Macquarie Geared Equities Investment plus (GEI plus)

In order to provide you with certainty regarding the tax treatment of interest paid on the Macquarie Geared Equities Investment plus (GEI plus), the ATO has issued various Product Rulings in relation to the GEI plus since the product was first offered. You may therefore be able to rely on a Product Ruling issued by the ATO where you entered into the GEI plus during the "period of application" (ie, the period from the issue of the ruling until its withdrawal) of one of these Product Rulings. Investors can generally continue to rely on a Product Ruling even after its withdrawal where they entered into the GEI plus during the Product Ruling's period of application.

The Product Rulings are only binding on the Commissioner of Taxation if your investment through the GEI plus is implemented in the specific manner provided in the applicable Product Ruling and the assumptions set out in that Product Ruling are satisfied. The Product Ruling is only a ruling on the application of taxation law and is in no way expressly or impliedly a guarantee or endorsement of the commercial viability of the GEI plus, of the soundness or otherwise of the GEI plus as an investment, or of the reasonableness or commerciality of any fees charged in connection with the GEI plus.

The Product Rulings specify how much of the GEI plus interest payments can be claimed as a tax deduction for "eligible investors" (i.e. those investors who, having regard to their personal circumstances, can rely on a particular Product Ruling). The table below assists you to identify which Product Ruling potentially applies to you and enables you to download the Product Rulings.

For those investors who may not be able to rely on a Product Ruling, please see "What is my level of tax deductibility?" below for a guideline as to how your interest deductibility should be calculated.

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

Period of Application	Product Brochure Version	Product Ruling
9 June 2004 to 30 June 2007	4 June 2004	PR 2004/76
1 July 2007 to 22 July 2008	1 July 2007	PR 2007/68
23 July 2008 to 26 May 2009	30 April 2008	PR 2008/59
27 May 2009 to 8 March 2011	4 February 2009	PR 2009/38
9 March 2011 to present	2 March 2011	PR 2011/5

PR 2011/5 was updated on 5 October 2011 with an addendum (PR 2011/5A1) to reflect the change to the benchmark rate from the RBA’s Indicator Lending Rate for Personal Unsecured Loans to the RBA’s Indicator Lending Rate for Standard Variable Housing Loans plus 100 basis points. Please note that the update to PR 2011/5 does not affect previously issued Product Rulings.

The amount of your GEI plus interest payments that is deductible will depend on when you applied for your GEI plus, your loan term and whether you are paying a fixed or variable interest rate. You should refer to the applicable Product Ruling for further details.

Generally, if you entered into the GEI plus on or after 9.30pm on 16 April 2003 but before 1 July 2007, you can claim a deduction for your interest up to the lower of:

• the Reserve Bank of Australia's Indicator Rate for Personal Unsecured Loans - Fixed or Variable (whichever is applicable) or
• 85 per cent of the interest rate (for five year loans), 82.5 per cent of the interest rate (for four year loans), 80 percent of the interest rate (for three year loans), 72.5 per cent of the interest rate (for two year loans) or 60 per cent of the interest rate (for one year loans).

Generally, if you entered into the GEI plus on or after 1 July 2007, you should be entitled to a deduction for the amount of interest payable on your GEI plus, less any amount that is reasonably attributable to the cost of capital protection. The amount that is reasonably attributable to capital protection is currently calculated in the following way:

1. Calculate the total costs you incur under or in respect of the GEI plus for the income year, ignoring amounts that are not in substance for capital protection or interest
2. Apply the Reserve Bank of Australia's Indicator Rate for Variable Personal Unsecured Loans to your loan amount under the GEI plus:
   • If your borrowing is at a fixed rate for some or all of the loan term, you would apply the Indicator Variable Interest Rate at the time the first of the amounts in Step 1 was incurred for the term, or that part of the term, or
   • If your borrowing is at a variable rate for some or all of the loan term, you would apply the average of the Indicator Variable Interest Rates during the term, or part of the term.
3. Where the amount under Step 1 exceeds the amount under Step 2, the excess is attributed to the cost of capital protection for the income year. If the securities you purchased using you GEI plus are held on capital account, the excess is a capital cost and will not be deductible.

Legislation was passed in June 2011 which changed the benchmark rate applicable to those investors who entered into the GEI plus on or after 7.30pm on 13 May 2008. As a result of this change, the amount that is reasonably attributable to capital protection for those investors will be calculated in the following way:

1. Calculate the total costs you incur under or in respect of the GEI plus for the income year, ignoring amounts that are not in substance for capital protection or interest
2. Apply the Reserve Bank of Australia's Indicator Lending Rate for Standard Variable Housing Loans plus 100 basis points to your loan amount under the GEI plus:
   • If your borrowing is at a fixed rate for some or all of the loan term, you would apply the Indicator Variable Interest Rate at the time the first of the amounts in Step 1 was incurred for the term, or that part of the term, or
   • If your borrowing is at a variable rate for some or all of the loan term, you would apply the average of the Indicator Variable Interest Rates during the term , or part of the term.
3. 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 securities you purchased using your GEI plus are held on capital account, the excess is a capital cost and will not be deductible.

The Reserve Bank of Australia's Indicator Lending Rate for Standard Variable Housing Loans plus 100 basis points will also apply from 1 July 2013 to any investors who entered into the GEI plus on or after 1 July 2007 whose loan is still in existence on 1 July 2013.

If as a result of the change to the benchmark rate you are required to amend your income tax returns, you have until 29 June 2013 to do so.

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

The applicable Reserve Bank of Australia's Indicator Rate used to determine the deductibility of interest on your GEI plus will generally depend on when you entered into the GEI plus.

• If you entered the GEI plus before 1 July 2007 and the interest rate on your GEI plus is variable, use the Reserve Bank of Australia's Indicator Rate for Variable Personal Unsecured Loans. If the interest rate on your GEI plus is fixed, use the Reserve Bank of Australia's Indicator Rate for Fixed Personal Unsecured Loans.
• If you entered the GEI plus on or after 1 July 2007, use the Reserve Bank of Australia's Indicator Rate for Variable Personal Unsecured Loans.
• If you entered the GEI plus on or after 7.30pm 13 May 2008, use the Reserve Bank of Australia's Indicator Lending Rate for Standard Variable Housing Loans (plus 100 basis points).

The Reserve Bank of Australia publishes the monthly Indicator Rates six to eight weeks after the end of the applicable calendar month. Current Indicator Rates are available on the Reserve Bank of Australia's website www.rba.gov.au

Individuals, companies and trusts can open a GEI plus Facility.

The Facility term is a fixed term of 1,2,3,4 or 5 years.

The minimum Loan Amount for a GEI plus Facility is $50,000. You do not need to contribute any upfront principal amount to purchase GEI Securities as Macquarie lends you 100 per cent of the purchase price of your investment through an interest-only limited recourse loan.

The interest rate applicable to your Facility will depend upon GEI Securities that you select to include in your GEI plus portfolio, the term of your loan and the interest payment option you choose.

Throughout the term of the loan, the interest rate for your GEI plus Facility will be equal to the applicable GEI Reference Rate plus their Facility Margin.

You can choose to construct your GEI plus portfolio from a selection of more than 50 ASX listed securities and certain unlisted managed funds or you may choose to invest in a proposed pre-selected portfolio as listed in the tab, More information. To select your securities simply complete and submit a GEI plus Securities Selection Form.

Macquarie does not make any recommendation or any representations regarding the GEI Securities or the pre-selected portfolios included on the Approved List of Securities, their suitability or their performance. The inclusion of any GEI Securities or pre-selected portfolios on the Approved List of Securities shall not be construed as the provision of financial advice in relation to those GEI Securities and pre-selected portfolios. Investors should obtain their own financial advice as to the suitability of investing in any GEI Security or pre-selected portfolios as to their suitability in light of their financial objectives, situations and needs.

If you already own ASX listed securities that are on the Approved List of Securities, you can roll those securities into a GEI plus. While you retain ownership of the securities, Macquarie will hold security over them for the loan term, and give you their equivalent value in cash, less the borrowing costs, for you to use in any investment. To do this, your existing shares must be on the Approved List of Securities.

If you elect to include any ASX listed securities in your GEI plus portfolio, we will arrange for Macquarie Equities Limited to purchase any ASX listed securities on your behalf. The securities are sponsored on CHESS by Macquarie Equities Limited and are registered in your name, so you benefit from all available dividends and any associated franking credits (subject to availability).

If you elect to include units in any unlisted managed funds in your portfolio we will submit an application to the responsible entity of that fund on your behalf. The units in each unlisted managed fund will be held in the investors name.

All available Distributions will be paid to the investor. You may also be entitled to claim any associated franking credits.²

When Corporate Actions occur, securities may be transferred to a Macquarie nominee company to ensure the investor’s interests, and Macquarie’s, are protected. If this occurs, any Distributions, interest or sale proceeds relating to those transferred securities received during the transfer may be credited to the investor’s loan account or held as security for the loan, rather than paid directly to the investor.

You can prepay the interest on your GEI plus if you fix your interest rate. If you elect to prepay the first year’s interest before the securities have been purchased (on the basis of an indicative interest rate), you may need to pay some additional interest, or receive a refund, if the actual interest rate is different from the indicative one.

If you choose to fix your interest rate and pay your interest annually in advance, you can apply for an Interest Prepayment Loan to fund your interest prepayments.

The Australian Taxation Office has issued various Product Rulings in relation to the GEI plus since the product was first offered. The Product Ruling applicable to your GEI plus depends on when you entered into the investment. The most recently issued Product Ruling confirms that, for eligible investors, interest may be deductible up to the Reserve Bank of Australia (RBA) Indicator Rate for Standard Variable Housing Loans (plus 100 basis points). For more information including the changes to the benchmark rate, refer to Risks and tax.

You will receive a loan statement twice a year (generally at the end of June and December). You will also have access to view your loan details 24/7 via our secure client service website, GearUp.

For each of your "profitable" GEI Securities you can:

• Repay that part of your loan and keep all those GEI Securities
• Repay that part of your loan and take the net proceeds in cash or GEI Securities; or
• Roll your GEI Securities into another GEI plus Facility.

Macquarie will write to you prior to the maturity of your loan about the options that are available to you. You will be asked to confirm your election in writing and Macquarie can then arrange the maturity and settlement of your loan.

Any securities sold while unwinding your loan will be sold at the prevailing market prices. Unless we have received written instructions within five business days prior to the end of your loan, we will usually sell your profitable GEI Securities and unwind your GEI plus.

For each of your "unprofitable" GEI Securities, you can take no action and Macquarie will organise for the disposal of those "unprofitable" securities, i.e. those securities that are below the GEI Security Loan Amount at maturity, and in this way satisfy your obligations with respect to the portion of the loan attributable to those GEI Securities.

The GEI plus Facility is designed to be held until maturity. However, you may choose to terminate your GEI plus Facility early.

Where your GEI plus Facility is terminated early you will still receive the benefit of the limited recourse nature of your loan. However you will need to pay an break costs, interest charges, fees and other costs that may apply.

You should note that break costs may be significant.

Once your loan is approved, you need to choose which GEI Securities you would like to purchase. Simply complete and submit the Macquarie GEI plus Securities Selection Form and Macquarie will then arrange the purchase of the GEI Securities on your behalf.

You can choose to construct your portfolio from a selection of more than 50 ASX listed securities and certain unlisted managed funds or you may choose to invest in a pre-selected portfolio. To view the current Approved List of Securities and pre-selected portfolios, refer to the tab, More Information. To select your GEI Securities, simply complete a GEI plus Securities Selection Form.

You can choose from a range of different interest payment methods to best accommodate your position, including:

Interest Rate Type	Payable
Variable	Monthly in arrears
Fixed for one year	Annually in advance
Fixed for the full loan term	Annually in advance

Unless you elect to fix your interest rate for the full loan term, we will invite you each year in early June to prepay your interest for the following 12 month period. There may be potential tax efficiencies associated with doing this – please speak to your financial adviser for more information about the potential tax implications.

If you choose to fix and prepay your interest, you may also apply for an Interest Prepayment Loan to fund up to 12 months’ interest prepayment on your GEI plus. The Interest Prepayment Loan has a term of 12 months and is repayable monthly in arrears via principal and interest repayments.

Once we receive your completed Securities Selection Form and your GEI Securities have been purchased, we will send you a settlement Confirmation Letter with your contract notes and details of your protected loan amount. You will also receive a Cashflow Analysis which will outline important information including the maturity date of your GEI plus.

You will then receive a loan statement twice a year (generally at the end of June and December), as well as confirmation of any transactions you make.

You can also view your loan details 24/7 via our secure client service website, GearUp.

The essence of the GEI plus is that you take out an investment loan to buy a parcel of GEI Securities which you intend to hold for at least the full loan term. The limited recourse nature of the loan is that it is expensive to unwind your loan (or part thereof) prior to maturity.

It is possible to sell some or all of your investments and repay some or all of your loan early (‘unwind’), but there are significant break costs involved in unwinding prior to the maturity date.

Please refer to the GEI plus Brochure dated 2 March 2011 for more information about the costs associated with unwinding your loan prior to maturity, or contact us for a free indicative quote for unwinding part or all of your GEI plus Facility (subject to a maximum of one fee quote per quarter and thereafter at a cost of $100 per quote).

The amount of your GEI plus interest payments that is deductible will depend on when you applied for your GEI plus, your loan term and whether you are paying a fixed or variable interest rate. You should refer to the applicable Product Ruling for further details.

Generally, if you entered into the GEI plus on or after 9.30pm on 16 April 2003 but before 1 July 2007, you can claim a deduction for your interest up to the lower of:

• the Reserve Bank of Australia's Indicator Rate for Personal Unsecured Loans - Fixed or Variable (whichever is applicable) or
• 85 per cent of the interest rate (for five year loans), 82.5 per cent of the interest rate (for four year loans), 80 percent of the interest rate (for three year loans), 72.5 per cent of the interest rate (for two year loans) or 60 per cent of the interest rate (for one year loans).

Generally, if you entered into the GEI plus on or after 1 July 2007, you should be entitled to a deduction for the amount of interest payable on your GEI plus, less any amount that is reasonably attributable to the cost of capital protection. The amount that is reasonably attributable to capital protection is currently calculated in the following way:

1. Calculate the total costs you incur under or in respect of the GEI plus for the income year, ignoring amounts that are not in substance for capital protection or interest
2. Apply the Reserve Bank of Australia's Indicator Rate for Variable Personal Unsecured Loans to your loan amount under the GEI plus:
   • If your borrowing is at a fixed rate for some or all of the loan term, you would apply the Indicator Variable Interest Rate at the time the first of the amounts in Step 1 was incurred for the term, or that part of the term, or
   • If your borrowing is at a variable rate for some or all of the loan term, you would apply the average of the Indicator Variable Interest Rates during the term, or part of the term.
3. Where the amount under Step 1 exceeds the amount under Step 2, the excess is attributed to the cost of capital protection for the income year. If the securities you purchased using you GEI plus are held on capital account, the excess is a capital cost and will not be deductible.

Legislation was passed in June 2011 which changed the benchmark rate applicable to those investors who entered into the GEI plus on or after 7.30pm on 13 May 2008. As a result of this change, the amount that is reasonably attributable to capital protection for those investors will be calculated in the following way:

1. Calculate the total costs you incur under or in respect of the GEI plus for the income year, ignoring amounts that are not in substance for capital protection or interest
2. Apply the Reserve Bank of Australia's Indicator Lending Rate for Standard Variable Housing Loans plus 100 basis points to your loan amount under the GEI plus:
   • If your borrowing is at a fixed rate for some or all of the loan term, you would apply the Indicator Variable Interest Rate at the time the first of the amounts in Step 1 was incurred for the term, or that part of the term, or
   • If your borrowing is at a variable rate for some or all of the loan term, you would apply the average of the Indicator Variable Interest Rates during the term , or part of the term.
3. 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 securities you purchased using your GEI plus are held on capital account, the excess is a capital cost and will not be deductible.

The Reserve Bank of Australia's Indicator Lending Rate for Standard Variable Housing Loans plus 100 basis points will also apply from 1 July 2013 to any investors who entered into the GEI plus on or after 1 July 2007 whose loan is still in existence on 1 July 2013.

If as a result of the change to the benchmark rate you are required to amend your income tax returns, you have until 29 June 2013 to do so.

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

The applicable Reserve Bank of Australia's Indicator Rate used to determine the deductibility of interest on your GEI plus will generally depend on when you entered into the GEI plus.

• If you entered the GEI plus before 1 July 2007 and the interest rate on your GEI plus is variable, use the Reserve Bank of Australia's Indicator Rate for Variable Personal Unsecured Loans. If the interest rate on your GEI plus is fixed, use the Reserve Bank of Australia's Indicator Rate for Fixed Personal Unsecured Loans
• If you entered the GEI plus on or after 1 July 2007, use the Reserve Bank of Australia's Indicator Rate for Variable Personal Unsecured Loans
• • If you entered the GEI plus on or after 7.30pm 13 May 2008, use the Reserve Bank of Australia's Indicator Lending Rate for Standard Variable Housing Loans (plus 100 basis points).

The Reserve Bank of Australia publishes the monthly Indicator Rates six to eight weeks after the end of the applicable calendar month. Current Indicator Rates are available on the Reserve Bank of Australia's website www.rba.gov.au