This Draft TD, issued on Wed 12.3.2014, states that the exemption in s 820-39 of the ITAA 1997 can apply to a special purpose entity (SPE) that seeks finance for a project, which is established as a part of a securitised licence structure, used in some social infrastructure Public Private Partnerships (PPPs). It states this is provided that the SPE satisfies the conditions in s 820-39(3).
The Draft TD was previously issued as Draft Taxation Determination TD 2012/D11 which was withdrawn on 8 May 2013. Draft TD 2014/D8 is substantially different to the previous Draft TD.
DATE OF EFFECT: When the final Determination is issued, it is proposed to apply both before and after its date of issue.
COMMENTS are due by 11 April 2014. ATO contact: Sharon Murray – Tel: (03) 9285 1837; Fax: (03) 8632 4036; Email: sharon.murray@ato.gov.au.
[LTN 48, 12/3/14]
Extract from Income Tax Assessment Act 1997 (‘ITAA97’)
S820-39 – Exemption of certain special purpose entities
(1) Subdivision 820-B, 820-C, 820-D or 820-E does not apply to disallow any * debt deduction of an entity for an income year if the entity meets the conditions in subsection (3) throughout the income year.
(2) Subdivision 820-B, 820-C, 820-D or 820-E does not apply to disallow any * debt deduction of an entity for an income year that is an amount incurred by the entity during a part of that year, if the entity meets the conditions in subsection (3) throughout that part.
(3) The conditions are:
(a) the entity is one established for the purposes of managing some or all of the economic risk associated with assets, liabilities or investments (whether the entity assumes the risk from another entity or creates the risk itself); and
(b) the total value of * debt interests in the entity is at least 50% of the total value of the entity‘s assets; and
(c) the entity is an insolvency-remote special purpose entity according to criteria of an internationally recognised rating agency that are applicable to the entity‘s circumstances.
(4) The condition in paragraph (3)(c) can be met without the rating agency determining that the entity meets those criteria.
Note 1: While an entity meets the conditions in subsection (3), it is treated for the purposes of this Division as not being a member of a consolidated group or MEC group (see section 820-584).
Note 2: An entity that does not qualify for the exemption in this section may still be a securitisation vehicle under subsection 820-942(2), in which case the value of its securitised assets will count towards its zero-capital amount under Subdivision 820-K.
Multi-tier special purpose entities
(5) An entity is taken to meet the conditions in subsection (3) throughout a period that is all or part of an income year, if the entity is one of 2 or more entities that together satisfy the condition that, assuming:
(a) each of the entities had been a division or part of the same entity (the notional entity ), rather than a separate entity, throughout that period; and
(b) the notional entity had consisted only of those divisions and parts throughout that period;
the notional entity would meet the conditions in subsection (3) throughout that period.