Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 16D - Certain arrangements relating to the use of property  

SECTION 159GG   QUALIFYING ARRANGEMENTS  

159GG(1)   [Conditions as to use of property]  

For the purposes of this Division, where at any time (in this subsection referred to as the relevant time ) any of the following conditions is satisfied in relation to an arrangement relating to the use by a person (in this subsection referred to as the end-user ), or to the control by a person (in this subsection also referred to as the end-user ) of the use, of property owned by another person who is a party to the arrangement, being property that is or includes an item of eligible property:

(a) the arrangement contains provision to the effect that:

(i) if:

(A) on the termination or expiration of the arrangement, the owner sells or otherwise disposes of the whole of the arrangement property, or part of the arrangement property that is or includes the item of eligible property, to any person; and

(B) the owner or an associate receives in respect of the sale or disposal no consideration, or consideration of an amount less than an amount (in this subparagraph referred to as the guaranteed residual value ) specified in, or ascertainable under, the provision,

the end-user or an associate will pay to the owner or an associate an amount equal to the guaranteed residual value, or to the amount by which the guaranteed residual value exceeds the consideration, as the case may be;

(ii) at or after the termination or expiration of the arrangement, the whole of the arrangement property or part of the arrangement property that is or includes the item of eligible property is to be transferred (whether or not for any consideration) to the end-user or an associate;

(iii) the end-user or an associate has or will have the right to purchase or to require the transfer of the whole of the arrangement property or part of the arrangement property that is or includes the item of eligible property; or

(iv) the arrangement period in relation to the item of eligible property in relation to the arrangement is a period that exceeds 1 year and the end-user or an associate will be liable to carry out, to expend money in respect of or to reimburse the owner or an associate for expenditure in respect of, repairs that may be required to the whole of the arrangement property or to part of the arrangement property that is or includes the item of eligible property;

(b) the arrangement period in relation to the item of eligible property in relation to the arrangement is equal to or greater than:

(i) where the item is an item of eligible real property - 50% of the effective life of that item at the commencement of the arrangement period; or

(ii) in any other case - 75% of the effective life of that item at the commencement of the arrangement period;

(c) the sum of:

(i) the payment portions of arrangement payments that were liable to be made at or before the relevant time in relation to the eligible amount, or in relation to all of the eligible amounts (including any eligible amount in respect of expenditure incurred after the commencement of the arrangement period), in relation to the item of eligible property; and

(ii) the payment portions of arrangement payments that, having regard to the provisions of the arrangement and any other relevant circumstances, are or were, at the relevant time, likely to become liable to be made after the relevant time in relation to the eligible amount, or in relation to all of the eligible amounts (including any eligible amount in respect of expenditure that, having regard to the provisions of the arrangement and any other relevant circumstances, is or was likely to be incurred during the arrangement period), in relation to the item of eligible property,

is equal to or greater than 90% of the sum of:

(iii) the residual amount in relation to the eligible amount, or the sum of the residual amounts in relation to the eligible amounts, in respect of which expenditure was incurred before the commencement of the arrangement period in relation to the item of eligible property, as ascertained at the commencement of the arrangement period; and

(iv) the amount of any expenditure that was, or is likely to be, incurred during the arrangement period, being expenditure giving rise to an eligible amount in relation to the item of eligible property,

the arrangement shall be taken to be, or to have been, a qualifying arrangement in relation to the item of eligible property:

(d) at the relevant time; and

(e) at all times before the relevant time when the arrangement was in force in relation to the item of eligible property.

159GG(2)   [Property transferred to end-user within 1 year]  

For the purposes of this Division, where:

(a) an item of eligible property is, or is included in, arrangement property in relation to an arrangement relating to the use by a person (in this subsection referred to as the end-user ), or to the control by a person (in this subsection also referred to as the end-user ) of the use, of property owned by another person who is a party to the arrangement; and

(b) the ownership of the item of eligible property is transferred to the end-user or an associate within 1 year after the arrangement ceases to be in force (whether by termination or expiration) in relation to the item of eligible property,

the arrangement shall be taken to have been a qualifying arrangement in relation to the item of eligible property at all times during the period during which the arrangement was in force in relation to the item of eligible property.

159GG(3)   [Leases]  

For the purposes of subsections (1) and (2):

(a) a lease to a person of property owned by another person shall be taken to be an arrangement relating to the use by the person of property owned by the other person; and

(b) any arrangement entered into in relation to the lease referred to in paragraph (a) shall be taken to be part of the arrangement referred to in that paragraph.

159GG(4)   [Commissioner's discretion to treat as non-qualifying arrangement]  

Where, but for this subsection, an arrangement would be a qualifying arrangement in relation to an item of eligible property at a particular time (in this subsection referred to as the relevant time ) and the Commissioner, having regard to:

(a) the circumstances by reason of which the arrangement is a qualifying arrangement in relation to that item of eligible property; and

(b) any other relevant circumstances,

considers it unreasonable that the arrangement should be a qualifying arrangement at the relevant time in relation to the item of eligible property, the arrangement shall be taken not to be a qualifying arrangement at the relevant time in relation to the item of eligible property.

159GG(5)   [Arrangement ceasing to be qualifying arrangement]  

Where an arrangement is a qualifying arrangement in relation to an item of eligible property at a particular time (in this subsection referred to as the relevant time ) and the arrangement ceases to be a qualifying arrangement in relation to that item of eligible property at a later time, the arrangement shall not be taken not to have been a qualifying arrangement in relation to that item of eligible property at the relevant time by reason of it ceasing to be a qualifying arrangement in relation to that item of eligible property at the later time.