Income Tax Act 2007 section 656

Power to modify: non-standard sale and repurchase arrangements

Section 656 gives the Treasury power to make regulations modifying how the accrued income scheme applies to sale and repurchase arrangements (repos) that do not follow the standard pattern.

• The Treasury may issue regulations to modify section 655 where a repo arrangement is non-standard — for example, where the buyback obligation is not performed, or the buyback option is not exercised
• A repo is also non-standard where the agreement allows different or additional securities to stand in as representative securities, or excludes certain securities from being treated as representative
• Arrangements are non-standard where the sale or repurchase price is determined or varied by reference to changes in value occurring after the agreement is made
• A further non-standard feature is where the agreement requires a payment to be made during the period between the original sale and the date the repurchase price becomes due, triggered by post-agreement fluctuations in value

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