Tax information

Tax information for the Macquarie Geared Equities Investment

The following information is general and not specific to your own particular circumstances. We strongly recommend you discuss this with your taxation adviser.

In order to provide you with certainty regarding the tax treatment of interest paid on the Macquarie Geared Equities Investment (GEI)*, if you entered into a GEI before 1 July 2007 a Product Ruling from the ATO may apply.

The Product Ruling is only binding on the Commissioner if the investments in the GEI are implemented in the specific manner provided in the Product Ruling.

The Product Ruling specifies how much of the GEI interest payments can be claimed as a tax deduction for eligible investors. The Product Ruling can be downloaded from the table below.

For those investors who entered into a GEI after 1 July 2007, please see "What is my level of tax deductibility?" below for a guideline as to how interest deductibility is calculated.

We recommend that investors visit the Australian Taxation Office's website for further details of how capital protected products and borrowings are treated.

What is my level of tax deductibility?

The level of tax deductibility of your GEI interest payments will depend on whether you are an "eligible investor" (i.e. whether the tax ruling applies in your particular circumstances), when you applied for your GEI, your loan term and whether you are paying a fixed or variable interest rate. Please refer to the applicable Product Ruling for further details.

Generally, if you are an eligible investor and have entered into the GEI before 23 May 2001 , you can claim your interest charges as a tax deduction:

• Up to the amount that does not exceed the average between the Reserve Bank Bulletin Indicator Lending Rates for Personal Unsecured Loans and Credit Cards.

Generally, if you are an eligible investor and have entered into the GEI on or after 23 May 2001 until 30 June 2007 , you can claim your interest charges as a tax deduction.

• Up to the lower of:
  • the Reserve Bank Indicator Rate for Personal Unsecured Loans - Fixed or Variable (whichever is applicable); or
  • 85% of the interest rate (for 5 year loans), 82.5% of the interest rate (for 4 year loans), 80% of the interest rate (for 3 year loans), 72.5% of the interest rate (for 2 year loans) or 60% of the interest rate (for 1 year loans).

Generally, if you are an eligible investor and have entered into the GEI on or after 1 July 2007 and before 7.30pm 13 may 2008, the amount that is reasonably attributable to capital protection is calculated in the following way:

• Calculate the total costs incurred by the borrower under or in respect of the capital protected product for the income year, ignoring amounts that are not in substance for capital protection or interest;
• Apply the Reserve Bank's Indicator Variable Interest Rate for Personal Unsecured Loans to the same amount of borrowing.
  • If the borrowing is at a fixed rate you would apply for the Indicator Variable Interest Rate at the time the first of the amounts in Step 1 was incurred, or
  • If the borrowing is at a variable rate, you would apply the average of the indicator rates during the term of the borrowing.
• Where the amount under Step 1 exceeds the amount under Step 2, the excess is attributed to the capital protection for the income year. If the underlying securities you purchased under the capital protected borrowing are held on capital account, the excess would be a capital cost and would not be deductible.
• Please note the Reserve Bank's Indicator Variable Interest Rate for Personal Unsecured Loans is the rate that will apply for a period of up to 5 years or the life of the GEI plus, which is the shorter. Following this period, the applicable benchmark rate will be the Reserve Bank's Indicator Variable Interest Rate for Standard Housing Loans. 

Generally, if you are an eligible investor and have entered into the GEI on or after 7.30pm 13 May 2008, the amount that is reasonably attributable to capital protection is calculated in the following way:

• Calculate the total costs incurred by the borrower under or in respect of the capital protected product for the income year, ignoring amounts that are not in substance for capital protection or interest;
• Apply the Reserve Bank's Indicator Variable Interest Rate for Standard Housing Loans. 
  • If the borrowing is at a fixed rate you would apply for the indicator variable interest rate at the time the first of the amounts in Step 1 was incurred, or
  • If the borrowing is at a variable rate, you would apply the average of the indicator rates during the term of the borrowing.
• Where the amount under Step 1 exceeds the amount under Step 2, the excess is attributed to the capital protection for the income year. If the underlying securities you purchased under the capital protected borrowing are held on capital account, the excess would be a capital cost and would not be deductible.

Please visit the Australian Taxation Office's website for further details of how capital protected products and borrowings are treated.

What are the Reserve Bank of Australia's Indicator Rates?

If you entered the product on or after 7.30pm 13 May 2008, use the Reserve Bank Indicator Variable Interest Rate for Standard Housing Loans.

If you entered the product on or after 1 July 2007, use the Reserve Bank Indicator Rate for Personal Unsecured Loans.

If you entered the product before 1 July 2007 and interest rate on your GEI is variable, use the Reserve Bank Indicator Lending Rate for Variable Personal Unsecured Loans. If your interest rate on your GEI is fixed, use the Reserve Bank Indicator Lending Rate for Fixed Personal Unsecured Loans.

The Reserve Bank (“RBA”) publishes the monthly Indicator Rates six to eight weeks after the end of the applicable calendar month. Current Indicator Rates are available on the RBA website www.rba.gov.au

If you have any queries regarding the benchmark rates or your GEI, contact your financial adviser or contact us.

*If you have applied for your loan facility under the Macquarie Geared Equities Investment (plus shared upside) brochure dated June 2003 or the Combined Product Disclosure Statement and Financial Services Guide dated 24 February 2004 or the Macquarie Geared Equities Investment plus Combined Product Disclosure Statement and Financial Services Guide dated 4 June 2004, please note that all references in this letter to "Geared Equities Investment" or "GEI" should be replaced with "Geared Equities Investment (plus shared upside)" or "GEI plus" or "Geared Equities Investment plus" or "GEI plus".

This information is current as at 14 Mayl 2008.

The Geared Equities Investment plus (GEI plus) is offered by Macquarie Bank Limited ABN 46 008 583 542 AFSL 237502. In deciding whether to acquire or continue to hold an investment, you should obtain the GEI plus Combined Product Disclosure Statement and Financial Services Guide dated 4 June 2004, including Supplementary Product Disclosure Statements dated 30 May 2005, 29 May 2006 and 1 July 2007 (“PDS”), and consider its contents. The PDS is available on this website or by phoning 1800 656 819. To acquire the product, you must complete the application form attached to the PDS. Loan terms and conditions are set out in the GEI plus loan contract and fees and charges and government taxes and charges apply.

This advice has been prepared by Macquarie for general information purposes only, without taking into account any potential investors’ personal objectives, financial situation or needs. Before acting on this general advice, you must consider its appropriateness having regard to your own objectives, financial situation and needs. All potential investors should obtain financial, legal and taxation advice before making any decision about whether to acquire that particular financial product. In particular, you should ensure that you understand the taxation consequences for you if you invest in the GEI plus and your payment obligations if you borrow under the Loan. Loan terms and conditions are set out in the GEI plus loan contract and fees and charges and government taxes and charges apply.

Macquarie or its associates, officers or employees may have interests in the financial products referred to in this information by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender or adviser. Macquarie or its associates may receive fees, brokerage or commissions for acting in these capacities. In addition, Macquarie or its associates, officers or employees may buy or sell the financial products as principal or agent and as such may effect transactions which are not consistent with any recommendations in the information. You may contact Macquarie on 1800 656 819.

**The Product Ruling (PR 2000/06, 2000/70 and 2000/70A), Product Ruling (PR 2002/87) or Product Ruling (2004/76) refer only to the application of taxation laws to the Geared Equities Investment (GEI), Geared Equities Investment (plus shared upside) (GEI plus) or Geared Equities investment plus (GEI plus) and does not represent an endorsement by the ATO of the commercial viability of the product or its soundness as an investment, or the commerciality of any fees charged. The Ruling is only binding on the ATO if the circumstances of the investor entering the GEI, GEI plus or GEI plus are as described in the Product Ruling under the heading "Arrangement". This Product Ruling does not apply if investors unwind their facility prior to loan maturity. The Product Ruling is only binding if the GEI, GEI plus or GEI plus are implemented in the specific manner provided in the Product Ruling.