INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 2 - Income  

Subdivision A - Assessable income generally  

SECTION 26AAB   ASSESSABLE INCOME FROM SALE OF LEASED MOTOR VEHICLE  

26AAB(1)   [Application]  

This section applies to a unit of property being a motor vehicle (including a vehicle known as a four wheel drive vehicle) that is a motor car or station wagon where:

(a) the unit of property has been leased under an agreement (in this section referred to as the ``relevant lease agreement'' );

(b) all or any of the charges paid or payable by the lessee under the relevant lease agreement have been allowed or are allowable in whole or in part as a deduction or deductions from the assessable income of the lessee or of any other person of any year of income;

(c) on or after 22 August 1979, and whether during or after the period of the relevant lease agreement, the lessor disposed of the unit of property to the lessee, to an associate of the lessee or to persons including the lessee or an associate of the lessee otherwise than under a contract between the lessor and the lessee, the lessor and the associate or the lessor and those persons, as the case may be, that was entered into before that date; and

(d) before the 1997-98 year of income, a person (in this section referred to as a ``relevant taxpayer'' ), being the lessee or an associate of the lessee, disposed of the unit of property or of an interest in the unit of property and the consideration receivable by the relevant taxpayer in respect of the disposal exceeded:

(i) in a case where the unit of property was disposed of - the cost of the unit of property to the relevant taxpayer; or

(ii) in a case where an interest in the unit of property was disposed of - the amount that, in the opinion of the Commissioner, was the cost of the interest to the relevant taxpayer.

Note:

Subdivision 20-B of the Income Tax Assessment Act 1997 applies to the disposal of a car, or of an interest in a car, by a relevant taxpayer in the 1997-98 year of income or a later year of income.

26AAB(2)   [Calculation of profit]  

Subject to this section, the amount of the excess referred to in paragraph (1)(d) in relation to the disposal by a relevant taxpayer of a unit of property to which this section applies shall be included in the assessable income of that relevant taxpayer of the year of income in which the disposal occurred to the extent that that amount does not exceed the lower or the lowest, as the case requires, of the amounts respectively applicable in accordance with the following paragraphs:

(a) the amount of depreciation that is deemed in accordance with subsection (6) to have been allowable to the lessee in respect of the unit of property in respect of the period of the relevant lease agreement;

(b) the amount, or the sum of the amounts, of the charges paid or payable under the relevant lease agreement that have been allowed or are allowable as a deduction or deductions in respect of the unit of property from the assessable income of the lessee or of any other person of any year of income;

(c) if the unit of property was disposed of by the lessor to 2 or more persons (whether or not the relevant taxpayer was one of those persons) or to a person other than the relevant taxpayer - the amount by which the consideration receivable by the relevant taxpayer in respect of the disposal of the unit of property by the relevant taxpayer exceeded:

(i) in a case to which subparagraph (ii) does not apply - the cost of the unit of property to the persons, or to the person, as the case may be, to whom the lessor disposed of the property; or

(ii) in a case where, after the property was disposed of by the lessor and before the disposal by the relevant taxpayer, expenditure (in this subparagraph referred to as the ``relevant capital expenditure'' ) of a capital nature was incurred in respect of the property by any person, being expenditure that is not, by virtue of subsection (17), deemed to be expenditure that is directly attributable to the acquisition of the property by the persons or the person, as the case may be, to whom the lessor disposed of the property - the cost of the unit of property to the persons or to the person, as the case may be, to whom the lessor disposed of the property increased by the amount of the relevant capital expenditure.

26AAB(3)   [Disposal of interest in unit of property]  

Subject to this section, so much (if any) as the Commissioner determines of the amount of the excess referred to in paragraph (1)(d) in relation to the disposal by a relevant taxpayer of an interest in a unit of property to which this section applies shall be included in the assessable income of that relevant taxpayer of the year of income in which the disposal occurred.

26AAB(4)   [Determination under subsec (3)]  

In making a determination for the purposes of subsection (3) in relation to a disposal of an interest in a unit of property, the Commissioner shall have regard to the manner in which this section would operate in relation to that disposal if it were a disposal of a unit of property.

26AAB(5)   [Prior disposal]  

Where, in relation to a unit of property to which this section applies:

(a) by reason of a disposal of the unit of property by a relevant taxpayer, an amount is required to be included in the assessable income of that relevant taxpayer of a year of income by the application of this section in relation to a relevant lease agreement; and

(b) by any application or applications of this section, in relation to that relevant lease agreement, in relation to a previous disposal or previous disposals of the unit of property or of an interest in the unit of property, an amount or amounts has or have been included, is or are required to be included, or would but for subsection (9), (10) or (12) have been or be required to be included, in the assessable income of any relevant taxpayer of any year of income in accordance with subsection (2) or (3);

then, in determining the amount to be so included in the assessable income of the first-mentioned relevant taxpayer as mentioned in paragraph (a) of this subsection, each of the amounts respectively applicable in accordance with paragraphs (2)(a), (b) and (c) shall be reduced by an amount equal to the amount, or the sum of the amounts, referred to in paragraph (b) of this subsection.

26AAB(6)   [Amount of deemed depreciation]  

For the purposes of the operation of paragraph (2)(a) in relation to a disposal of a unit of property to which this section applies, the depreciation that is deemed to have been allowable to the lessee in respect of the unit of property in respect of the period of the relevant lease agreement is an amount calculated in accordance with the formula

AB C

,

where:

A is the amount of depreciation that would have been allowed or allowable to the lessee in respect of the unit of property under section 54 if:

(a) the cost of the unit of property to the lessee had been the amount that, for the purposes of the application of the provisions of this Act relating to depreciation, is the cost (ascertained without regard to subsections 59(2A) and (2D)) of the property to the lessor; and

(b) the lessee had been entitled to a deduction or deductions calculated in accordance with paragraph 56(1)(b) in respect of the whole of the period (in this subsection referred to as the lessor's period of ownership ) commencing on the day on which the lessor first used the property (whether for the purpose of producing assessable income or otherwise) and ending on the day on which the lessor disposed of the property;

B is the number of whole days in the period of the relevant lease agreement;

C is the number of whole days in the lessor's period of ownership.

26AAB(7)   [Reduction of deemed depreciation]  

Where, under section 59 , an amount would be included in the assessable income of the lessee if:

(a) the lessee were entitled to a deduction or deductions in respect of the unit of property as mentioned in subsection (6);

(b) the cost of the property to the lessee had been the amount that, for the purposes of the application of the provisions of this Act relating to depreciation, is the cost (ascertained without regard to subsections 59(2A) and (2D) ) of the property to the lessor;

(c) the lessee had disposed of the property at the time when the lessor disposed of the property and had not made a request under subsection 59(2A) or (2D) in respect of the disposal; and

(d) the lessee had, in respect of that disposal, received:

(i) where subsection 59(3) applies for the purpose of ascertaining the amount of the consideration receivable by the lessor in respect of the disposal of the property by the lessor - the amount ascertained in accordance with that subsection;

(ii) where subsection 59(4) applies for the purpose of ascertaining the amount of the consideration receivable by the lessor in respect of the disposal of the property by the lessor - the amount that would be applicable under subparagraph (i) of this paragraph if that subparagraph were applicable in relation to the disposal of the property by the lessor;

(iii) where subsections 59(3) and (6) apply for the purpose of ascertaining the amount of the consideration receivable by the lessor in respect of the disposal of the property by the lessor - the amount ascertained in accordance with those subsections; or

(iv) where subsections 59(4) and (6) apply for the purpose of ascertaining the amount of the consideration receivable by the lessor in respect of the disposal of the property by the lessor - the amount that would be applicable under subparagraph (iii) of this paragraph if that subparagraph were applicable in relation to the disposal of the property by the lessor;

the component A for the purposes of the formula in subsection (6) shall be reduced by the amount that would have been so included in the assessable income of the lessee.

26AAB(8)   [Increase in deemed depreciation]  

Where, under section 59 , a deduction would have been allowable to the lessee if:

(a) the lessee were entitled to a deduction or deductions in respect of the unit of property as mentioned in subsection (6);

(b) the cost of the property to the lessee had been the amount that, for the purposes of the application of the provisions of this Act relating to depreciation, is the cost (ascertained without regard to subsections 59(2A) and (2D) ) of the property to the lessor;

(c) the lessee had disposed of the property at the time when the lessor disposed of the property; and

(d) the lessee had, in respect of that disposal, received:

(i) where subsection 59(3) applies for the purpose of ascertaining the amount of the consideration receivable by the lessor in respect of the disposal of the property by the lessor - the amount ascertained in accordance with that subsection;

(ii) where subsection 59(4) applies for the purpose of ascertaining the amount of the consideration receivable by the lessor in respect of the disposal of the property by the lessor - the amount that would be applicable under subparagraph (i) of this paragraph if that subparagraph were applicable in relation to the disposal of the property by the lessor;

(iii) where subsections 59(3) and (6) apply for the purpose of ascertaining the amount of the consideration receivable by the lessor in respect of the disposal of the property by the lessor - the amount ascertained in accordance with those subsections; or

(iv) where subsections 59(4) and (6) apply for the purpose of ascertaining the amount of the consideration receivable by the lessor in respect of the disposal of the property by the lessor - the amount that would be applicable under subparagraph (iii) of this paragraph if that subparagraph were applicable in relation to the disposal of the property by the lessor;

the component A for the purposes of the formula in subsection (6) shall be increased by the amount of the deduction that would have been so allowable to the lessee.

26AAB(9)   [Amount assessable under another provision]  

Any amount that, apart from this subsection, would, by reason of the disposal of a unit of property, or of an interest in a unit of property, by a relevant taxpayer, be included in the assessable income of the relevant taxpayer under this section shall be reduced by any amount that has been or will be, or the sum of any amounts that have been or will be, included in the assessable income of the relevant taxpayer of any year of income in respect of that disposal in accordance with another provision of this Act other than section 59.

26AAB(10)   [Successive lease agreements]  

Where:

(a) by reason of the operation of this section in relation to a relevant lease agreement, an amount would, apart from this subsection and subsection (9), be included in the assessable income of a relevant taxpayer in relation to the disposal of a unit of property, or of an interest in a unit of property, by the relevant taxpayer; and

(b) by reason of the operation of this section in relation to another relevant lease agreement or in relation to other relevant lease agreements, an amount is, or amounts are, also required to be included in the assessable income of the relevant taxpayer in relation to that disposal;

the greater, or the greatest, as the case requires, of the amounts so required to be included in that assessable income shall be included in that assessable income and the other amount, or the other amounts, as the case requires, shall not be included in that assessable income under this section.

26AAB(11)   [Earlier disposal at market value]  

Where:

(a) by reason of the operation of this section in relation to a relevant lease agreement, an amount would, apart from this subsection and subsections (9) and (10), be included in the assessable income of a relevant taxpayer in relation to the disposal of a unit of property by the relevant taxpayer;

(b) after the property was disposed of by the lessor as mentioned in paragraph (1)(c) and before the disposal by the relevant taxpayer, the property was disposed of by another person (in this subsection referred to as the previous seller ), being the lessee or an associate of the lessee; and

(c) in relation to the disposal of the property by the previous seller, either of the following conditions is satisfied, namely:

(i) the consideration receivable in respect of the disposal by the previous seller was not less than the market value of the unit of property at the time of that disposal; or

(ii) an amount has been or will be included in the assessable income of the previous seller by reason of that disposal, being an amount that is, or is calculated by reference to, the value or market value of the unit of property at the time of that disposal;

no amount shall be included in the assessable income of the relevant taxpayer under this section in relation to the disposal of the unit of property by the relevant taxpayer.

26AAB(12)   [Unit of property acquired under will, etc]  

Where:

(a) apart from this subsection and subsections (9), (10) and (11), an amount would be included in the assessable income of a relevant taxpayer under this section by reason of a disposal by the relevant taxpayer of a unit of property to which this section applies or of an interest in a unit of property to which this section applies; and

(b) the relevant taxpayer acquired the unit of property or the interest, as the case may be, under or by reason of:

(i) a will, a codicil or an order of a court that varied or modified the provisions of a will or a codicil; or

(ii) an intestacy or an order of a court that varied or modified the application, in relation to the estate of a deceased person, of the provisions of the law relating to the distribution of the estates of persons who die intestate;

no amount shall be included in the assessable income of the relevant taxpayer under this section in relation to the disposal of the unit of property or of the interest in the unit of property by the relevant taxpayer.

26AAB(13)   [Substitute lease agreement]  

Where:

(a) this section applies in relation to a unit of property in relation to a relevant lease agreement that came into operation on or after 22 August 1979;

(b) at any time before the relevant lease agreement came into operation another lease agreement (in this subsection referred to as the ``earlier lease agreement'' ) had been in operation in relation to the unit of property;

(c) the earlier lease agreement came into operation before 22 August 1979 and was in operation on that date or came into operation on or after that date;

(d) the lessor under the relevant lease agreement, or an associate of that lessor, was the lessor under the earlier lease agreement;

(e) the lessee under the relevant lease agreement, or an associate of that lessee, was the lessee under the earlier lease agreement; and

(f) by reason of a disposal of the unit of property by a relevant taxpayer, an amount is required to be included in the assessable income of that relevant taxpayer of a year of income in accordance with subsection (2) by virtue of the application of that subsection in relation to the relevant lease agreement;

then, in determining the amount to be so included in the assessable income of that relevant taxpayer as mentioned in paragraph (f), the amounts respectively applicable in accordance with paragraphs (2)(a) and (b) shall be increased by any amounts that would be respectively applicable in accordance with those paragraphs if the earlier lease agreement were the relevant lease agreement.

26AAB(14)   [Definitions]  

In this section, unless the contrary intention appears:

associate
, in relation to a person (in this definition referred to as the taxpayer ) means:

(a) where the taxpayer is a natural person, other than a taxpayer in the capacity of a trustee:

(i) a relative of the taxpayer;

(ii) a partner of the taxpayer or a partnership in which the taxpayer is a partner;

(iii) if a person who is an associate of the taxpayer by virtue of subparagraph (ii) is a natural person - the spouse or a child of that person;

(iv) a trustee of a trust estate where the taxpayer or another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts; or

(v) a company where:

(A) the company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the taxpayer, of another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph, of a company that is an associate of the taxpayer by virtue of another application of this subparagraph or of any 2 or more such persons; or

(B) the taxpayer is, the persons who are associates of the taxpayer by virtue of sub-subparagraph (A) and the preceding subparagraphs of this paragraph are, or the taxpayer and the persons who are associates of the taxpayer by virtue of that sub-subparagraph and those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company;

(b) where the taxpayer is a company, other than a taxpayer in the capacity of a trustee:

(i) a partner of the taxpayer or a partnership in which the taxpayer is a partner;

(ii) if a person who is an associate of the taxpayer by virtue of subparagraph (i) is a natural person - the spouse or a child of that person;

(iii) a trustee of a trust estate where the taxpayer or another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts;

(iv) another person where:

(A) the taxpayer company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of that person, or of that person and another person or other persons, whether those directions, instructions or wishes are communicated directly to the taxpayer company or its directors, or through any interposed companies, partnerships or trusts; or

(B) that person is, or that person and the persons who, if that person were the taxpayer, would be associates of that person by virtue of paragraph (a), by virtue of sub-subparagraph (A), by virtue of another subparagraph of this paragraph or by virtue of paragraph (c) are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the taxpayer company;

(v) another company where:

(A) the other company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the taxpayer company, of a person who is an associate of the taxpayer company by virtue of another subparagraph of this paragraph, of a company that is an associate of the taxpayer company by virtue of another application of this subparagraph or of any 2 or more such persons; or

(B) the taxpayer company is, the persons who are associates of the taxpayer company by virtue of sub-subparagraph (A) and the other subparagraphs of this paragraph are, or the taxpayer company and the persons who are associates of the taxpayer company by virtue of that sub-subparagraph and those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the other company; or

(vi) any other person who, if a third person who is an associate of the taxpayer company by virtue of subparagraph (iv) were the taxpayer, would be an associate of that third person by virtue of paragraph (a), by virtue of another subparagraph of this paragraph or by virtue of paragraph (c);

(c) where the taxpayer is a trustee of a trust estate:

(i) any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust estate, either directly or through any interposed companies, partnerships or trusts;

(ii) where a person who is an associate of the taxpayer by virtue of subparagraph (i) is a natural person - any person who, if that natural person were the taxpayer, would be an associate of that natural person by virtue of paragraph (a) or this paragraph; or

(iii) where a person who is an associate of the taxpayer by virtue of subparagraph (i) or (ii) is a company - any person who, if that company were the taxpayer, would be an associate of that company by virtue of paragraph (b) or this paragraph; or

(d) where the taxpayer is a partnership:

(i) a partner in the partnership;

(ii) where any partner in the partnership is a natural person - any person who, if that natural person were the taxpayer, would be an associate of that natural person by virtue of paragraph (a) or (c); or

(iii) where any partner in the partnership is a company - any person who, if the company were the taxpayer, would be an associate of the company by virtue of paragraph (b) or (c).

casual hiring agreement
means 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 or monthly basis.

consideration receivable
, in relation to a disposal by a person of a unit of property or of an interest in a unit of property, means:

(a) in a case where the unit of property or the interest, as the case may be, is sold by the person otherwise than as mentioned in paragraph (b) - the consideration for the sale less the expenses of the sale;

(b) in the case where the unit of property or the interest, as the case may be, is traded-in by the person in connection with the acquisition by the person of another unit of property or is disposed of by the person in connection with the acquisition by another person of another unit of property - the amount by which the cost of the acquisition of that other unit of property was reduced by reason of the disposal of the first-mentioned unit of property or the interest, as the case may be or, if any consideration other than that reduction in the cost of acquisition of the other unit of property was received or receivable in respect of the disposal of the first-mentioned unit of property, the sum of the amount of the reduction and that other consideration; and

(c) in the case where the unit of property or the interest, as the case may be, is sold by the person with other assets and no separate value is allocated to the unit of property or the interest, as the case may be - the amount determined by the Commissioner.

leased
means let on hire (including a letting on hire that is described in the relevant agreement as a lease) under an agreement other than:

(a) a hire-purchase agreement; or

(b) a casual hiring agreement.

26AAB(15)   [Deemed associate]  

For the purposes of this section, where:

(a) a person (in this subsection referred to as the ``transferor'' ) acquires property from the person who is the lessor in relation to the relevant lease agreement; and

(b) the transferor acquires the property under an agreement, arrangement or understanding entered into for the purpose, or for purposes that included the purpose, of securing that the property would, directly or indirectly, be acquired by the person who is the lessee in relation to the relevant lease agreement or by an associate of that lessee;

the transferor shall be deemed to be an associate of that lessee.

26AAB(16)   [Meaning of terms]  

In this section, unless the contrary intention appears:

(a) a reference to the cost of a unit of property or of an interest in a unit of property to a person shall be read as a reference to expenditure incurred by that person that is directly attributable to his acquiring ownership of the unit of property or of the interest, as the case may be;

(b) a reference to a person shall be read as including a reference to a partnership;

(c) a reference to the period of an agreement shall be read as including a reference to any period or periods for which the term of the agreement is extended;

(d) a reference to the lessee under a lease agreement, in relation to a time after the expiration of the lease agreement, shall be read as a reference to a person who had been the lessee under that lease agreement;

(e) if 2 or more persons constitute or constituted the lessee under a lease agreement, a reference to the lessee shall be read as a reference to those persons or to either or any of them; and

(f) a reference to an associate of a person shall be read as a reference to a person who was such an associate at any relevant time.

26AAB(17)   [Capital expenditure]  

For the purposes of paragraph (16)(a), expenditure of a capital nature incurred by a person in respect of property acquired by the person, being expenditure incurred after the time of acquisition, shall be taken to be expenditure that is directly attributable to the person's acquiring ownership of the property.

26AAB(18)   [Market value]  

In this section, a reference to the market value of property at a particular time shall, if there is insufficient evidence of the market value at that time, be read as a reference to such amount as, in the opinion of the Commissioner, is fair and reasonable.