Income Tax Act 2007 section 564WA

Diminishing shared ownership arrangements: further provision in respect of refinancing

Section 564WA ensures that when a customer refinances a diminishing shared ownership arrangement (a type of Sharia-compliant home finance), the various transfers of the asset that occur as part of the refinancing process do not trigger any income tax charges or distort later tax calculations.

• Any profit, gain or loss arising to the customer on the disposal of the asset during the refinancing is ignored for income tax purposes.
• When the customer later sells the asset, the intermediate disposal and reacquisition steps involved in the refinancing are disregarded when calculating any taxable profit, gain or loss on that later sale.
• The customer is treated as if the refinancing transfers never happened, preserving continuity of ownership for income tax purposes.
• Where a successor financier takes over the outgoing financier's interest in a lease as part of the refinancing, that transfer is also disregarded for income tax — it is not treated as a disposal or acquisition.