Income tax: Offshore Banking Units (OBU) - does trading in, or entering into commodity derivatives such as commodity futures, forwards, options and swaps constitute offshore banking (OB) activity for the purposes of section 121D?

Each of the commodity derivatives mentioned above is an 'eligible contract' , a term which is defined in section 121C of the Income Tax Assessment Act 1936. The definition has been drafted widely and there is nothing to suggest that only interest rate derivative products and loans of foreign currencies should fall within the definition.

Although trading with an offshore person in any eligible contract is an OB activity under subsection 121D(4) (as long as any amounts payable by non-residents are in non-Australian dollars), it should be noted that, under subsection 121D(5), if the OBU [1] enters into an eligible contract (as distinct from trading in it), an eligible contract does not include a loan contract.