Income Tax Act 2007 section 579

Allowable deductions

Section 579 sets out the rules governing when and to what extent a payer of manufactured interest can claim a tax deduction for that payment.

• Manufactured interest paid under a stock lending or repo arrangement may be deductible against income tax, but only to the extent it is not already deductible as a trading expense or under other general income tax relief rules.
• The deduction is limited to the amount that can be matched against an interest-type receipt, an accrued income profit, or deemed interest arising under a repo transaction.
• General income tax relief rules take priority — if the manufactured interest qualifies as a trading expense, it must be deducted under those rules first rather than under this section.
• This section replaced earlier provisions that treated manufactured interest as if it were an annual payment; that fiction is no longer continued, though the practical deductibility rules remain substantively the same.