Individual Taxation Advice
The following notes relate to the general taxation consequences
of investment in QuantumWarrants. They do not consider the
circumstances of individual taxpayers. Individual taxpayers
are encouraged to consult with their own tax advisers to
obtain advice as to the tax consequences to them of investment
in QuantumWarrants.
Taxation Office Product Ruling
The observations noticed below (except where otherwise
indicated) are supported by Taxation Office Product Ruling
PR 2005/27 dated 16 March 2005.
Taxation Office Product Ruling PR 2005/27 is a binding ruling.
The ruling applies prospectively from 16 March 2005. The
ruling is withdrawn and ceases to have effect after 30 June
2008 (unless withdrawn earlier). So far as relevant the
ruling continues to apply in respect of the tax laws ruled
upon to all persons who acquired QuantumWarrants between
the date of effect of the ruling and the date the ruling
was withdrawn. That is the ruling continues to apply to
those persons who acquired QuantumWarrants prior to withdrawal
of the ruling provided there is no change in the arrangement
or those person’s involvement in the arrangement.
Interest
(a) All the interest paid by an investor to QuantumWarrants
Pty Limited as a consequence of acquiring a QuantumWarrant
will be deductible to the Investor in the year incurred;
(b) Subdivision H of Division 3 of the Income Tax Assessment
Act 1936 (”ITAA 36”) (which contains the “period
of deductibility of certain advance expenditure provisions”
of the Act) will not prevent an Investor from claiming a
deduction for interest paid yearly in advance to QuantumWarrants
Pty Limited as a consequence of the Investor acquiring a
QuantumWarrant in the year in which that interest expense
was incurred;
(c) Section 51 AAA of ITAA 36 which is a technical provision
which disallows deductions to taxpayers where the deduction
would only be allowable because a taxpayer had incurred
a net or notional capital gain in the taxpayer’s assessable
income will not be applicable;
(d) Section 82KL of ITAA 36 that disallows deductions where
the amount of a deduction will be “recouped”
will not be deductible.
Capital gains
(a) For capital gains tax (“CGT”) purposes
including for the purpose of the CGT discount the date of
acquisition of a Property is the date on which the Security
Trustee entered into a contract for the acquisition of the
Property;
(b) No CGT event arises when the legal title to the Property
is transferred from the Security Trustee to the Investor
on cancellation or redemption of a QuantumWarrant;
(c) A CGT event will arise under section 104-10 of the ITAA
97 to the Investor where a Completion Payment is not made
and a Property is sold by QuantumWarrants Pty Limited exercising
its power of sale of the Property;
(d) If on sale of an underlying property the sale proceeds
are insufficient to allow the Investor to repay the loan
made to it by QuantumWarrants Pty Limited given that QuantumWarrants
Pty Limited will not be able to recover from the Investor
that shortfall the cost of the property will be reduced
by the amount of that shortfall in determining whether or
not a capital gain was made or capital loss incurred on
that sale of the Property;
(e) Any capital gain realised by an Investor on sale of
a Property received pursuant to completion of a QuantumWarrant
will be treated as a discount capital gain for the purposes
of the ITAA 97 where the Investor is an individual, a complying
superannuation entity or a trust that owned the QuantumWarrant
for at least 12 months.
Annual Income
All the income derived from a Property will be included
in the assessable income of the Investor and not the Security
Trustee.
Anti avoidance provisions
The anti avoidance provisions contained in Part IVA of
ITAA 36 will not apply to an Investor in respect of QuantumWarrants
(which means the deduction for any interest paid to QuantumWarrants
Pty Limited in respect of a QuantumWarrant will not be denied
outright or pro rated by reason of an application of that
Part).
Stamp Duty
Although this is not the subject of Product Ruling PR
2005/27 It is our opinion that no stamp duty will be payable
as a consequence of the issue or redemption of a QuantumWarrant
although stamp duty may be payable where a mortgage is given
over Property. Stamp duty will however most probably be
payable by the Security Trustee where the Security Trustee
purchases a Property.
Goods and Services Tax
Goods and Services tax is also not the subject of Product
Ruling PR 2005/27. We are of the opinion that no goods and
services tax will be payable as a consequence of the issue
or redemption of a QuantumWarrant. Goods and services tax
may – depending upon the nature of the Property –
be payable by a vendor (and possibly effectively recharged
to the Security Trustee) when the Security Trustee purchases
a Property.
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