Clause 61 amends section 248 of the Income Tax Act. Section 248 contains the definitions that are relevant generally for the purposes of the Income Tax Act, so there are several measures that are reflected in clause 61. I'll go through each of them.
The first measure relates to the definition of a “derivative forward arrangement”. These are arrangements that were popular a number of years ago that effectively sought, through the use of derivative financial instruments, to convert fully taxable ordinary income into capital gains, which were only half-taxable, and also to defer the inclusion in income of those amounts. It provided a deferral benefit generally for up to five years and also a recharacterization from fully taxable ordinary income to capital gains that are only half-taxed.
In 2013, the previous government implemented rules in order to prevent this type of derivative planning. A new iteration of the planning was recently developed that sought to exploit an exception to the previous rules. What this measure would do is ensure that the derivative forward arrangement rules work appropriately to prevent this type of planning.