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    Non-share equity interests

    Under a taxation measure that took effect from 1 July 2001 (the debt and equity rules), certain interests which are not shares in legal form are treated in a similar way to shares for some tax law purposes. These interests are called non-share equity interests. Examples are some income securities and some stapled securities. The Guide to the debt and equity tests, available on our website, provides an overview of the debt and equity rules and explains what a non-share equity interest is.

    Company bonds and convertible notes

    Companies are increasingly borrowing money by issuing debt securities or 'bonds'. These can be bought and sold in the stock market in the same way as shares. Usually the company pays back the money borrowed after a period of time. Sometimes the holder of a bond is given the right to exchange the bond for shares in the borrowing company or another company. Company bonds that can be exchanged for shares are referred to in this publication as convertible notes.

    A company bond is a promise made by a company to pay back money that it previously borrowed. In addition, the company pays interest until the money it borrowed is paid back. Interest you receive as the holder of a company bond is included on your 2006 tax return as interest income at item 10. Special rules apply if you sell a company bond before the company returns the money that it borrowed or if the bond is exchanged for shares in the borrowing company or another company.


    Non-equity shares


    Last modified: 01 Jul 2006QC 27783