Income Tax Act 2007 section 349

No pre-arranged protection against risks

Section 349 is an anti-avoidance provision that ensures investors claiming community investment tax relief are exposed to genuine commercial risk and are not shielded from loss through pre-arranged protective measures.

• Any arrangements made before or at the time of the investment must not include "excluded arrangements" designed to protect the investor against the normal risks of investing.
• Excluded arrangements are those whose main purpose (or one of their main purposes) is to provide partial or complete protection against investment risk, whether through insurance, indemnity, guarantee, or any other means.
• However, protection that would reasonably be expected to be provided for commercial reasons — as if the investment were made in the ordinary course of a banking business — is permitted and does not count as excluded.
• The term "arrangements" is drawn broadly and includes any scheme, agreement, or understanding, regardless of whether it is legally enforceable.