PG电子

Payments on transfer without accrued interest

ITA07/S633 deals with the case where securities are transferred without accrued interest (`ex div鈥�), that is, on the basis that the transferor will receive the next interest payment. In this situation the transferor is treated as making a payment to the transferee.

As with 鈥榗um-div鈥� amounts, it is arrived at in one of two ways.

• If the transferor accounts to the transferee, under a market arrangement, separately for the consideration and for gross interest accruing from the settlement day to the next interest payment day (that is, on a 鈥榗lean price鈥� basis), the payment will be the gross interest so accounted for.
• In any other case the payment is to be calculated by applying the formula I x A/B, where again I is the interest payable, A is the number of days in the interest period up to and including the settlement day, and B is the number of days in the period.

Example

The facts are as in the example in SAIM4140, except that the transferor, Harriet, will receive the interest coupon. If Howard pays a 鈥榗lean price鈥� of 拢10,000 for the bonds, less a rebate of 拢35 to allow for the interest Harriet will receive, then Harriet is treated as making a payment of 拢35, while Howard is treated as receiving as payment of 拢35.

If the sale price of the bonds is simply expressed as being 拢9,965, it is necessary to time-apportion the interest coupon of 拢200 that is receivable on 31 March. Again, A is 74 days and B is 90 days, so the 鈥渞ebate amount鈥� is 拢200 x (90 鈥� 74)/90 = 拢35.56. Harriet gets relief of 拢36, and Howard is taxed on 拢35.

See SAIM4160 for more examples.