Infrastructure Borrowings: Direct and indirect infrastructure borrowings - infrastructure period

For the purpose of determining the amount of any liability to tax pursuant to section 159GZZZZH of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of any year of income in which there is a tax benefit amount, will the infrastructure period be the period from the time the Indirect Infrastructure Borrowing (IIB) was issued by the taxpayer until the time the proceeds of such issue were on-lent by the taxpayer to the project company under the Direct Infrastructure Borrowing (DIB)?

Yes. The infrastructure period for the purpose of determining the amount of any liability to tax pursuant to section 159GZZZZH of the ITAA 1936 will be the period from the time the IIB was issued by the taxpayer until the time the proceeds of such issue were on-lent by the taxpayer to the project company under the DIB.

The project company currently holds a certificate from the Development Allowance Authority (DAA) permitting it to issue DIBs with which it financed construction of an infrastructure project. In turn, the taxpayer holds a corresponding certificate from the DAA permitting it to issue IIBs to fund the subscription for the DIBs issued by the project company.

The 'infrastructure period' in relation to a cancelled certificate is defined by section 159GZZZZD of the ITAA 1936 to mean the period from the time of the borrowing, to which the certificate applied, until the conditions under section 93R of the Development Allowance Authority Act 1992 would, if the certificate had not been cancelled, have ceased to apply to the holder.

The Explanatory Memorandum to the Taxation Laws Amendment (Infrastructure Borrowings) Act 1994 explains that the length of the infrastructure period depends on the type of borrowing. Although the period for DIBs is 25 years from the first use of the asset, for IIBs the period begins at the time of the borrowing and ends when the borrowed money is lent to the direct infrastructure borrower.

Accordingly, the infrastructure period will be the period from the time the IIB was issued by the taxpayer, until the time the proceeds were on-lent by the taxpayer to the project company.