In many cases, for example, in the case of a box spread (see
SAIM7030) the exact return from the
investment in the future or option will be known at the outset.
Other schemes may produce a return that varies only slightly with
fluctuations in the value of the underlying subject matter. The
legislation aims to catch cases where the return on the investment
is predictable and has more similarity to interest than to the risk
expected on a future or option.
ITTOIA05/S560 explains what is meant by producing a
guaranteed return from the disposal (or disposals) of futures or
options. A guaranteed return as one where the risks from
fluctuations in the underlying subject matter are eliminated or
reduced so that
the amount of the returns is not to any significant extent attributable to any such fluctuations, and
The elimination or reduction of risk includes those cases where
the subject matter is chosen because it will be liable only to
minimum fluctuation.
The term ‘to any significant extent' is not defined in
the legislation.
Underlying subject matter here means the commodities,
currencies, shares, stocks or securities, interest rates, indices
or other matter to which the future or option refers.
