Income Tax Act 2007 section 623

Transfers with accrued interest

Section 623 explains when securities are treated as transferred "with accrued interest" for the purposes of the accrued income profits rules.

• Securities are generally transferred with accrued interest when the transferee receives the right to the next interest payment, meaning the transferor typically receives a higher price to compensate for interest that has built up but not yet been paid.
• If the settlement day falls on an interest payment day, the right to that day's interest passes with the transfer; otherwise, the right to interest on the next payment day passes instead.
• Certain deemed transfers — such as conversions, trading stock appropriations, an owner becoming entitled as trustee, and securities leaving charitable trusts — follow a modified rule: they are treated as with accrued interest only if the deemed transferor had the right to the next interest payment.
• Variable rate securities are excluded from these rules and are instead subject to separate provisions under section 626.