Commentary on Sections Overview Chapter 2: Accrued income profits and losses Section 637: Accrued income losses treated as payments in next interest period
1876.This section provides for a particular treatment of an accrued income loss. It is based on section 714 of ICTA.
1877.Where a person makes accrued income losses there are two ways of relieving those losses. The most common is by exempting the interest arising at the end of the interest period to which the accrued income loss relates to the extent of the amount of the loss. This relief is given by section 679, which is signposted in subsection (3) together with other exemptions which may apply when the interest period ends with an interest payment day.
1878.This section deals with the far less common circumstance where the interest period does not end with an interest payment day and so interest does not arise at the end of it. (This can occur where an interest payment day is more than twelve months after the previous one. The accrued income scheme restricts all interest periods to no more than twelve months. See section 673(1)(b)).
1879.Subsection (2) treats the person who made the accrued income loss as making a payment in the next interest period. So losses are in effect carried forward and taken into account in computing the accrued income profit (or accrued income loss as the case may be) on securities of the same kind in the next interest period. If that interest period does not end with an interest payment date and there are still losses to carry forward, the process repeats until the losses are those of an interest period which does end with an interest payment day.