Income Tax Act 2007 section 655

Transfers under sale and repurchase arrangements

Section 655 excludes transfers of securities made under sale and repurchase arrangements (repos) from the accrued income scheme.

• When securities are subject to a repo arrangement, both the initial sale and the repurchase are excluded from the accrued income scheme
• The exclusion applies because the economic benefit of the interest remains with the original holder throughout the arrangement
• The original owner continues to be taxed on the interest under separate repo rules, so applying the accrued income scheme would create double taxation
• The exclusion does not apply where section 608 prevents the repo price difference rules in section 607 from operating — in that case, the accrued income scheme applies as normal

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