Income Tax Act 2007 section 584

Manufactured payments less than underlying payments

Section 584 provides an adjustment rule where a manufactured payment (manufactured interest or manufactured overseas dividend) is less than the real underlying payment it represents, overriding the main rules to ensure income tax relief for the payer is based on the correct amount.

• This section applies when a manufactured interest payment or manufactured overseas dividend (MOD) is smaller than the actual underlying interest or dividend it replicates.
• It overrides the main rules about manufactured interest and MODs found in sections 578 to 582, as well as section 589(3) which defines the gross amount of a MOD.
• Where the section applies, the gross amount of the manufactured interest or MOD is adjusted downwards for the purposes of calculating the payer's income tax relief.
• The effect is that the payer's tax relief is limited to the amount actually paid as a manufactured payment, rather than the full amount of the underlying real payment.