The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Mal Brough

Mal Brough

Minister for Revenue and Assistant Treasurer

18 July 2004 - 26 January 2006

Media Release of 02/09/2005

No.073

Friday September 2, 2005

Securitisation Vehicles and Foreign Currency Rules

Securitisation vehicles will be exempted from the new foreign currency rules in the income tax law.

Minister for Revenue and Assistant Treasurer, Mal Brough, announced today securitisation vehicles will instead remain subject to the former foreign currency tax legislation.

Authorised deposit-taking institutions (ADIs) and non-ADI financial institutions, as defined in the income tax law, are already exempt from the new foreign currency rules.

'The exemption I am announcing today will confirm that securitisation vehicles receive similar treatment', Mr Brough said.

Securitisation vehicles are special purpose vehicles (companies or trusts) that acquire, by assignment, rights to cash flows from a number of assets which are funded by the issue of securities to investors.

The exemption will apply until the commencement of retranslation and hedging regimes in the income tax law, to be introduced as part of Stages 3 and 4 of the Taxation of Financial Arrangements reforms. Broadly speaking, retranslation and hedging will be elective regimes that allow entities to achieve tax timing matches of foreign exchange gains and foreign exchange losses.

Further information is in the attachment.

Media contact: Carlie Hogan - (02) 6277 7360


Attachment

Securitisation Vehicles and Foreign Currency Rules

The new foreign currency rules are contained in Division 775 and Subdivisions 960-C and 960-D of the Income Tax Assessment Act 1997 (ITAA 1997).

The exemption from the new foreign currency rules for special purpose vehicles (SPVs) will mirror the exemption that currently applies to ADIs and non-ADI financial institutions. The exemption will apply only to SPVs that meet the conditions in subsection 820-39(3) of the ITAA 1997 (refer also to subsections 820-39(4) and 820-39(5)) or SPVs that satisfy the definition of 'securitisation vehicle' in subsection 820-942(2) of the ITAA 1997. These provisions identify entities that are eligible for special treatment as securitisation vehicles under the thin capitalisation rules in the income tax law.

The new foreign currency rules will not apply and will be taken never to have applied to SPVs. In addition, in respect of SPVs, the provisions that existed prior to the commencement of the new foreign currency rules will be taken never to have been repealed. These provisions, and their application to ADIs and non-ADI financial institutions following their repeal, are mentioned in Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.