Income Tax Act 2007 section 638

Excluded persons: disregard of certain payments and transfers

Section 638 explains how certain persons who are classified as "excluded" transferors or transferees are taken outside the accrued income scheme, so that payments and transfers relating to them are disregarded when calculating accrued income profits or losses.

• Where a person is an excluded transferor or excluded transferee, any payment treated as made by or to them on a transfer of securities is ignored when calculating accrued income profits or losses under the general rule
• Where the settlement day falls outside the interest period, the entire transfer is disregarded if the person is an excluded transferor — this rule applies only to transferors, not transferees
• Exclusion attaches to the person, not the transaction, meaning that on the same transfer one party may be excluded while the other is not
• Nine categories of excluded person are defined elsewhere, including individuals with small holdings, traders, non-residents, remittance basis users, charitable trusts, pension scheme trustees, and makers of manufactured payments