What is the purpose of section 678 of the Income Tax Act 2007?

Section 678 serves as the introductory provision for a chapter dealing with exemptions from income tax on interest that arises on transferred securities. It does not itself grant any exemption but introduces three substantive exemptions that follow in subsequent sections and signposts the relevant definitions used throughout the chapter.

Where are the key definitions used in the exemptions chapter of Part 12 found?

All key terms used in the exemptions chapter carry the same meanings as defined in Chapter 2 of Part 12 of the Income Tax Act 2007. These include interest, interest payment day, interest period, securities, transfer, transferee, transfer with unrealised interest, unrealised interest, and makes accrued income losses.

How does section 678 treat transfers made through nominees or trustees?

Section 678 confirms that where transfers of securities are made by or to nominees or trustees, those transfers are treated as made by or to the underlying beneficial owners. This ensures consistency with Chapter 2 rules, so you look through to the beneficial owner when deciding whether an exemption applies.

Does section 678 itself provide any exemption from income tax on accrued interest?

No, section 678 is purely introductory and does not itself grant any exemption from income tax on accrued interest. It introduces the chapter that contains three substantive exemptions relating to interest on transferred securities, with the actual exemption rules set out in the subsequent sections of the chapter.

Income Tax Act 2007 section 678

Exemptions relating to interest on securities: preliminary

Section 678 introduces the chapter that provides certain exemptions from income tax on interest received following the transfer of securities, and signposts the relevant definitions used throughout.

This chapter sets out three exemptions from income tax relating to interest on securities that have been transferred.
All key terms used in this chapter — such as "interest", "securities", "transfer", "transferee", and "unrealised interest" — carry the same meanings as defined in Chapter 2 of Part 12.
Where transfers are made by or to nominees or trustees, those transfers are treated as made by or to the underlying beneficial owners, in line with the rules in Chapter 2.
This section is purely introductory and does not itself grant any exemption; the substantive exemption rules follow in subsequent sections of the chapter.

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