Income Tax Act 2007 section 564F

Profit share agency arrangements

Section 564F defines the conditions under which a profit share agency arrangement qualifies as an alternative finance arrangement for income tax purposes.

• A principal appoints an agent (where one or both must be a financial institution) and provides money for the agent to invest with a view to producing a profit.
• The principal is entitled to profits up to a specified level, while the agent keeps any additional profits (and may also receive a fee from the principal).
• The payments the principal receives must, in substance, equate to the return on an investment of money at interest — mirroring a conventional interest-bearing deposit or loan.
• These arrangements are subject to the arm's length exclusion in section 564H, which can disqualify them from alternative finance treatment if the terms are not commercially realistic.