial benefit that has a high degree of liquidity; and
(c) subsection (4) or (5) is satisfied.
(4) This subsection is satisfied if, for the recipient of the * financial benefit, the amount of the money or * money equivalent referred to in paragraph (3)(a) is not subject to a substantial risk of substantial decrease in value.
(5) This subsection is satisfied if your purpose, or one of your purposes, for entering into the arrangement under which you are to receive or provide the * financial benefit, is to receive or deliver the financial benefit:
(a) to raise or provide finance; or
(b) if paragraph (a) does not apply--so that it may be converted or liquidated into money or a money equivalent (other than as part of your expected purchase, sale or usage requirements).