Income Tax Act 2007 section 564D

Diminishing shared ownership arrangements: initial acquisition

Section 564D sets out the conditions under which a diminishing shared ownership arrangement qualifies as an alternative finance arrangement for income tax purposes.

• A financier (being a financial institution, regulated home purchase plan provider, or party to a regulated electronic system facilitated arrangement) and a customer each acquire a beneficial interest in the same asset.
• The customer makes payments to the financier that together equal the cost of the financier's beneficial interest, gradually acquiring that interest in return, while also making separate additional payments for the use of the asset.
• The customer has the exclusive right to occupy or use the asset and is solely entitled to any income, profit or gain from it, including any increase in value.
• The arrangements are subject to an arm's length test under section 564H, and the customer may grant rights over the asset to third parties provided the grant is not to the financier or a connected person and is not required by the financier.