Income Tax Assessment Act 1936
(Repealed by No 79 of 2010 )
View history note
Hide history noteSch 2E repealed by No 79 of 2010 , s 3 and Sch 3 item 1, effective 1 July 2010. Sch 2E formerly read:
SCHEDULE 2E - LEASES OF LUXURY CARS
Division 42A - Leases of luxury cars
SECTION 42A-1 WHAT THIS DIVISION IS ABOUTHistoryDiv 42A inserted by No 95 of 1997.
This Division provides for leases of luxury cars to be treated as notional sale and loan transactions.
The lessor under such a lease is taken to have notionally sold the car to the lessee and made a loan to the lessee to finance the cost of the notional acquisition of the car.
The lessor's assessable income of a year of income in which any part of the lease term falls is to include a proportion of the finance charge for the notional loan.
A proportion of the finance charge for the notional loan is allowable as a deduction to the lessee for a year of income to the extent that the lease payments made for the year of income would have been deductible.
As the lessee is taken to be the owner of the car, the lessee is the person entitled to any deductions for depreciation in accordance with the rules applying under this Act to the owners of luxury cars.
HistoryS 42A-1 inserted by No 95 of 1997.
Subdivision 42A-A - Notional sale of car, and notional loan, to lessee
SECTION 42A-5 WHAT THIS SUBDIVISION IS ABOUTHistorySubdiv 42A-A inserted by No 95 of 1997.
This Subdivision:
(a) sets out the circumstances in which a leased car that is a luxury car is taken to be sold by the lessor to the lessee; and (b) provides that the lease is taken to constitute a loan by the lessor to the lessee to finance the cost of the acquisition of the car. Operative provisionsHistoryS 42A-5 inserted by No 95 of 1997.
SECTION 42A-10 APPLICATION OF THIS DIVISION
42A-10(1)
This Division applies to a motor car:
(a) that is a leased car; and
(b) that is a luxury car; and
(c) that is not trading stock of the lessee; and
(d) the lease of which was granted after 7.30 pm by legal time in the Australian Capital Territory on 20 August 1996.
42A-10(2)
If:
(a) a lease of a car was granted before the time referred to in paragraph (1)(d); and
(b) an extension of the lease was granted after that time, whether the extension took effect before or after that time;the extension is taken for the purposes of that paragraph to be a new lease granted after that time.
42A-10(3)
This Division has effect for the purposes of this Act (including, to avoid doubt, the Income Tax Assessment Act 1997 ) other than Division 11A of Part III .HistoryS 42A-10(3) amended by No 174 of 1997.
S 42A-10 inserted by No 95 of 1997.
SECTION 42A-15 NOTIONAL SALE OF CAR BY LESSOR AND NOTIONAL ACQUISITION OF CAR BY LESSEE
42A-15(1)
The car is taken to have been disposed of by the lessor by way of sale to the lessee, and to have been acquired by the lessee, at the start of the lease term.
42A-15(2)
The lessee is taken to be the owner of the car until the lease term ends or the lease is terminated before that time, as the case may be.
42A-15(3)
However, the lessee ceases to be taken to be the owner of the car if:
(a) the lessee enters into, in respect of the car, an arrangement of a kind mentioned in paragraph (b) of the definition of lease in section 42A-115 ; and
(b) this Division applies to the car in respect of that arrangement.
SECTION 42A-20 CONSIDERATION FOR NOTIONAL SALE, COST OF NOTIONAL ACQUISITION, AND DEPRECIATED VALUE, OF CARHistoryS 42A-15 inserted by No 95 of 1997.
42A-20(1)
The consideration for the sale of the car by the lessor, and the cost of the acquisition of the car by the lessee, are each taken to have been:
(a) if the lease states an amount as the cost or value of the car for the purposes of the lease and the lessor and the lessee were dealing with each other at arm's length in connection with the lease - the amount so stated; or
(b) otherwise - the amount that could reasonably have been expected to have been paid by the lessee for the purchase of the car if:
(i) the lessor had actually sold the car to the lessee when the lease was granted; and
(ii) the lessor and lessee were dealing with each other at arm's length in connection with the sale.
42A-20(2)
If:
(a) the lease is an arrangement of a kind referred to in paragraph (b) of the definition of lease in section 42A-115 ; and
(b) the lessee is an associate of the lessor;the cost of the car for the purpose of calculating its depreciated value at the time (the acquisition time ) when it is taken to have been acquired by the lessee is taken, for the purposes of the application of this Act to the lessee, to be the sum of:
(c) the amount that would have been the depreciated value of the car at the acquisition time for the purposes of the application of this Act to the lessor if the lessor were not taken under this Division to have disposed of the car; and
(d) any amount that is included in the lessor's assessable income under former subsection 59(2) because the lessor is taken to have disposed of the car.HistoryS 42A-20(2) amended by No 101 of 2006 , s 3 and Sch 2 item 515, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 42A-20 inserted by No 95 of 1997.
SECTION 42A-25 NOTIONAL LOAN BY LESSOR TO LESSEE
42A-25(1)
On the grant of the lease, the lessor is taken to have made a loan (the notional loan ) to the lessee:
(a) for a period equal to the lease term; and
(b) of an amount (the notional loan principal ) equal to the consideration for the sale of the car less any amount paid, or credited by the lessor as having been paid, by the lessee to the lessor, at or before the start of the lease term, for the cost of the car; and
(c) subject to payment of a charge (the finance charge ).
42A-25(2)
The notional loan principal is taken to be repaid, and the finance charge is taken to be paid, by the making of the lease payments.
HistoryS 42A-25 inserted by No 95 of 1997.
Subdivision 42A-B - Amounts to be included in lessor's assessable income
SECTION 42A-30 WHAT THIS SUBDIVISION IS ABOUTHistorySubdiv 42A-B inserted by No 95 of 1997.
This Subdivision provides for the inclusion in the lessor's assessable income of:
(a) amounts (accrual amounts) on account of the finance charge for the notional loan that the lessor is taken to have made to the lessee; and (b) any profit made by the lessor:
(i) on the notional sale of the car to the lessee; or (ii) on a sale of the car after any notional re-acquisition of the car by the lessor. Operative provisionsHistoryS 42A-30 inserted by No 95 of 1997.
SECTION 42A-35 AMOUNTS TO BE INCLUDED IN LESSOR'S ASSESSABLE INCOME
42A-35(1) Accrual amounts.The lessor's assessable income of a year of income includes:
(a) if an accrual period for the notional loan that the lessor is taken under this Division to have made to the lessee occurs wholly during that year of income - the accrual amount for that accrual period; and
(b) if part of an accrual period for that notional loan occurs during that year of income - so much of the accrual amount for that accrual period as may appropriately be related to that year of income in accordance with generally accepted accounting principles.
42A-35(2) Profit on notional sale.If the consideration for the sale of the car by the lessor that is taken under this Division to have been made exceeds the cost of the acquisition of the car by the lessor, the excess is included in the lessor's assessable income of the year of income in which the sale is taken to have occurred.
42A-35(3) Profit on actual sale after notional re-acquisition.If:
(a) the lessor is taken under this Division to have re-acquired the car from the lessee; and
(b) the lessor afterwards sells the car; and
(c) the consideration for the sale exceeds the cost of the re-acquisition;the excess is included in the lessor's assessable income of the year of income in which the sale occurred.
SECTION 42A-40 TREATMENT OF LEASE PAYMENTSHistoryS 42A-35 inserted by No 95 of 1997.
42A-40(1)
The lease payments that the lessor receives, or is entitled to receive, under the lease:
(a) are not to be included in the lessor's assessable income of any year of income; but
(b) are not taken to be exempt income of the lessor.
42A-40(2)
However, those lease payments are taken into account in calculating accrual amounts that are included in the lessor's assessable income under section 42A-35.
42A-40(3)
A loss or outgoing incurred by the lessor in deriving any such lease payments is not taken to be a loss or outgoing incurred by the lessor in relation to gaining or producing exempt income.
HistoryS 42A-40 substituted by No 174 of 1997 and inserted by No 95 of 1997.
Subdivision 42A-C - Deductions allowable to lessee
SECTION 42A-45 WHAT THIS SUBDIVISION IS ABOUTHistorySubdiv 42A-C inserted by No 95 of 1997.
This Subdivision provides that the lessee may, in certain circumstances, be entitled to deductions for the finance charge for the notional loan that the lessor is taken to have made to the lessee.
Operative provisionsHistoryS 42A-45 inserted by No 95 of 1997.
SECTION 42A-50 EXTENT TO WHICH DEDUCTIONS ARE ALLOWABLE TO LESSEE
42A-50(1)
If an accrual period for the notional loan that the lessor is taken under this Division to have made to the lessee occurs wholly during a year of income of the lessee, the accrual amount for that accrual period is allowable as a deduction to the lessee for that year of income.
42A-50(2)
If part of an accrual period for that notional loan occurs during a year of income of the lessee, so much of the accrual amount for that accrual period as may appropriately be related to that year of income in accordance with generally accepted accounting principles is allowable as a deduction to the lessee for that year of income.
42A-50(3)
An accrual amount, or part of an accrual amount, for an accrual period is allowable as a deduction under subsection (1) or (2) to the lessee for a year of income of the lessee only to the extent that the lease payments made for that year of income would, apart from this Division, be allowable as deductions to the lessee for that year of income.
SECTION 42A-55 LEASE PAYMENTS NOT TO BE ALLOWABLE DEDUCTIONSHistoryS 42A-50 inserted by No 95 of 1997.
42A-55
The lease payments that the lessee makes under the lease are not allowable as deductions to the lessee for any year of income, but they are taken into account in calculating accrual amounts that are allowable as deductions under section 42A-50 .HistoryS 42A-55 inserted by No 95 of 1997.
Subdivision 42A-D - Adjustments if total amount assessed to lessor differs from amount of finance charge
SECTION 42A-60 WHAT THIS SUBDIVISION IS ABOUTHistorySubdiv 42A-D inserted by No 95 of 1997.
This Subdivision provides for adjustments if the sum of the amounts included in the lessor's assessable income are greater or less than the finance charge, worked out at the end of the lease term, for the notional loan.
Operative provisionsHistoryS 42A-60 inserted by No 95 of 1997.
SECTION 42A-65 ADJUSTMENTS FOR LESSOR
42A-65(1)
This section applies at the following times ( adjustment times ):
(a) the end of the lease term;
(b) if the lease is terminated before that time - when the termination takes place;
(c) if the lease term is extended - when the extension takes effect;
(d) if the lease is renewed - when the renewal takes effect.
42A-65(2)
If the sum of all amounts (whether lease payments, a termination amount or any other payments) that were paid or payable to the lessor under the lease exceeds the amount worked out using the formula in subsection (4), the excess is included in the lessor's assessable income of the year of income in which the relevant adjustment time occurs.Note:
Subsection 42A-80(9) deems the amount of a notional loan that is taken to be made by an extended or renewed lease to be a termination amount paid under the previous lease.
42A-65(3)
If the amount worked out using the formula in subsection (4) exceeds the sum of all amounts (whether lease payments, a termination amount or any other payments) that were paid or payable to the lessor under the lease, the excess is allowable as a deduction to the lessor for the year of income in which the relevant adjustment time occurs.Note:
Subsection 42A-80(9) deems the amount of a notional loan that is taken to be made by an extended or renewed lease to be a termination amount paid under the previous lease.
42A-65(4)
The formula for the purposes of subsections (2) and (3) is:
Notional loan principal + Assessed accrual amounts where:
notional loan principal means the notional loan principal for the notional loan that is taken under this Division to have been granted by the lessor to the lessee.
assessed accrual amounts means the sum of the accrual amounts that have been or are to be included in the lessor's assessable income of any year of income.
SECTION 42A-70 ADJUSTMENTS FOR LESSEEHistoryS 42A-65 inserted by No 95 of 1997.
42A-70(1)
If:
(a) an amount is included in the lessor's assessable income of a year of income under subsection 42A-65(2) ; or
(b) an amount would have been so included if the lessor had been subject to tax on assessable income;a corresponding amount is allowable as a deduction to the lessee for the lessee's year of income.
42A-70(2)
If:
(a) an amount is allowable as a deduction to the lessor for a year of income under subsection 42A-65(3) ; or
(b) an amount would have been so allowable if the lessor had been subject to tax on assessable income;a corresponding amount is included in the lessee's assessable income of the lessee's year of income.
42A-70(3)
An amount is not to be allowed as a deduction to the lessee for any year of income under subsection (1), or to be included in the lessee's assessable income of any year of income under subsection (2), except to the extent (if any) that the lease payments made would, apart from this Division, be allowable as deductions to the lessee.
HistoryS 42A-70 inserted by No 95 of 1997.
Subdivision 42A-E - What happens when the lease expires
SECTION 42A-75 WHAT THIS SUBDIVISION IS ABOUTHistorySubdiv 42A-E inserted by No 95 of 1997.
This Subdivision sets out what happens at the end of the lease term. The situations dealt with are:
(a) the lease is extended or renewed; (b) the lessee buys the car; (c) the lessee ceases to have the right to use the car. Operative provisionsHistoryS 42A-75 inserted by No 95 of 1997.
SECTION 42A-80 WHAT HAPPENS IF THE LEASE TERM IS EXTENDED OR THE LEASE IS RENEWED
42A-80(1)
If, after the end of the lease term, the lessee continues to have the right to use the car because the term is extended or the lease is renewed, the following provisions have effect.
42A-80(2)
The lessee is taken to continue to be the owner of the car until:
(a) the end of the period of extension; or
(b) the end of the lease term of the renewed lease;as the case may be.
42A-80(3)
However, the lessee ceases to be the owner of the car if:
(a) the lessee enters into, in respect of the car, an arrangement of a kind mentioned in paragraph (b) of the definition of lease in section 42A-115 ; and
(b) this Division applies to the car in respect of that arrangement.
42A-80(4)
The notional loan that is taken under this Division to have been made because of the grant of the previous lease is taken to have been repaid and Subdivision 42A-D applies.
42A-80(5)
The lessor is taken to have made a loan (the notional loan ) to the lessee:
(a) for the period of the extension of the lease term or the period of the renewed lease, as the case may be; and
(b) of an amount (the notional loan principal ) equal to the amount worked out under subsection (7); and
(c) subject to the payment of a charge (the finance charge ).
42A-80(6)
The notional loan principal is taken to be repaid, and the finance charge is taken to be paid, by the making of the lease payments under the lease as extended or under the renewed lease, as the case may be.
42A-80(7)
The notional loan principal is:
(a) if the lease as extended or renewed states an amount as the cost or value of the car for the purposes of the extension or renewal and the lessor and the lessee were dealing with each other at arm's length in connection with the extension or renewal - the amount so stated; or
(b) otherwise - the amount that could reasonably have been expected to have been paid by the lessee for the purchase of the car if:
(i) the lessor had actually sold the car to the lessee when the lease was extended or renewed; and
(ii) the lessor and lessee were dealing with each other at arm's length in connection with the sale.
42A-80(8)
In determining whether subsection (1) applies to the lessee, any period after the end of the lease term and before the extension or renewal is granted during which the lessee did not have the right to use the car is disregarded if the extension or renewal:
(a) has effect from the time immediately after the end of that term; or
(b) would otherwise result in substantial continuity of the leasing of the car to the lessee.
42A-80(9)
The amount of the notional loan is taken, for the purposes of section 42A-65, to be a termination amount paid to the lessor under the previous lease.
SECTION 42A-85 WHAT HAPPENS IF AN AMOUNT IS PAID BY OR ON BEHALF OF THE LESSEE TO ACQUIRE THE CARHistoryS 42A-80 inserted by No 95 of 1997.
42A-85
If, at the end of the lease term or any extension of that term, an amount is paid to the lessor by, or on behalf of, the lessee to acquire the car, the following provisions have effect:
(a) the amount paid is not included in the lessor's assessable income;
(b) a deduction is not allowable to the lessee because of the payment;
(c) the lessee is taken to continue to be the owner of the car until the lessee disposes of it;
(d) the transfer to the lessee of legal title to the car is not taken to be a disposal of the car by the lessor.SECTION 42A-90 WHAT HAPPENS IF THE LESSEE CEASES TO HAVE THE RIGHT TO USE THE CARHistoryS 42A-85 inserted by No 95 of 1997.
42A-90(1)
If, at the end of the lease term:
(a) the lessee ceases to have the right to use the car because the term is not extended and the lease is not renewed; and
(b) no amount is paid to the lessor by, or on behalf of, the lessee to acquire the car;the following provisions have effect.
42A-90(2)
The car is taken to have been disposed of by the lessee by way of sale to the lessor, and to have been acquired by the lessor, at the end of the lease term.
42A-90(3)
The consideration for the sale of the car by the lessee, and the cost of the acquisition of the car by the lessor, are each taken to have been:
(a) the amount worked out in accordance with subsection (6); or
(b) if it is not practicable to work out an amount in accordance with that subsection - the market value of the car at the end of the lease term.
42A-90(4)
If the car is afterwards acquired by an associate of the lessee, the cost of the car for the purpose of calculating its depreciated value at the time of the acquisition for the purposes of the application of this Act to the associate is taken to be whichever is the lesser of:
(a) the sum of:
(i) the amount that would have been the depreciated value of the car at that time for the purposes of the application of this Act to the lessee if the lessee were not taken under this Division to have disposed of the car; and
(ii) any amount that is included in the lessee's assessable income under former subsection 59(2) or under Subdivision 40-D , or the former Subdivision 42F or 42G, of the Income Tax Assessment Act 1997 because the lessee is taken to have disposed of the car; or
(b) the cost of the acquisition of the car by the associate.HistoryS 42A-90(4) amended by No 101 of 2006 , s 3 and Sch 2 item 516, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 42A-90(4) amended by No 174 of 1997, No 77 of 2001.
42A-90(5)
For the purposes of paragraph (1)(a), the lessee is not taken to have ceased to have the right to use the car if:
(a) the lease term is extended, or the lease is renewed, at a time after, but not immediately after, the end of that term with effect from the time immediately after the end of that term; or
(b) the extension or renewal would otherwise result in substantial continuity of the leasing of the car to the lessee.
42A-90(6)
For the purposes of paragraph (3)(a), the amount of the consideration for the sale, and of the cost of the acquisition, is the amount worked out using the formula:
Balance of notional loan − Payable amount + Refundable amount where:
balance of notional loan means the sum of:
(a) the outstanding notional loan principal at the end of the lease term; and
(b) any amounts payable by the lessee for the notional loan that were not paid at or before that time; and
(c) any amounts (other than the payable amount) payable by the lessee because of the expiry of the lease.payable amount means the amount (if any) payable to the lessor by the lessee because the value of the car at the end of the lease term was less than the balance of notional loan.
refundable amount means the amount (if any) payable to the lessee by the lessor because the value of the car at the end of the lease term was more than the balance of notional loan.
HistoryS 42A-90 inserted by No 95 of 1997.
Subdivision 42A-F - What happens if the lease is terminated before the end of the lease term
SECTION 42A-95 WHAT THIS SUBDIVISION IS ABOUTHistorySubdiv 42A-F inserted by No 95 of 1997.
This Subdivision sets out what happens if the lease is terminated before the end of the lease term.
The situations covered are:
(a) the lessee buys the car; (b) the lessee ceases to have the right to use the car. Operative provisionsHistoryS 42A-95 inserted by No 95 of 1997.
SECTION 42A-100 WHAT HAPPENS IF AN AMOUNT IS PAID BY OR ON BEHALF OF THE LESSEE TO ACQUIRE THE CAR
42A-100
If, on the termination of the lease before the end of the lease term, an amount is paid to the lessor by, or on behalf of, the lessee to acquire the car, the following provisions have effect:
(a) the amount paid is not included in the lessor's assessable income;
(b) a deduction is not allowable to the lessee because of the payment;
(c) the lessee is taken to continue to be the owner of the car until the lessee disposes of it;
(d) the transfer to the lessee of legal title to the car is not taken to be a disposal of the car by the lessor.SECTION 42A-105 WHAT HAPPENS IF THE LESSEE CEASES TO HAVE THE RIGHT TO USE THE CARHistoryS 42A-100 inserted by No 95 of 1997.
42A-105(1)
If, on the termination of the lease before the end of the lease term, no amount is paid to the lessor by, or on behalf of, the lessee to acquire the car, the following provisions have effect.
42A-105(2)
The car is taken to have been disposed of by the lessee by way of sale to the lessor, and to have been acquired by the lessor, on the termination of the lease.
42A-105(3)
The consideration for the sale of the car by the lessee, and the cost of the acquisition of the car by the lessor, are each taken to have been:
(a) the amount worked out in accordance with subsection (5); or
(b) if it is not practicable to work out an amount in accordance with that subsection - the market value of the car on the termination of the lease.
42A-105(4)
If the car is afterwards acquired by an associate of the lessee, the cost of the car for the purpose of calculating its adjustable value, within the meaning of Division 40 of the Income Tax Assessment Act 1997 , at the time of the acquisition for the purposes of the application of this Act to the associate is taken to be whichever is the lesser of:
(a) the sum of:
(i) the amount that would have been the adjustable value of the car (within the meaning of the Income Tax Assessment Act 1997 ) at that time for the purposes of the application of this Act to the lessee if the lessee were not taken under this Division to have disposed of the car; and
(ii) any amount that is included in the lessee's assessable income under former subsection 59(2), under the former Subdivision 42F or 42G of the Income Tax Assessment Act 1997 or under Subdivision 40-D of that Act because the lessee is taken under this Division to have disposed of the car; or
(b) the cost of the acquisition of the car by the associate.HistoryS 42A-105(4) amended by No 101 of 2006 , s 3 and Sch 2 item 517, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 42A-105(4) amended by No 174 of 1997; substituted by No 77 of 2001. For application provisions see note under s 42A-90(4).
42A-105(5)
For the purposes of paragraph (3)(a), the amount of the consideration for the sale, and of the cost of the acquisition, is the amount worked out using the formula:
Balance of notional loan − Payable amount + Refundable amount where:
balance of notional loan means the sum of:
(a) the outstanding notional loan principal at the termination of the lease; and
(b) any amounts payable by the lessee for the notional loan that were not paid at or before that time; and
(c) any amounts (other than the payable amount) payable by the lessee because of the termination of the lease.payable amount means the amount (if any) payable to the lessor by the lessee because the value of the car at the termination of the lease was less than the balance of notional loan at that time.
refundable amount means the amount (if any) payable to the lessee by the lessor because the value of the car at the termination of the lease was more than the balance of notional loan at that time.
HistoryS 42A-105 inserted by No 95 of 1997.
Subdivision 42A-G - Interpretation
SECTION 42A-110 WHAT THIS SUBDIVISION IS ABOUTHistorySubdiv 42A-G inserted by No 95 of 1997.
This Subdivision explains the meanings of various expressions used in this Division.
Operative provisionsHistoryS 42A-110 inserted by No 95 of 1997.
SECTION 42A-115 GENERAL DEFINITIONS
42A-115
In this Division, unless the contrary intention appears:accrual amount
has the meaning given by section 42A-140 .accrual period
has the meaning given by section 42A-140 .associate
has the meaning given by section 318 but, in addition:
(a) a person and any employer of the person are taken to be associates; and
(b) a person and any employee of the person are taken to be associates.extension
of the lease term of a lease means (except in subsection 42A-10(2) ) extension of the term on the same terms and conditions as applied under the lease before the extension.finance charge
means the finance charge referred to in section 42A-25 or 42A-80 , as the case may be, as worked out under section 42A-130 .hire purchase agreement
means:
(a) an agreement for letting property on hire under which the hirer has an option to buy the property where:
(i) title in the property does not pass to the hirer until the option is exercised; and
(ii) amounts paid under the agreement are taken into account in working out the amount payable on the exercise of the option; or
(b) an agreement to buy property by instalments, where title in the property does not pass to the hirer until the final instalment is paid.implicit interest rate
has the meaning given by section 42A-150 .lease
of a motor car means:
(a) any arrangement to let the car on hire under which a right to use the car is granted by the owner to another person for a monetary or other consideration; and
(b) any arrangement to let the car on hire under which a right to use the car, being a right derived directly or indirectly from a right referred to in paragraph (a), is granted by a person to another person for a monetary or other consideration;and includes a renewal of such an arrangement, but does not include a short-term hiring agreement or a hire purchase agreement.
leased car
means a motor car of which a lease has been granted.lease payment
means an amount that the lessee under a lease of a motor car is required to pay for the rental or hire of the car but does not include:
(a) an amount in the nature of a penalty payable for failure to make a payment for rental or hire on time; or
(b) a termination amount.lease payment period
has the meaning given by section 42A-135 .lease term
of a lease means the period:
(a) starting on the day as from which the lease has effect; and
(b) ending on the day on which the lease is to cease to have effect or, if the lease is of indefinite duration, on the day on which it would be reasonable to conclude, having regard to the terms and conditions of the lease, that the lease will cease to have effect.lessee
of a leased car means the person to whom the right to use the car was granted under the arrangement constituting the lease.lessor
of a leased car means the person by whom the right to use the car was granted under the arrangement constituting the lease.luxury car
has the meaning given by section 42A-120 .motor car
or car means a car within the meaning of subsection 995-1(1) of the Income Tax Assessment Act 1997 , other than one mentioned in subsection 40-230(2) of that Act (about cars modified to carry disabled people).notional loan
has the meaning given by section 42A-25 or subsection 42A-80(5) , as the case may be.notional loan principal
of a notional loan means the amount that was the notional loan principal under section 42A-25 or subsection 42A-80(5) , as the case may be, of the notional loan at the time as at which that loan is taken under this Division to have been granted.outstanding notional loan principal
has the meaning given by section 42A-145 .right to use
a car includes the right to possess the car.short-term hiring agreement
means, subject to section 42A-125 , an agreement for taking a unit of property on hire where the agreement is of a kind ordinarily entered into by persons taking property on hire intermittently as the occasion requires on an hourly, daily, weekly, monthly or other short-term basis.termination amount
means an amount payable on the expiry, or termination before expiry, of a lease of a motor car and includes:
(a) if, on the expiry or termination, the lessee acquires the car from the lessor - an amount payable to the lessor for the acquisition; or
(b) otherwise - the value of the car at the time of the expiry or termination.HistoryArchived:
Definition of " motor car or car " substituted by No 101 of 2006 , s 3 and Sch 2 item 518, effective 14 September 2006. For application and savings provisions and for former wording see the CCH Australian Income Tax Legislation archive .
SECTION 42A-120 LUXURY CARHistoryS 42A-115 inserted by No 95 of 1997.
42A-120
A leased car is a luxury car for the purposes of this Division if, had the car:
(a) been bought from the owner, at the first time when the owner granted a lease of the car, by the person who is the lessee for a price equal to the amount applying under paragraph 42A-20(1)(a) or (b) , as the case may be; and
(b) been first used by that person for any purpose in the financial year in which that time occurred;the cost of the car, for the purpose of calculating the deductions allowable to that person for the decline in value of the car, would have been reduced because of the operation of former section 57AF, the former section 42-80 of the Income Tax Assessment Act 1997 or section 40-230 of that Act.
SECTION 42A-125 CONSECUTIVE SHORT-TERM HIRING AGREEMENTSHistoryS 42A-120 amended by No 101 of 2006 , s 3 and Sch 2 item 519, by amending references to repealed inoperative provisions, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 42A-120 inserted by No 95 of 1997; amended by No 77 of 2001 , No 174 of 1997. For application provisions see note under s 42A-90(4).
42A-125(1)
If:
(a) 2 or more consecutive agreements have been or are entered into for the hiring of the same motor car; and
(b) the total of the periods for which the car was hired under the agreements exceeds 6 months; and
(c) the car was or is let on hire under the agreements by the same person or by persons who were associates of each other; and
(d) the car was or is taken on hire under the agreements by the same person or by persons who were associates of each other; and
(e) each agreement would, apart from this section, be a short-term hiring agreement;each agreement is taken to have been or to be a lease of the car.
42A-125(2)
For the purposes of paragraph (1)(a), if an agreement takes effect after, but not immediately after, a previous agreement ceased to have effect, the agreements are taken to be consecutive if the effect of the agreements is to result in substantial continuity of the hiring of the car by the same person or by persons who were associates of each other.
SECTION 42A-130 FINANCE CHARGEHistoryS 42A-125 inserted by No 95 of 1997.
42A-130
For the purposes of this Division, the finance charge for a notional loan that the lessor, under a lease of a motor car, is taken to have made to the lessee is the amount worked out using the formula:
Total lease payments + Other payments − Notional loan principal where:
total lease payments means the sum of the lease payments under the lease.
other payments means the sum of the amounts (other than lease payments) that are required under the lease to be paid and includes any termination amount, less any of those amounts that are refunded by the lessor to the lessee.
notional loan principal means the notional loan principal of the notional loan that the lessor is taken under this Division to have made to the lessee.
SECTION 42A-135 LEASE PAYMENT PERIODSHistoryS 42A-130 amended by No 174 of 1997 and inserted by No 95 of 1997.
42A-135(1)
A lease payment period for a lease of a motor car, is a period for which a lease payment, under the lease, is allocated or expressed to be payable.
42A-135(2)
However, if a period (the excessive period ) referred to in subsection (1) exceeds 6 months, the excessive period is not a lease payment period but each of the following parts of the excessive period is a separate lease payment period:
(a) the part of the excessive period beginning at the start of that period and ending 6 months later;
(b) each part (a later part ) of the excessive period:
(i) beginning immediately after a part of the excessive period that is a lease payment period under paragraph (a) or under a previous application of this paragraph; and
(ii) ending 6 months after the start of that later part or at the end of the excessive period, whichever first occurs.
SECTION 42A-140 ACCRUAL PERIODS AND ACCRUAL AMOUNTSHistoryS 42A-135 inserted by No 95 of 1997.
42A-140(1)
The accrual periods for a notional loan that the lessor, under a lease of a motor car, is taken under this Division to have made to the lessee are the lease payment periods under the lease.
42A-140(2)
The accrual amount for an accrual period for such a notional loan is the part of the finance charge that relates to the accrual period and is worked out using the formula:
Outstanding notional
loan principal× Implicit interest rate where:
outstanding notional loan principal means the outstanding notional loan principal at the start of the accrual period.
implicit interest rate means the implicit interest rate under the lease for the accrual period.
SECTION 42A-145 OUTSTANDING NOTIONAL LOAN PRINCIPALHistoryS 42A-140 inserted by No 95 of 1997.
42A-145
The outstanding notional loan principal at a particular time (the relevant time ) of a notional loan that the lessor, under a lease of a motor car, is taken under this Division to have made to the lessee is the amount worked out using the formula:
Notional loan
principal+ Previous accrual
amounts− Previous lease
paymentswhere:
notional loan principal means the notional loan principal of the notional loan.
previous accrual amounts means the sum of the accrual amounts for accrual periods that occurred before the relevant time.
previous lease payments means the sum of the lease payments that the lessee paid or was required to pay under the lease at or before the relevant time.
SECTION 42A-150 IMPLICIT INTEREST RATEHistoryS 42A-145 inserted by No 95 of 1997.
42A-150(1)
The implicit interest rate , under a lease of a motor car, for an accrual period for the notional loan that the lessor is taken under this Division to have made to the lessee, is the rate of compound interest for the accrual period at which the sum of:
(a) the present value of the lease payments; and
(b) the present values of any other amounts that are required under the lease to be paid by the lessee; and
(c) the present values of any termination amounts;equals the notional loan principal.
42A-150(2)
However, if an amount referred to in paragraph (1)(a), (b) or (c) is not known at the start of the term of the lease:
(a) if a reasonable estimate of the amount can be made at that time - such an estimate is to be made and is to be used for the purposes of the application of subsection (1) for each year of income of the lessor; or
(b) otherwise - an estimate of the amount is to be made at the end of each year of income of the lessor for the purposes of the application of subsection (1) to the lessor for that year of income.
HistoryS 42A-150 inserted by No 95 of 1997.
Sch 2E inserted by No 95 of 1997.
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