Income tax: Offshore Banking Units - what is the meaning of 'guarantee-type activity' under subsection 121D(3)?

'Guarantee-type activities' are defined in subsection 121D(3) of the Income Tax Assessment Act 1936 as activities involving fee income for: . the provision of guarantees or letters of credit . the syndication of loans . the underwriting of risk . the issue of performance bonds.

The meaning of guarantee-type activities is to be interpreted widely. The Explanatory Memorandum states that 'activities which fall within the normal meaning of a guarantee ... would also constitute "guarantee-type activities". All of the activities listed guarantee performance of a contract. In Lord Halsbury's Laws of England, 'guarantee' is defined as 'an accessory contract whereby the promisor undertakes to be answerable to the promisee for the debt, default or miscarriage of another person whose primary liability to the promisee must exist or be contemplated'. Activities which fall within this broad definition are to be treated as 'guarantee-type activities'. For example, as pointed out in the Explanatory Memorandum, bid bonds would be covered by 'guarantee-type activity'.