Income tax: can convertible notes qualify as infrastructure borrowings under Division 16L of Part III of the Income Tax Assessment Act 1936 ?

Yes. Borrowings that are issued in the form of notes convertible into shares may constitute infrastructure borrowings. The income exemption period would terminate when the notes are converted into shares. On conversion, the shares will not be infrastructure borrowings.

The income exemption applies only to interest or amounts in the nature of interest. Other payments which are not interest or in the nature of interest made on the notes would not qualify for exemption.