When is a person treated as carrying out a transaction on behalf of another under section 835R of the Income Tax Act 2007?

Under section 835R, a person is treated as carrying out a transaction on behalf of another in two situations: where they actually undertake the transaction themselves on behalf of or to the account of that person, or where they give instructions for the transaction to be carried out by someone else on that basis.

How does section 835R apply where investment management is only part of a wider business?

Where broking or investment management forms only part of a person's wider business, section 835R requires that element to be treated as a separate, standalone business. This ring-fencing ensures the Chapter's tests and conditions are applied specifically to the relevant activities without distortion from other business operations.

Does section 835R apply if an investment manager delegates trade execution to an external broker?

Yes. Under section 835R, if an investment manager gives instructions for transactions to be carried out by an external broker on behalf of a client, the manager is still regarded as carrying out those transactions on behalf of the client. The Chapter's rules apply as if the manager had executed the trades directly.

What is the purpose of the supplementary rules in section 835R of the Income Tax Act 2007?

The supplementary rules in section 835R ensure consistent application of the Chapter's provisions regardless of whether an intermediary acts directly or through others, and regardless of the structure of the intermediary's business. They support the operation of the independent broker and investment manager conditions.

Income Tax Act 2007 section 835R

Supplementary provision

Section 835R clarifies when a person is treated as carrying out a transaction on behalf of another and how the rules apply where broking or investment management forms only part of a wider business.

A person is regarded as acting on behalf of another if they undertake a transaction for that other person or to that person's account.
A person is also regarded as acting on behalf of another if they give instructions for the transaction to be carried out by someone else on that basis.
Where broking or investment management is only part of a person's overall business, that part is treated as a separate business for the purposes of this Chapter.
These supplementary rules ensure the Chapter's provisions are applied consistently regardless of whether the intermediary acts directly or through others, and regardless of the structure of the intermediary's business.

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