Financial Arrangements Of Div 230

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The TOFA reform also called Div 230 generally applies to financial arrangements that entities subject to TOFA start to have for income years starting on or after 1 July 2010 with a few exceptions.
TOFA does not follow the financial accounting for financial instruments in every respect. TOFA was designed with financial accounting concepts, particularly those in AASB139, in mind. Thus, the mixed attribute model in AASB139 helps to explain why there are a number of different tax treatments under TOFA.
Division 230 applies to the gains and losses made from financial arrangements. More specifically, the general rule is that gains made from financial arrangements are included in assessable income and losses made from financial arrangements that meet the nexus test are deductible.
The objects of Div 230 are:
• to minimise the extent to which the tax treatment of gains and losses from financial arrangements distorts, by providing inappropriate impediments and stimulation, trading, financing and investment decisions and risk taking and risk management
• to do so by aligning more closely the tax and commercial recognition of gains and losses from financial arrangements in the following ways:

– by allocating the gains and losses to income years throughout the life of financial arrangements on a reasonable basis
– by generally recognising gains and losses on revenue rather than capital account, and
• to appropriately take account of, and minimise, compliance costs.

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