Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 240 - Arrangements treated as a sale and loan  

Guide to Division 240  

SECTION 240-3   How the recharacterisation affects the notional seller  

Effect of notional sale

240-3(1)    
The consideration for the notional sale is either the price stated as the cost or value of the property or its arm's length value. If the notional seller is disposing of the property as trading stock, the normal consequences of disposing of trading stock follow. In particular, the notional seller will be assessed on the sale price.

240-3(2)    
Where the property is not trading stock the notional seller's assessable income will include any profit made by the notional seller on the notional sale or on the sale of the property after a notional re-acquisition.

Effect of notional loan

240-3(3)    
The notional seller's assessable income will include notional interest over the period of the loan.

Other effects

240-3(4)    
These effects displace the income tax consequences that would otherwise arise from the arrangement. For example, the actual payments to the notional seller are not included in its assessable income. Also, the notional seller loses the right to deduct amounts under Division 40 (about capital allowances).