Income Tax Act 2007 section 628

Making accrued income profits and losses: general rule

Section 628 sets out the general rule for determining whether a person makes accrued income profits or accrued income losses when securities are transferred by or to them.

• A separate calculation must be made for each kind of security and each interest period, comparing total deemed payments received (A) against total deemed payments made (B)
• If the total payments treated as received (A) exceed those treated as made (B), the person has accrued income profits; if B exceeds A, the person has accrued income losses
• The deemed payments arise because, on a transfer of securities, the purchase price reflects whether accrued interest passes to the buyer or seller, and the scheme ensures that accruing interest is taxed as income of the person who owned the securities while it accrued
• This general rule does not apply where the settlement day falls outside an interest period — in that case, section 630 applies instead (relevant only for certain variable rate securities or transfers with unrealised interest)