Income Tax Act 2007 section 401

Interest: loans for investing in co-operatives

Section 401 provides rules on when tax relief on interest is available for loans used to invest in co-operatives, with transitional provisions depending on when the loan was made.

• Tax relief on loan interest for investing in co-operatives is governed by section 401, which specifies permitted uses of the loan proceeds.
• Where a loan is used to buy shares in, or lend money to, a co-operative, the interest relief rules only apply if the loan was made after 10 March 1981.
• Where a loan replaces an earlier qualifying loan (a refinancing), the interest relief rules apply regardless of when the original loan was made.
• The distinction ensures that refinancing of older co-operative investment loans is not disadvantaged by the 10 March 1981 cut-off date.

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