Preamble
For the purposes of 82W, a loan is wholly or partly rolled over if it is renewed, in whole or part, by repaying the maturing loan and replacing it with a new loan.
Division 3B of Part III applies only to foreign exchange gains and losses of a capital nature. The Division applies to foreign exchange gains made, or foreign exchange losses incurred, under certain contracts entered into on or after 19 February 1986 (see definition of 'eligible contract' in subsection 82V(1)). The effect of section 82W is that the Division also applies to foreign exchange gains or losses under pre-19 February 1986 contracts where particular events occur after that date.
If, on or after 19 February 1986 and under a contract entered into by a taxpayer before that date, a loan made to the taxpayer is wholly or partly rolled over (except pursuant to a contractual obligation that was binding on the taxpayer before 19 February 1986), the loan resulting from the roll-over is deemed to be made to the taxpayer under a contract entered into by a taxpayer at the time of the roll-over (paragraphs 82W(1)(b) and 82W(1)(e)). Paragraphs 82W(2)(b) and 82W(2)(e) are corresponding provisions in relation to the roll-over of a loan made by a taxpayer before 19 February 1986.
The terms 'rolled over' and 'roll-over' are not defined in Division 3B. The Macquarie Dictionary (Second Edition), Macquarie University, 1991 defines 'roll-over provision' as 'an agreement made between a borrower and lender in which each agrees to renew a loan, when it matures, at a rate of interest based on the ruling rate of interest at the time'. This definition is of limited assistance because it does not explain how the renewal of a loan may occur under a roll-over. Commercial dictionaries provide greater assistance as to the meaning of 'roll-over', perhaps because the term is widely used in banking and finance.
Alan Gilpin, Dictionary of Economics and Financial Markets (Fifth Edition), Butterworths, 1986, defines 'roll-over' as 'renewing credit i.e. to roll-over debts by borrowing to pay them'. S.P. Valentine, 'International Dictionary of the Securities Industry', Macmillan, 1985 gives the following more expansive definition: 'Rollover is ... the practice of extending a period of credit by technical repayment followed by a further loan of the same amount for a further period. The terms of the loan may not be precisely the same, however. The lender might well take the opportunity to increase the rate of interest on the loan.' We consider that these definitions accurately describe the meaning of roll-over in section 82W.
Some commercial dictionaries say that 'roll-over' includes the extension of a loan. We consider that in paragraphs (b) and (e) of subsections 82W(1) and 82W(2), 'roll-over' does not include the extension of the period of a loan - paragraphs (c) and (f) of those subsections expressly address the situation where the period of the loan is extended.
Bills of exchange and promissory notes are not loans (Chow Yoong Hong v. Choong Fah Rubber Manufactory [1962] AC 209 at 215-217; Willingale (Inspector of Taxes) v. International Commercial Bank Ltd [1978] AC 834). Therefore, the roll-over of a bill or a note (see Taxation Ruling TR 93/8 at paragraph 66) is not the roll-over of a loan for the purposes of section 82W. Similarly, if a loan is repaid and replaced by a bill of exchange, the loan is not rolled over.