Bills Digest no. 56 2007–08
Tax Laws Amendment (Taxation of Financial Arrangements)
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact officer & copyright details
Amendment (Taxation of Financial Arrangements) Bill
20 September 2007
House: House of Representatives
Schedule 1, Items 1 to 21
and Items 23 to 84, 87, 89, 91, 93 and 95 to 99 Royal Assent, Item
22 1 July 2003, Items 85 and 86, 88, 90, 92, and 94 Immediately
after the commencement of the New Business Tax Systems
(Taxation of Financial Arrangements) Act (No. 1) 2003 (17
latter Act applied to the disposal or redemption of a traditional
security if the traditional security was issued after 7.30 pm, by
legal time in the Australian Capital Territory, on 14 May
amendments contained in the Bill will apply to income years
commencing on or after 1 July 2009 unless a taxpayer elects to
apply the amendments to income years commencing on or after 1 July
Links: The relevant
links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
inserts new Division 230 into the Income Tax
Assessment Act 1997 (ITAA97). The proposed Division defines
the term financial arrangement and sets out six alternative methods
for the profits and loss from transactions involving financial
arrangements to be assessed for taxation purposes.
For the purposes of this Bill a financial
arrangement is a right to receive or an obligation to provide a
benefit that is:
monetary in nature
non-monetary in nature and may be settled by
money or a money equivalent, or
in substance and effect monetary in
In short, these obligations are cash settlable
. Further, it does not matter that the value of the arrangement, or
its existence is contingent on some event or other matter
occurring. Rather, it is enough for these rights and obligations to
formally exist and be capable of execution. 
The above definition seeks to cover the
elements common to a wide range of financial instruments, such as
futures and options, credit swaps, forward agreements and other
financial products. The definition also covers more traditional
financial arrangements such as loans, promissory notes and
The pace at which new financial products have
been devised and used, by both business and industry, has been
rapid in the past two decades. The use of futures and options,
forward contracts and hybrid debt/equity securities (to name a few)
has increased as business has sought to protect itself from
financial risks in an increasingly global environment.
The Explanatory Memorandum argues that
government responses to the use of these new financial instruments
has been ad hoc and piecemeal in nature and that taxation law lacks
an overarching framework for the tax assessment of these
The result of this approach is that the legal
form, not the economic substance, of a transaction has been the
basis for the taxation of these arrangements. This has led to
inconsistent treatment of arrangements with similar economic
outcomes but of different legal forms, uncertainties in the
application of the law and a mismatch between the point at which
the gains or losses arising from these arrangements are realised
and the point at which they are taxed. Ideally, the realisation of
the gains and losses, and the tax treatment of those events, should
occur at the same time.
These difficulties have favoured the use of
some types of financial arrangement over others, due to the more
favourable tax treatment. Thus tax law is said to impact adversely
on pricing, risk management and the efficient allocation of
financial resources. 
As noted above, the proposed changes are based
on a single comprehensive definition of a financial arrangement.
The proposed new Division contains six methods under which the
gains and losses from these transactions are realised and assessed
for taxation purposes. The difference between capital and revenue
is removed and all losses and gains are recorded on an entities
revenue account. Losses are tax deductible, and gains are tax
A particular feature of the proposed changes
is that the recognition of gains and losses are closely aligned
with the relevant Australian Accounting Standards.
In the context of the proposed
Division 230, three of the most relevant
accounting standards are:
Australian Accounting Standard AASB 139
Financial Instruments: Recognition and Measurement which
covers recognition and measurement of financial assets and
Australian Accounting Standard AASB 121 The
Effects of Changes in Foreign Exchange Rates which covers
certain gains and losses attributable to changes in foreign
exchange rates; and
- Australian Accounting Standard AASB 127 Consolidated and
Separate Financial Statements which covers the preparation and
presentation of consolidated financial statements for a group of
entities under the control of a parent. 
No-one would disagree that the Taxation of
Financial Arrangements (TOFA) project has been long and difficult.
Treasury s first public step along this journey was the
Consultative Document released in 1993.  The Senate Economics References
Committee examined this issue in September 1995 and concluded that
the consultative process then undertaken by the Australian Taxation
Office was the preferred method for further developing these
matters.  A
further Issues Paper was released in 1996,  and the Review of Business Taxation
revisited the territory in 1999.
This decade of ongoing consultation, drafting
and re-drafting led to TOFA stage one in the debt-equity
legislation of 2001.  Stage two was the foreign exchange legislation of 2003.
 TOFA stages three
and four are contained in the current Bill. 
The current Bill has been subject to extensive
business and industry consultation. A substantial exposure draft
was released on 5 December 2005.  A revised draft of the proposed changes was
released for comment on 3 January 2007.  Further confidential exposure drafts
were released in May and August 2007.  Extensive comment was made on the
December 2005 and January 2007 drafts by a wide range of business
and industry organisations.  No doubt, those receiving the May and August 2007
drafts also made comments.
The government s intention to adopt a number
of the recommendations of the Review of Business Taxation (i.e. the
Ralph review) was first announced in the Treasurer s press release
of 11 November 1999.  The government s intention to proceed with TOFA stages
three and four was announced in the Minister for Revenue and
Assistant Treasurer s press release of 4 August 2004. 
Press reports have indicated widespread
support for the proposed changes in this Bill. 
The Australian Bankers Association has
welcomed the proposed changes in this Bill.  The Corporate Tax Association and a
number of accounting groups are reported as also welcoming the
proposed changes, though they stress that there is still more to do
in this area. 
Clearly, the proposed changes would provide a
greater degree of certainty in the taxation of financial
arrangements. The proposal to closely align the proposed changes
with the prevailing Australian Accounting Standards would reduce
business and industry compliance costs. Further, if successful,
these changes would reduce the influence of tax considerations on
the choice of a financial arrangement, thus encouraging the use of
the most appropriate arrangement in any particular situation.
The author understands that the ALP broadly
supports the proposed changes.
The Explanatory Memorandum notes that the
financial impact of the proposed changes is unquantifiable .
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The majority of the proposed changes in this
Bill are contained in Part 1 of Schedule
1 of this Bill.
Item 1 of Schedule
1 inserts Division 230 into the ITAA97.
This Division specifies the tax treatment of gains and losses from
Proposed section 230-5
specifies that the new Division does not apply to:
an individual, or
an Authorised Deposit-taking Institution (ADI)
or other financial sector entity with a total annual turnover of
less than $20m, or
another entity with an annual turnover of less
than $100m, and
the financial arrangement is to last less than
12 months, or is not a qualifying security .
A qualifying security is defined in
subsection 159GP(1) of the Income Tax
Assessment Act 1936 (ITAA36). Broadly, it is a security which,
at the time of issue, is reasonably likely to result in the sum of
the payments (excluding periodic interest as defined in
subsection 159GP(6) of the ITAA 1936) exceeding
the statutorily established formula in subsection
159GP(1) of the ITAA 1936. 
230-5(2)(b) also exempts financial arrangements from the
scope of the new Division that are equity interests if neither:
apply to the particular arrangement (see below
for further discussion of these elections).
Under proposed section 230-55
all other equity interests are classed as financial
Equity interests will include such securities
as shares, but will also include a wider range of securities and
arrangements such as convertible notes or arrangements that are
linked to the level of a particular equity index (e.g. the
Australian Stock Exchange All Ordinaries Index). It also includes
arrangements where the parties have the right to receive, or an
obligation to provide, equity interests in settlement of a
Technically, an equity interest has the
meaning given by Subdivision 974-C of the ITAA
1997 in the case of a company (contained within Division
974 of the ITAA 1997 dealing with debt and equity
interests), and by section 820-930 of the ITAA
1997 in the case of a partnership or trust (contained within
Subdivision 820-J of the ITAA 1997, dealing with
equity interests in a trust or partnership under the thin
capitalisation rules). 
Proposed subsection 230-45(1)
specifies the 6 methods for taking a gain or loss into account
arising from a financial arrangements. These methods are:
The balancing adjustment method is also used
in conjunction with most of the above methods when an estimated
gain or loss needs to be adjusted in the light of an actual outcome
or change in circumstances, or when a financial arrangement
Generally, the accruals and realisation methods
will apply unless the taxpayer elects to use another method, as
circumstances require. Proposed subsection
230-45(2) enables such an election to be made.
Proposed sections 230-50 and
230-55 precisely define the term financial
arrangement in the terms discussed above. The proposed legislation
specifies that a financial arrangement exists even if the entity
who provides or receives the financial benefit is not a formal
party to the arrangement (proposed section
Proposed section 230-85 requires
the taxpayer to use any method in a consistent manner for working
out gains or losses arising from a financial arrangement.
Further, the Explanatory Memorandum notes that
the methods used, should be used consistently both from year to
year for a particular financial arrangement (subject to a
particular method ceasing to apply, for example where the
requirements for its application are no longer met), and where the
taxpayer is entitled to choose to apply a method in a particular
manner they must use the same manner for all financial arrangements
that are of a similar nature.  This is illustrated in the provisions that make
each election irrevocable once made; such as proposed
subsection 230-180(3) which specifies that once a
fair value election is made it is irrevocable.
These rules make the choice of a particular
method for assessing the gains and losses for a financial
arrangement a very important choice indeed. Once the taxpayer has
chosen a method for a particular financial arrangement, they must
use the same method, in a consistent manner, for all similar
financial arrangements they have entered into.
Further, these provisions prevent the taxpayer
from picking an assessment method that may give them a temporary
tax advantage at any particular time. That is, they cannot
cherry-pick assessment methods.
Compounding accruals in the context of the
taxation of financial arrangements refers to the allocation or
spreading of gains or losses over time, where the gain or loss is
calculated by reference to known or estimated future amounts
(represented by the financial benefits under the arrangement) and
on the assumption that the entity will continue to have the
arrangement for its remaining term.
The period over which the sufficiently certain
gains or losses are intended to be spread is the period to which
the gains or losses relate. The intended basis of allocation of the
relevant gain or loss under the accruals (spreading) principle
reflects the financial concept of interest on interest, or compound
interest. For the purpose of Division 230, this
form of accrual is referred to as compounding accruals .
The compounding accruals allocation
methodology is conceptually identical to the effective interest
method adopted by Accounting Standard AASB 139 Financial
Instruments: Recognition and Measurement (AASB 139) that is,
the financial accounting accruals methodology used to allocate
gains and losses from loans, receivables, and held-to-maturity
Proposed section 230-105
requires the accruals method to be used if the return from the
arrangement is sufficiently certain at the start of the arrangement
and the taxpayer has not elected to use another of the methods in
Division 230 for assessing the gains or losses
form this arrangement. Proposed section 230-110
specifies that a return is sufficiently certain if at the start of
the arrangement the gain or loss is a particular amount, or at
least a particular amount.
The Explanatory Memorandum notes that a gain or
loss is sufficiently certain if it is either:
determinable with reasonable accuracy. 
Proposed sections 230-130 to
230-135 specify how the gains and losses are to be
spread over two or more income years.
Proposed section 230-145
allows a balancing adjustment to be made to assessable income if
the either the gains or losses from a financial arrangement have
been wrongly estimated. Gains are taxable income, losses are
deductions from income.
Proposed sections 230-155 and
230-160 require the taxpayer using the accruals
method to re-calculate the gains or losses if changing
circumstances materially affect the taxpayers financial
The realisation method allocates gains and
losses to income years when they occur, which will generally be
when the relevant financial benefit representing the gain or loss
is due to be provided or received, as the case may be.  This is specified in
proposed section 230-150.
230-105(5) requires that the realisation method be used if
the gain or loss from the financial arrangement is not sufficiently
certain and the taxpayer has not elected to use any other
assessment method in Division 230 in relation to
The elective fair value method is a tax-timing
methodology that measures gain or loss for tax purposes as the
change in the value of a financial arrangement between two points
in time. Under fair value tax accounting the gain or loss from a
financial arrangement for a particular period is the increase or
decrease in its fair value between the beginning and end of the
period, adjusted for amounts paid or received during the period.
Proposed subsection 230-45(3)
specifies that the fair value method does not apply to a gain or a
loss to the extent that elective hedging or elective financial
reports method applies.
Proposed section 230-180
specifies that a taxpayer is eligible to use the fair value
election if they prepare annual financial reports under the
relevant Australian, or specified foreign, accounting and auditing
standards (see further discussion below). Subsection 230-180(3)
specifies that this election is irrevocable. But such an election
may cease to have effect under proposed subsection
230-205 (see below).
Annual financial reports
The Corporations Act 2001 and
Australian accounting standards (e.g. Australian Accounting
Standard AASB 101 Presentation of Financial Statements) set out
what is meant by the term financial report . A financial report
a balance sheet
an income statement (profit or loss
a statement of changes in equity showing
a cash flow statement
notes, comprising a summary of significant
accounting policies and other explanatory notes, 
a director s declaration that the financial
statements are a true and fair representation of the entity s
As readers would be aware, financial reports
must be prepared by many entities regulated by the Corporations
Act 2001. Proposed section 230-435 allows the
government, by regulation, to specify what the appropriate foreign
accounting standards may be for the purposes of defining what is a
financial report. Since 1 January 2005 Australia has adopted the
International Financial Reporting Standards (IFRS) as the basis for
its own accounting standards. With the wide spread adoption of the
IFRS by first world countries, many foreign accounting and auditing
standards will have the same standards as those used in Australia.
For example, the Explanatory Memorandum notes that the United
States Financial Accounting Standards are comparable with
Australian standards, because the former broadly comply with the
International Financial Reporting Standards. 
Proposed section 230-185
applies the fair value method to financial arrangements that are
required by the relevant accounting standard to be reported through
the profit and loss statement of an entity.
However, the fair value method will not apply
to financial arrangements that are an equity interest and the
taxpayer is the issuer of that equity interest under proposed
Under proposed section
230-205 a fair value election ceases to have effect
the entity ceases preparing financial reports
(this may be the same as ceasing to operate as a registered
the particular financial arrangement ceases to
be required to be recognised in the entities financial
According to proposed section
230-210 a balancing adjustment applies if a fair valuation
election ceases to apply.
What is the foreign exchange retranslation
The retranslation method measures the gain or
loss that arises from translating a given number of units of one
currency into another currency, which is due to different
prevailing exchange rates at different points in time. The
retranslation tax-timing method will only be relevant to those
taxpayers with arrangements denominated in, or determined by
reference to, a foreign currency or, in the case of taxpayers who
have made an election under subdivision 960-D ITAA 1997, a
non-functional currency. 
Under proposed section 230-45
where the foreign exchange retranslation method applies to the
financial arrangement, the accruals or realisation methods will
also apply to determine any gains or losses from the financial
arrangement, to the extent they are not attributable to currency
exchange movements. 
There are two retranslation elections
specified in proposed subdivision 230-D, the
general election and the qualifying foreign exchange accounts
Under proposed section
230-220 an entity may make a foreign exchange
retranslation election if they prepare financial reports in
accordance with the relevant accounting standards and the financial
reports have been audited under the appropriate auditing
Proposed section 230-225
applies the general election method to financial arrangements that
are recognised in financial reports that the relevant Australian or
foreign accounting standard requires to be recognised in financial
Qualifying foreign exchange accounts
230-220(3) allows these elections to be made in relation
to a qualifying forex account if no other retranslation election
has been made in relation to that account.
A qualifying forex account is an account that
is denominated in a foreign currency, and which either has the
primary purpose of facilitating transactions, or is a credit card
230-220(5) specifies that these elections are irrevocable.
However, they may cease to apply under the provisions of proposed
Proposed section 230-245
specifies circumstances when a foreign retranslation method
election ceases to apply:
a general election cease to apply when the
taxpayer ceases to eligible under proposed subsection
230-220(2) that is if the taxpayer ceases to prepare
financial accounts for a given year. It is not clear whether the
latter is the same as the taxpayer ceasing to operate.
a general election also ceases to apply if the
taxpayer ceases to satisfy the requirements of proposed
paragraphs 230-335(1)(b)&(c) which appear to
be that the taxpayer no longer holds financial arrangements that
are required to be recognised in the relevant accounting standard,
a qualifying foreign exchange accounts election
ceases to apply when the taxpayer ceases to meet the requirements
of proposed subsection 230-220(3) which appear to
be that the taxpayer either ceases to hold such accounts or that
they make a general election in relation to these accounts.
Proposed section 230-250
requires that a balancing adjustment be made to the value of the
financial instrument for taxation purposes if these elections cease
What is hedging transition?
A hedging transition is one that offsets,
either partly or fully, losses or gains arising from the taxpayer s
position in another investment market. For example, a taxpayer may
hold a parcel of Commonwealth bonds. However, these bonds will
loose value if their interest rate rises. To guard against these
losses the taxpayer may sell the appropriate number of futures
contracts covering Commonwealth bonds.  The selling of theses futures
contracts is a hedging transaction. The commonwealth bonds held by
the taxpayer is a hedged item.
What is a hedging financial arrangement
This is an election under the provisions of
proposed Division 230 to have a hedging
transaction assessed for taxation purposes unde the provisions of
proposed subdivision 230-E ITAA97.
A taxpayer is eligible to apply a hedging
financial arrangement election under proposed section
230-275. Briefly, the taxpayer may make this election if
they prepare financial reports in accordance with the appropriate
accounting standards and those reports are audited under the
appropriate auditing standards.
Under proposed section
230-280 such an election may apply to a hedging financial
arrangement . This term is defined in proposed section
- either a derivative financial arrangement or a foreign currency
the arrangement is created for the purposes of
hedging a risk or risks in relation to a hedged item
the taxpayer meets the requirements of proposed
subsection 230-375, and
- the arrangement is included in the taxpayer s financial reports
as a hedging instrument.
A derivative financial arrangement is, under
proposed section 230-305, an arrangement that:
For example, a futures contract is a derivative
financial arrangement, as it requires an outlay of perhaps 5 per
cent of the value of the nominal value of the contract and changes
in value according to the changes in the value of the financial
instrument or commodity (or other thing) to which it relates.
A foreign currency hedge is defined in similar
terms save that it hedges a risk in relation to movements in
currency exchange rates. 
Under proposed section
230-300 the Commissioner for Taxation has the option to
treat an arrangement as a hedging financial arrangement for the
purposes of this Division, if an honest or inadvertent mistake has
been made in setting up the arrangement and it does not meet the
These arrangements are very complex and it would
be too easy to make a mistake and have a financial arrangement not
qualify as a hedging financial arrangement for the purposes of this
A wide variety of assets and liabilities are
defined as a hedged item for the purposes of this subdivision in
proposed subsection 230-290(9).
Proposed section 230-310
requires that the taxpayer keep separate records covering all the
necessary characteristics of the hedging financial arrangement that
they have in place.
Proposed section 230-320
requires that the hedging financial arrangement must be highly
effective within the meaning of the relevant accounting
In Australia the relevant accounting standard
is AASB 139 Financial Instruments: Recognition and
Under proposed section
230-325 a hedging financial arrangement election only
ceases to have effect when the taxpayer ceases to meet the
requirements of proposed subsection 230-375(2),
ceasing to issue financial reports according to
the required accounting standards, or
ceasing to be audited according to the required
It seems strange that the proposed legislation at
this point does not note that the hedging financial arrangement
election also ceases to operate when that arrangement has come to
One of the clear objectives of this Bill was
to put in place arrangements for dealing with consecutive hedging
arrangements (i.e. rolling hedges). That is, a series of
arrangements that hedge the risks associated with a particular
hedged item. There is no clear text in proposed subdivision
230-E noting that it specifically applies to these
Members and Senators may wish to make further
enquires of the government to satisfy themselves that this proposed
subdivision does indeed deal adequately with consecutive hedging
arrangements undertaken with respect to a single set of hedged
Under proposed subdivision
320-F a taxpayer may elect to rely on their annual
Proposed section 230-350 allows
the taxpayer to elect to rely on the profit and loss statement
contained in their annual reports for the tax assessment of their
gains and losses arising from financial arrangements providing
are compiled in accordance with the appropriate
are audited according to the appropriate audit
have not been qualified by the auditor in the
last four financial years, and
have reliable accounting systems, controls and
internal governance processes.
Proposed section 230-360 also
requires that the gains and losses shown in the annual accounts not
be substantially different from the gains and losses that would
have been calculated if other of the above assessments methods in
this Division had been used instead.
An auditor s qualification on a set of accounts
is a serious matter. It means that some or all of the information
in the accounts is to some extent unreliable or unable to be
Proposed section 230-355
allows the Commissioner for Taxation to disregard the fact that a
taxpayer s accounts have been audited in certain circumstances.
230-350(3) specifies that this election is irrevocable.
However proposed section 230-375 requires that
this election cease to apply if the taxpayer ceases to be eligible
to make this election. In terms of the above requirements this may
mean having an auditor qualify the taxpayer s accounts and the
Commissioner for Taxation deciding to exercise his discretion under
proposed section 230-355.
Proposed section 230-380
requires a balancing adjustment to be made in the calculation of
gains and losses from the relevant financial arrangements, should
the election to rely on a taxpayer s financial accounts cease to
This schedule makes consequential amendments
to a number of Acts, such as:
Item 98 applies the financial
arrangement to the income years commencing 1 July 2009. However, a
taxpayer may choose to have the amendments apply to them for the
income year commencing 1 July 2008.
This Bill is accompanied by an extensive and
detailed Explanatory Memoranda. While this document provides
comprehensive background and explanation of the Bill s provisions
to Members and Senators, it also provides a comprehensive guide to
the operation of these provisions to the financial industry.
These provisions have been a long time coming
and possibly have been subject to the widest possible set of
industry consultations of any recent set of tax measures. The
Investment and Financial Services Association, amongst others, have
been advocating for the tax laws to be changed to enable Australia
to further develop its funds management industry to manage the
savings of other countries; that is, become an offshore financial
centre .  It
could be argued that the provisions of this Bill are a necessary
precondition for such a development to take place.
The reader is directed to the general comment
on subdivision 250-E on page fifteen of this
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. The Hon. Peter Costello MP, Treasurer, Explanatory
Memorandum to the Tax Laws Amendment (Taxation of Financial
Arrangements) Bill 2007, 20 September 2007 (hereafter Explanatory
Memorandum), pp. 29 30.
. Explanatory Memorandum, pp. 7 8.
. The Hon. John Dawkins MP, then Treasurer, Taxation
of financial arrangements A consultative document, December
1993. This document was released by the Australian Taxation
. Senate Economics references Committee, Taxation of
Financial Arrangements, September 1995, p. 2.
. Secretary to the Treasury and Commissioner for
Taxation, Taxation of Financial Arrangements an issues
paper, December 1996.
. Implemented by the New Business Tax System (Debt
and Equity) Act 2001 which inserted Division 974 into the
. Implemented by the New Business tax System
(Taxation of financial Arrangements) Act (No. 1) 2003 which
inserted Division 775 and Subdivisions 960-C and 960-D into the
ITAA97. Other relevant changes were in sections 26BB and 70B
Income Tax Assessment Act 1936.
. Tony Frost, Greenwood and Freehills, Taxation of
Financial Arrangements, Web based article, 20 December 2005, at
(accessed 24 September 2007).
. The Hon. Mal Brough MP, then Minister for Revenue and
Assistant Treasurer, TOFA reform to give
Australia edge, media release, No. 107, Canberra,
16 December 2005.
. The Hon. Peter Dutton MP, Minister for Revenue and
Assistant Treasurer, taxation of financial arrangements (TOFA)
stages 3 and 4: Release of revised exposure draft legislation and
explanatory material, media release, No. 001, Canberra, 3
. The Hon. Peter Costello MP, Treasurer, The new
business tax system: Stage 2 response, media release, No. 74,
Canberra, 11 November 1999.
. The Hon. Mal Brough MP, Minister for Revenue and
Assistant Treasurer, Taxation of financial arrangements: Easing
compliance costs, media release, No. 002, Canberra,
5 August 2004.
. Fleur Anderson, Financial transaction changes hailed ,
Australian Financial Review, 21 September 2007, p. 27
and Tax and accounting rules to be aligned, Australian
Financial Review, 20 September 2007, p. 3; Marc Moncrief, The
twain shall meet on tax reporting , the Age, 21 September 2007, p.
3; David Uren, Howard tax bill finalises Keating s agenda ,
Australian, 21 September 2007, p. 21.
. Australian Bankers Association, Australian Bankers
Association welcomes tax reform on financial arrangements,
media release, Sydney, 21 September 2007.
. Fleur Anderson, op. cit., and Marc Moncrief, op.
. Explanatory Memorandum, p. 3.
. Explanatory Memoranda, p. 71.
. Explanatory Memorandum, p. 63.
. Explanatory Memorandum, pp. 116 117.
. Explanatory Memorandum, p. 23.
. Explanatory Memorandum, p. 24.
. Explanatory Memorandum, pp. 119 120.
. Explanatory Memorandum, p. 184.
. Explanatory Memorandum, p. 187.
. Explanatory Memorandum, p. 211. Note, A functional
currency under section 960 70 ITAA97 is the
currency in which a foreign account is kept. If follows that a
non-functional currency is a currency other than the one used by a
particular foreign account.
. Explanatory Memorandum, p. 222.
. Such contracts obligate the counter party to take
delivery of a certain number of Commonwealth bonds at a set price
that is usually higher than the price to which Commonwealth bonds
has fallen. In practice the seller of such futures contracts
receives the difference between the price at which the contract was
struck (the current price) and the lower price (when the contract
is executed). Thus the value of there existing physical stock of
commonwealth bonds is protected by the receipt of these monies. Of
course, if the price of the Commonwealth bond rises (caused by an
interest rate fall) the selling of such futures contracts will lead
to the seller having to pay the counter party money.
. Explanatory Memorandum, p. 109.
. ibid., pp. 241 242.
. Investment and Financial Services Association,
Other peoples money I: A snapshot of Australia
s funds management and its export potential, report by
LateraEconomics, June 2007, and Other people s money II,
Making Australia a supplier of funds management
to the world, A report by LateraEconomics, July 2007.
12 October 2007
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