Income Tax Assessment Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-10 - CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE  

Division 45 - Disposal of leases and leased plant  

Operative provisions  

SECTION 45-10   Disposal of interest in partnership  

45-10(1)    
An amount is included in your assessable income if:

(a) a partnership of which you are (or were) a member has deducted or can deduct an amount for the decline in value of ^* plant; and

(b) the deductions have been or would be reflected in your interest in the partnership net income or partnership loss; and

(c) for most of the time when the partnership ^* held the plant, it leased it to another entity; and

(d) all or part of the lease period occurred on or after 22 February 1999; and

(e) on or after that day, you dispose of your interest in the plant, or part of it, and that disposal constitutes a ^* balancing adjustment event; and

(f) the sum of the following amounts is more than that part of the plant ' s ^* written down value that is attributable to that interest:

(i) the money you receive or are entitled to receive for the disposal;

(ii) the amount of any reduction in a liability of yours as a result of the disposal;

(iii) the *market value of any other benefit you receive or are entitled to receive as a result of the disposal.

45-10(2)    
The amount included is the excess referred to in paragraph (1)(f). It is included for the income year in which the disposal occurred.

Example:

Chris has a 50% share in a partnership formed to lease an asset. The asset has a written down value of $124,000 (of which Chris ' share is $62,000).

Chris assigns his partnership share to another entity for $34,000 plus the other entity agreeing to take over Chris ' obligations to service his share of the partnership debt (which is $165,000). The total consideration is:

$34,000   +   $165,000   =   $199,000

The amount assessable under section 45-10 is the excess referred to in paragraph 45-10(1)(f) , which is:

$199,000   −   $62,000   =   $137,000

This amount would be reduced if part of it is included in Chris ' assessable income under another provision (see subsection 45-10(5) ).

Note 1:

There is a reduction of the amount included for certain plant acquired before 21 September 1999: see section 45-30 .

Note 2:

There is a limit on the amount included for plant for which there is a CGT exemption: see section 45-35 .

45-10(3)    
An amount is also included in your assessable income if:

(a) a partnership of which you are (or were) a member has deducted or can deduct an amount for the decline in value of ^* plant; and

(b) the deductions have been or would be reflected in your interest in the partnership net income or partnership loss; and

(c) for most of the time when the partnership ^* held the plant, it leased it to another entity; and

(d) all or part of the lease period occurred on or after 22 February 1999; and

(e) on or after that day, you dispose of:

(i) your interest in the plant, or part of it; or

(ii) a right under, or an interest in, the lease;

and that disposal does not constitute a ^* balancing adjustment event.

45-10(4)    
The amount included is the sum of the following amounts:

(a) the money you receive or are entitled to receive for the disposal;

(b) the amount of any reduction in a liability of yours as a result of the disposal;

(c) the *market value of any other benefit you receive or are entitled to receive as a result of the disposal.

It is included for the income year in which the disposal occurred.

45-10(5)    
However, an amount is not included in your assessable income under this section to the extent that:

(a) it is included in that assessable income under a provision of this Act outside this Division; or

(b) you apply it under section 40-365 (about offsetting balancing adjustments).

Note:

There are special rules for disposals between 22 February 1999 and 21 September 1999: see Division 45 of the Income Tax (Transitional Provisions) Act 1997 .