Anti-arbitrage rules for the use of the fair value method

2011 correction to the anti-arbitrage rules in relation to the use of the fair value method for financial arrangements used to hedge other financial arrangements.

Section EW 15D(2B)(b) of the Income Tax Act 2007

Key features

The anti-arbitrage rules were amended in 2009 to get them working as they were originally proposed, being to prevent income and expenditure being deferred/advanced on two financial arrangements which are in an IFRS designated hedging relationship. However, in amending the rules last year the ability to use the fair value method for financial arrangements which are used to hedge other financial arrangements (being agreements for the sale and purchase of property in foreign currency subject to determination G29) has been inadvertently denied. This oversight has been corrected in the Taxation (Tax Administration and Remedial Matters) Act 2011 and is very specific in its terms. No other changes to the application of the anti-arbitrage rules or the taxation of the other financial arrangements under Determination G29 are intended to result from this correction.

Application date(s)

The amendments apply retrospectively from the application dates of the original legislation.