Income Tax Act 2007 section 637

Accrued income losses treated as payments in next interest period

Section 637 deals with how accrued income losses are carried forward when the interest period in which they arise does not end on an interest payment day.

• Where accrued income losses arise from securities transfers in an interest period that does not end on an interest payment day, the losses are carried forward to the next interest period
• The person is treated as having made a payment in the next interest period equal to the amount of those losses, which feeds into the calculation of accrued income profits or losses for that period
• If the next interest period also does not end on an interest payment day, the carry-forward process repeats until the losses reach a period that does end on an interest payment day
• Where the interest period does end on an interest payment day, relief is given differently — through exemptions for interest on securities under sections 678 to 680, rather than through this carry-forward mechanism

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