Income Tax Act 2007 section 601

Repo cases in which deeming rules apply

Section 601 defines the circumstances under which sale and repurchase arrangements (repos) are treated as giving rise to manufactured payments, even where no such payment is explicitly made.

• Sale and repurchase arrangements (repos) can be structured so that no separate manufactured payment is identifiable within the transaction
• Instead, the pricing of the repo may simply reflect the fact that a dividend or interest payment on the securities will be received by someone other than the original seller
• Without this section, such arrangements would fall outside the manufactured payments rules in Chapter 2, creating a gap in the legislation
• Chapter 4 closes this gap by deeming the arrangement to include a manufactured payment, which then attracts the rules in section 602