Revenue Rulings
Optional exemption for in house
finance companies
Revenue Ruling FID.043
Preamble
The term ‘in house finance company’ is used to refer
to a company which is established to conduct the
treasury and financing functions for the members of
a corporate group. The Financial Institutions Duty
Act 1982 (the Act) defines a financial institution to
include ‘person whose sole or principal business
activities in Victoria are the borrowing of money and
the provision of finance’. Most, if not all, in house
finance companies will be financial institutions under
this definition and will be required to register and
pay financial institutions duty (FID).
The State Revenue Office acknowledges that many
large corporates establish a separate division rather
than a separate company to conduct their treasury
and financing operations. In this structure, the
treasury and financing functions would be a minor
part of a corporate’s business activities and generally
the corporate would not satisfy the definition of
financial institution for FID purposes. Large corporates
or corporate groups which establish an in house
finance company, which is a financial institution in its
own right, may face greater compliance costs and
administrative responsibilities than those that merely
establish separate finance divisions or business units.
To promote increased equity under the FID
legislation for all corporates which conduct similar
treasury and financing functions, the Treasurer has
agreed that an in house finance company, which
would otherwise be a financial institution under the
Act, is able to seek exemption from the requirement
to register and pay FID.
This ruling explains which companies are entitled to
seek exemption from the requirement to register,
how they should apply for the exemption and the
manner in which the exemption operates.
Ruling
An in house finance company for FID purposes is
one which satisfies all of the following criteria:
• a company whose sole or principal business
activities in Victoria are the borrowing of money
and the provision of finance to related bodies
corporate, or
• a credit provider which is a financial institution
solely because it makes loans to related
bodies corporate
• a company which does not provide finance to
any person other than a related body corporate
or a person eligible for registration as a short
term money market operator in Victoria or in a
corresponding jurisdiction
• a company which is not a bank, a dealer or a
management company within the meaning of
section 9 of the Corporations Law
• a company which is not a member of a FID
group (under the Act) which contains another
financial institution other than another in house
finance company
In the above criteria, related bodies corporate means:
• related bodies corporate within the meaning of
section 9 of the Corporations Law (which may
include a trustee company) and a company and
a trustee of the type defined as related persons
in section 75(3)(f) of the Stamps Act 1958.
• provision of finance has the same meaning as
defined in section 4 of the Act.
• a corresponding jurisdiction is a state or territory
which has similar FID legislation.
An in house finance company, which is a financial
institution within the meaning of the Act, may
apply to the Commissioner for exemption from the
requirement to register and pay FID. The application
shall be in writing and shall be made on the
application form available from the State
Revenue Office.
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FID.043
Where the Commissioner is satisfied that the
applicant satisfies all the criteria of an in house
finance company, he will arrange for the applicant
to be prescribed in the Financial Institutions Duty
Regulations 1992 (the Regulations) as a person to
whom the Act does not apply. The applicant will
then be excluded from the definition of financial
institution found in section 3(1) by paragraph (t)
of that definition which refers to a person, or class
of persons, to which the Act does not apply.
An in house finance company will not acquire
exempt status until such time as its name is
published in the Regulations. However, the
Commissioner has ruled that a new company, or an
existing company which changes its activities so that
it becomes a financial institution, will be granted a
three month period of grace during which time it
may apply for exempt status without being treated
as a financial institution in the interim. The period of
grace will commence on the date of incorporation or
the date on which the company’s business activities
changed, whichever applies.
The Commissioner may review a prescribed
company’s status at any time to ensure that it
continues to be an in house finance company. Any
company which has been listed in the Regulations
must notify the State Revenue Office as soon as it is
no longer entitled to the exemption. Where a
company ceases to be an in house finance company
as defined in this ruling, the Commissioner shall
revoke the exemption by causing the company’s
name to be removed from the Regulations.
The commencement date of this Ruling is 1
February 1997.
Please note that rulings do not have the force of law.
Each decision made by the State Revenue Office is
made on the merits of each individual case having
regard to any relevant ruling. All rulings must be
read subject to Revenue Ruling GEN.01.
Denzil Griffiths
Commissioner of State Revenue
1 February 1997
ictoria ON THE MOVE
FID.043