Income tax: Offshore Banking Units (OBU) - does share capital subscribed by a resident owner to its subsidiary, before that subsidiary becomes registered as an OBU, constitute 'OBU resident-owner money'?

No. Section 121EC of the Income Tax Assessment Act 1936 sets out the meaning of the term "OBU resident-owner money". It is money 'paid to the OBU by a resident owner of the OBU by way of a subscription for, or a call on, shares in the OBU...' As the subsidiary is not an OBU at the time of the share subscription, section 121EC can have no application.

As share capital subscribed to a subsidiary before it becomes an OBU is not "OBU resident-owner money", section 121EK, which deems interest to apply to 90% of certain OBU resident-owner money has no application to that capital.

As the share subscription will constitute "non-OB money" as defined in section 121C, any assessable income derived from the use of that money cannot be "assessable OB income" for the purposes of subsection 121EE(2).