Australian Government CrestReview of Taxation of Financial Arrangements

Consultation Papers

Exposure Draft – Amendments to the Taxation of Financial Arrangements Stages 3 & 4 – January 2013

The legislation in this exposure draft aims to implement the announced changes relating to the following parts of the TOFA tax rules:

  • core rules;
  • accruals and realisation methods;
  • fair value method;
  • hedging financial arrangements method;
  • transitional balancing adjustment provisions; and
  • requirements for making certain elections.

Discussion Paper – Improving the operation of the TOFA tax hedging provisions – February 2012

The discussion paperExternal website link outlines issues that were raised in the post enactment consultation on the TOFA Stages 3 & 4 provisions.  The purpose of the paper is to canvass possible implementation options for the following measures announced in the 2011‑12 Budget:

  • hedge ineffectiveness; and
  • hedging of a firm commitment

and facilitate discussion of four other issues relating to the TOFA tax hedging provisions.

Exposure Draft – TOFA related amendments to ease transition and to ensure appropriate interaction with the pay as you go instalments provisions – July 2011

The exposure draft legislation and accompanying explanatory materials are in relation to the TOFA related announced amendments that:

  • ensure that the TOFA Stages 3 & 4 provisions interact appropriately with the pay as you go instalments provisions to lower compliance costs for taxpayers (announced by the former Assistant Treasurer on 29 June 2010); and
  • give the Commissioner of Taxation the power to extend the time for taxpayers to notify the Commissioner about making a transitional election to apply the TOFA Stages 3 and 4 provisions to existing financial arrangements (announced by the Assistant Treasurer on 29 November 2010).

Exposure Draft Legislation
RTF 150KB
PDF 36KB
Draft Explanatory Memorandum
RTF 527KB
PDF 125KB

 

Exposure Draft Legislation and Explanatory Material for TOFA amendments April 2010

The exposure draft legislation will give effect to the TOFA amendments announced in the Assistant Treasurer's press release of 20 April 2010. It will also extend the debt/equity transitional period for Upper Tier 2 instruments to 1 July 2010.

Exposure Draft Legislation
RTF 257KB
PDF 70KB
Draft Explanatory Memorandum
RTF 479KB
PDF 107KB
Division 775 Consultation Summary
RTF 826KB
PDF 35KB
Division 230 and Consequential Amendments Consultation Summary
RTF 838KB
PDF 42KB

 

Pay as you go instalments and taxation of financial arrangements interactions

This draft legislation and explanatory material address a number of issues arising out of amendments to the PAYG instalment provisions contained in the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009.

Exposure Draft Legislation
RTF 74KB
PDF 23KB
Draft Explanatory Memorandum
RTF 203KB
PDF 51KB

 

Exposure draft regulations addressing the treatment of certain term subordinated notes – April 2009

The exposure draft regulation will facilitate certain term subordinated notes being treated as debt interests for the purposes of the debt/equity tax rules. The regulation aims to ensure that certain clauses relating to solvency and capital adequacy will not preclude such notes from being debt interests. The clauses are commonly found in Lower Tier 2 term subordinated notes issued by authorised deposit-taking institutions. However, the regulation will apply to all issuers.

Exposure Draft Regulation
RTF 260KB
PDF 30KB

 

Exposure Draft Legislation and Explanatory Material – September 2008

Since the lapsing of the 2007 TOFA Bill, the draft legislation has undergone a number of technical amendments, including the addition of consolidation interaction rules.  The new draft legislation also includes integrity rules to address value shifting and non-arm’s length dealings in relation to financial arrangements.

Exposure Draft Legislation
RTF 1MB
PDF 537KB
Exposure Draft Legislation (with changes)
RTF 1.1MB
PDF 512KB
Explanatory Material
RTF 3MB
PDF 1.8KB
Explanatory Material (with changes)
RTF 2.3MB
PDF 3.1KB

 

Consolidation and TOFA Interactions – June 2008

The discussion paper examines the interactions between the proposed TOFA Stages 3 and 4 regime and the existing tax consolidation regime.

Consolidation and TOFA Interactions
RTF 627KB
PDF 278KB

 

Exposure Draft Provisions Addressing Synthetic Arrangements – May 2007

The exposure draft provisions in relation to synthetic arrangements are integrity measures that cover deemed disposal, deemed non disposal and deemed gains in certain circumstances.

Exposure Draft Provisions
RTF 73KB
PDF 41KB

 

Exposure Draft Legislation Including Interactions and Consequential Amendments – May 2007

The interactions and consequential amendments included in the draft legislation provide the necessary changes to the ITAA 1936 and ITAA 1997 to allow the Taxation of Financial Arrangements Stages 3 and 4 rules to operate and interact with existing tax law.

Exposure Draft Legislation
RTF 737KB
PDF 435KB

 

Exposure Draft Legislation – January 2007

The Taxation of Financial Arrangements Stages 3 and 4 exposure draft legislation provide rules for taxation of gains and losses on financial arrangements to promote financial decision-making that is more neutral, that is, less distorted by tax considerations. The aim is for financial innovation and dealing in risk to be neither impeded (because of inappropriate tax treatment) nor inappropriately stimulated (because of unintended tax advantages). To the extent possible, the draft rules minimise compliance and administrative costs and mirror accounting treatment.

The exposure draft legislation defines 'financial arrangement' and sets out five tax-timing methods. These methods — fair value, accruals, retranslation, realisation and hedging (including character hedging) — determine the tax‑timing treatments of all financial arrangements covered by the proposed legislation.

Exposure Draft Legislation
RTF 745KB
PDF 304KB

 

Explanatory Material – January 2007

The exposure draft legislation contains taxation concepts and rules which address areas not covered by the current tax law. To assist in understanding the draft legislation, explanatory material is available for download below.

The explanatory material covers in detail the framework, the 'financial arrangements' definition, the treatment of gains and losses, and the calculation of gains and losses under the five tax-timing regimes.

Explanatory Material
RTF 1.8MB
PDF 625KB

 

Interactions and Consequential Amendments Discussion – January 2007

The exposure draft legislation does not contain amendments required to ensure appropriate interactions with the current law.  However, a document explaining the amendments which will be required is available below.  Draft legislation for the interactions has now been added to this site (see above).

Interactions and consequential amendments discussion
RTF 363KB
PDF 120KB

 

December 2005 Exposure Draft Legislation – December 2005

Exposure draft legislation for Taxation of Financial Arrangements Stages 3 and 4 was previously released on 16 December 2005, and is available below along with the corresponding explanatory memorandum.

2005 Exposure Draft Legislation
2005 Explanatory Material

 

CONTACT DETAILS
By Mail:

The Manager

Finance Taxation Unit

The Treasury

Langton Crescent

PARKES ACT 2600


By Email:

tofa@treasury.gov.au


Phone:

(02) 6263 2768


Fax:

(02) 6263 4466