Income Tax Act 2007 section 809AZE

Exception: transfer by way of security

Section 809AZE provides an exception from the transfer of income streams rules where the transfer is made by way of security under certain finance arrangements.

• The transfer of income streams rules do not apply where the consideration for the transfer is an advance under a type 1 finance arrangement and the transferor is, or is a member of a partnership that is, the borrower under that arrangement.
• The rules also do not apply where the consideration is an advance under a type 2 or type 3 finance arrangement and the transferor is a member of the partnership receiving the advance.
• The three types of finance arrangement are defined elsewhere in the legislation and broadly cover situations where assets are transferred as security for what is in substance a loan.
• The purpose of this exception is to ensure that genuine secured lending transactions are not caught by the anti-avoidance rules on transfers of income streams.