When are securities transferred without accrued interest under ITA 2007 section 624?

Securities are transferred without accrued interest when the transferor retains the right to receive the next interest payment. The seller keeps the upcoming interest but accepts a lower sale price to compensate the buyer, who will not receive the next interest payment despite holding the securities after the transfer date.

How does section 624 apply to deemed transfers such as conversions and trading stock appropriations?

For deemed transfers — including conversions, trading stock appropriations, an owner becoming entitled as trustee, or securities leaving charitable trusts — the securities are treated as transferred without accrued interest only if the person deemed to be the transferor did not hold the right to the next interest payment at the time of the deemed transfer.

Are variable rate securities ever treated as transferred without accrued interest under section 624?

No. Section 626 of the Income Tax Act 2007 provides that variable rate securities are never treated as transferred without accrued interest. This overrides the general rule in section 624, regardless of whether the transferor retained the right to the next interest payment or not.

How do gilt-edged security strips relate to transfers without accrued interest?

Section 648 of the Income Tax Act 2007 provides that certain exchanges of strips of gilt-edged securities are specifically treated as transfers without accrued interest. This is a separate, targeted rule that applies alongside the general provisions in section 624 when dealing with government bond strips.

Income Tax Act 2007 section 624

Transfers without accrued interest

Section 624 explains when securities are considered to be transferred without accrued interest, meaning the seller retains the right to the next interest payment and accepts a lower sale price to reflect this.

Securities are generally transferred without accrued interest when the transferor keeps the right to receive the next interest payment, regardless of when in the interest period the transfer takes place.
For certain deemed transfers — such as conversions, trading stock appropriations, an owner becoming entitled as trustee, or securities leaving charitable trusts — the securities are treated as transferred without accrued interest only if the deemed transferor did not hold the right to the next interest payment.
Variable rate securities are excluded from these rules and are never treated as transferred without accrued interest, as provided by section 626.
Certain exchanges of gilt-edged security strips are also treated as transfers without accrued interest under section 648.

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