Income Tax Act 2007 section 660

Transfers with unrealised interest: interest in default

Section 660 deals with the tax treatment of securities transferred with unrealised interest where the issuer has defaulted on paying that interest, reducing the value of the right to receive it.

• Where securities are transferred with unpaid interest and the issuer has defaulted, the taxable amount for the transferor is reduced to the actual market value of the right to receive that interest, rather than the full amount of interest owed
• This reduced value — known as the "unrealised interest value" — replaces the full unrealised interest figure when calculating both the deemed payment to the transferor and the accrued income profits
• Where there have been successive transfers of defaulted securities, separate rules apply that may further adjust the unrealised interest value
• Where a person holds securities of the same kind acquired at different times, they are treated as transferring the most recently acquired securities first

---