From the Income Tax Assessment Act 1936 Volume 8 Part 3 Division...

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    From the Income Tax Assessment Act 1936 Volume 8 Part 3 Division 16E

    'qualifying security means any security:

    (a) that is issued after 16 December 1984;
    (b) that is not a prescribed security within the meaning of section 26C; (ba) that is not part of an exempt series (see subsection (9A));
    (c) the term of which, ascertained as at the time of issue of the security will, or is reasonably likely to, exceed 1 year;
    (d) that has an eligible return;
    and (e) where the precise amount of the eligible return is able to be ascertained at the time of issue of the security—in relation to which the amount of the eligible return is greater than 1% of the amount ascertained by multiplying the amount of the payment or the sum of the payments (excluding any periodic interest) liable to be made under the security by the number (including any fraction) of years in the term of the security;'

    At the time of the issue it was not reasonably likely that the term of the convertibles, which convert on the company IPO, would likely exceed 1 year.
    The company presentation issued at the time of the raising showed a timeframe that had the IPO within 12 months.
    The convertibles were issued on 12/06/20 & the IPO is on 07/05/21, 329 days.

    So the convertibles are not Qualifying Securities per the above.

    Definition eligible return.
    '
    (3) For the purposes of this Division, there shall be taken to be an eligible return in relation to a security if at the time when the security is issued it is reasonably likely, by reason that the security was issued at a discount, bears deferred interest or is capital indexed or for any other reason, having regard to the terms of the security, for the sum of all payments (other than periodic interest payments) under the security to exceed the issue price of the security, and the amount of the eligible return is the amount of the excess.'

    I also don't believe that the eligible return applies as the above states that it has to be reasonable likely at the time of the issue of the convertibles.
    The convertibles were in an unlisted, high risk company that if they were unable to IPO the company or secure additional finance would not have been able to pay the interest accrued.
    In this case the company would have likely have become bankrupt & the convertibles worthless.

    Last edited by Tarvold: 21/04/21
 
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