Commentary on Sections Overview Chapter 2: Accrued income profits and losses Section 627: Meaning of “variable rate securities”
1833.This section defines “variable rate securities” for the purposes of the accrued income scheme. It is based on sections 717(1) to (3) and 726A(2), (7) and (8) of ICTA. They are all securities other than fixed rate securities and securities for which the interest rate is tied to a base rate or a recognised prices index. Variable rate securities may, for example, have periods for which no interest is payable or periods in which sharply different rates of interest are payable. The rules for transfers with and without interest work on the premise that interest accrues evenly, which is not the case with variable rate securities.
1834.Subsection (4) applies the test for qualifying as variable rate securities in a special way if securities are issued in tranches (“new securities”) and section 649 applies.