2. Division 250 and Division 6C : a practical perspective Tuesday 18 September 2007

3. Outline of session Division 250 : Overview of provisions Division 250 : Transitional issues Implications for Infrastructure Implications for Property Restructures of stapled groups : Division 6C amendments Stamp duty issues

4. Overview of provisions Josh Cardwell, Director

5. Overview of provisions 5 Gateways 5 Exclusions Asset vs arrangement Expanded lease definition

6. Gateways Asset put to tax preferred use Arrangement period > 12 months Provision of financial benefits Capital allowance entitlement Lack of predominant economic interest (PEI)

7. Asset put to tax preferred use End user – Control Tax preferred use – Lease: tax preferred entity offshore use by non-resident – Other use: tax preferred entity offshore use by non-resident Tax preferred entity – Government – Tax exempt

8. Arrangement period > 12 months Start Time End time Options

9. Provision of financial benefits Financial benefits Provider of financial benefits: – Tax preferred end user – Tax preferred entity – Non-resident

10. Capital allowance entitlement Division 40 Division 43 Other

11. Lack of predominant economic interest (PEI) LRD test Right to acquire test Effectively non-cancellable long term arrangement test Level of expected financial benefits test

12. LRD test LRD - definition Domestic end user – 80% Non-resident end user – 55% Exclusions

13. Right to acquire test Will transfer other than for market value Right/obligation to acquire other than for market value

14. Effectively non-cancellable long term arrangements test Effectively non-cancellable: – Non-cancellable – Discouragement Arrangement period: – Greater than 30 years – 75% of remaining effective life

15. Level of expected financial benefits test Guaranteed residual value Debt interest PV of financial benefits > 70% of depreciable base

16. Exclusions Small business Minimum value Alternate assessable amount Commissioners discretion

17. Exclusions Short Term/Low Value – Arrangement period: Real property lease: 5 years or less Other: 3 years or less – Financial benefits: Real property lease: $50m or less Other: $30m or less – Asset value: Real property lease: $40m or less Other: $20m or less

18. Application Notional loan : similar to Division 16D Apportionment Principal and interest: compounding accruals

19. Transitional provisions Chris Colley, Director

20. Transitional provisions Generally, applies tax preferred use commencing on or after 1 July 2007. Legally enforceable arrangement prior to 1 July 2007, can elect into Div 250. Election can be made on an arrangement by arrangement basis.

21. Transitional provisions (cont.) Pre - 1 July 2007 arrangements subject to Div 250 where: – material variation after that date; and – variation would have caused 51AD / Div 16D to apply. Removing contingent equity is not a material variation.

22. Transitional provisions (cont.) 51AD switched off for: – pre 1 July 2007 arrangements – tax preferred use started after 1 July 2003. Division 16D still applies. Does not apply to sale and leasebacks (unless also tax preferred use?)

23. Implications for Infrastructure Paul King, Director

24. Tax Preferred End User Exclusions PEI Calculation

25. Tax Preferred End User Tax exempt (or a connected entity) has or will have use or control of use

26. TPU TaxpayerTPE Financial control Day to day control Tax or pay fixed fee fixed return

27. TPU TaxpayerTPE Lease (excl. step in rights) OR use of specific asset a right to control

28. Relevant Exclusions Lesser 250 amount Commissioners discretion

29. PEI LRD Right to acquire asset (not a reversion) non-cancellable long term arrangement level of expected benefits (pv) guaranteed residual versus LRD (51AD) Finance Lease (Division 16D) – s.159GG(4)

30. PEI: General LRD Test Carve-Out Depreciable Asset Taxpayer TPE 90% Tax Preferred Use wholly in Australia TPU neither lease nor hire arrangement No TPE Financing of Asset Limited Recourse Debt Excl: TPE assists in financing

31. PEI TPE Taxpayer TPE Lease Sale Freehold Taxpayer TPE 30 year Ground Lease Reversionary Interest Hospital Sublease

32. Financial Benefits Company Trust TPE Staple Lease Rent Expenses Services Agt Availability charge

33. Financial Benefits Company Trust TPE Staple Loan Interest Expenses Availability charge

34. Example Project Banks Debt Construction Equity $10m Project Deed Construct Co Service Co Court Co Equity Providers State Govt. Availability Charges $90m $80m Facilities Management Services Div. 43:$70m Div. 40:$10m Other costs:$20m

35. Implications for Property Josh Cardwell, Director

36. Tax preferred end user LPT Non Resident Lease Aus Offshore

37. Alternate Structure LPT Lease PE/Branch Aus Co Hold Co. 100% Offshore Aust

38. CFC LPT For Co Lease Aus Offshore 100% CFC

39. LRD Test Exclusion LPT TPE Leases LRD Non TPE Leases

40. LRD Test Land Co. Building Co. Ground Lease TPE Lease Loan for land and shares Equity

41. Other Examples Options to extend Floor leases vs Master lease Put options and estimated value

42. Restructures of stapled groups Division 6C amendments Andrew White, Director

43. Introduction Tax Laws Amendment (2007 Measures No. 5) Bill 2007 introduced that seeks to make: – CGT amendments to allow for stapled groups to restructure to facilitate scrip offers – Consequential amendments to Division 6C – Further amendments to Division 6C in relation to foreign entities / groups acquired by Australian LPTs

44. Base structure Public Investors Company AUnit Trust IIUnit Trust I

45. Permitted restructure – Option 1 Head Unit Trust Company AUnit Trust IIUnit Trust I Public Investors Newly interposed trust Units

46. Permitted restructure – Option 2 Unit Trust 1 Company AUnit Trust II Public Investors Original trust - now the head trust Units

47. Comments CGT roll-over relief for investors provided: – percentage ownership interest remains the same – the market value of the investors new securities is the same as the existing securities Interposed trust to determine cost base of interests in the stapled entity acquired by reference to cost bases of the assets of stapled entity A sale facility can be put in place to deal with foreign holders that cannot participate in restructure Divisions 6B and 6C amended (narrow changes)

48. Division 6C amendment US REIT Taxable REIT subs Other subs Australian LPT Primarily investing in land This may now be permissible

49. Other comments Other issues to consider: – stamp duty – legal: meeting required – accounting? Cross-holdings could be problematic

50. Stamp Duty issues Matthew Stutsel, Partner Freehills

51. Stamp duty issues Potential duty, especially land rich – Underlying assets – Listed or unlisted – Company or trust – Interpose new trust or existing trust – Transfer or issue/redemption

52. Stamp duty issues Potential duty, especially land rich Reconstruction relief PCA lobbying

53. Q&A

54. www.gf.com.au