Income tax: interest withholding tax exemption under section 128F of the Income Tax Assessment Act 1936 - does an issue of a debenture fail the public offer test under subsection 128F(5) if an associate of the company that issued the debenture takes a security interest over the debenture?

No, unless the security interest is held by way of mortgage or similar security and at the time of issue the issuing company knew or had reasonable grounds to suspect an interest in the debenture was being, or would later be, acquired by an associate.

Whether reasonable grounds exist is, of course, a question of fact to be determined in the light of the individual facts and circumstances of each case. Although reasonable care must be taken, a detailed examination into this matter would not be expected at or before the date of issue.

If you wish to comment on this draft Determination, please send your comments promptly by Friday 26 February 1999 to: Contact officer details have been removed following publication of the final ruling.