Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

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

SECTION 159GK   EFFECT OF APPLICATION OF DIVISION ON ASSESSABILITY OF ARRANGEMENT PAYMENTS  

159GK(1)   [Amount to be included in assessable income]  

Where this Division applies in relation to an item of eligible property in relation to which there is an assessable arrangement payment or assessable arrangement payments in relation to a taxpayer in respect of the application period, there shall be included in the assessable income of the taxpayer so much only of any payment portion of each assessable arrangement payment in relation to an eligible amount as does not exceed the interest amount (if any) in relation to the payment portion.

159GK(2)   [Calculation of interest amount]  

For the purposes of subsection (1), a reference to the interest amount in relation to a payment portion of an assessable arrangement payment in relation to an eligible amount is a reference to the amount (if any) ascertained in accordance with the formula

A(1   +   B) t   −   A

where:

A is the eligible principal in relation to the payment portion;

B is:

(a) where the sum of the payment portions of the likely arrangement payments in relation to the eligible amount in respect of the likely application period (including any notional final payment portion of an arrangement payment) exceeds the residual amount, as ascertained at the commencement of the application period, in relation to the eligible amount - the fraction that is the effective annual interest rate, ascertained at the commencement of the application period referred to in subsection (1), at which the sum of the present values of the payment portions equals the residual amount; and

(b) in any other case - nil; and

t is the number of whole days in the arrangement payment period divided by 365.

159GK(3)   [``eligible principal'', ``arrangement payment period'']  

For the purposes of subsection (2):

(a) a reference in that subsection to the eligible principal in relation to a payment portion of an arrangement payment in relation to an eligible amount is a reference to:

(i) where the arrangement payment is the first arrangement payment in the likely application period referred to in that subsection - the residual amount in relation to the eligible amount, as ascertained at the commencement of the arrangement payment period in relation to the arrangement payment; and

(ii) in the case of any other arrangement payment - an amount ascertained in accordance with the formula

A   −   B   +   C

where:

A is the eligible principal in relation to the payment portion of the immediately preceding arrangement payment;

B is the amount of the payment portion of the immediately preceding arrangement payment; and

C is the interest amount in relation to the payment portion of the immediately preceding arrangement payment; and

(b) a reference in that subsection to the arrangement payment period in relation to an arrangement payment is a reference to:

(i) where the arrangement payment is the first arrangement payment liable to be made in respect of the application period referred to in that subsection - the period commencing at the beginning of the application period and ending at the time at which the arrangement payment is liable to be made; and

(ii) in the case of any other arrangement payment - the period commencing at the time at which the immediately preceding arrangement payment was liable to be made and ending at the time at which the arrangement payment concerned is liable to be made.

159GK(4)   [No provision for sale to party to qualifying arrangement]  

Where the qualifying arrangement in relation to an item of eligible property in relation to which this Division applies does not provide for the sale or disposal of the item to a person who is a party to the qualifying arrangement or to an associate, for the purposes of this section an arrangement payment (not being an assessable arrangement payment) that includes a payment portion (which portion is in this section referred to as a notional final payment portion ) in relation to any eligible amount by reason of which the item is an item of eligible property shall be taken to be liable to be made at the end of the likely application period of an amount equal to:

(a) where the qualifying arrangement is a qualifying arrangement by reason of the application of subparagraph 159GG(1)(a)(i) - so much of the guaranteed residual value referred to in that subparagraph as is attributable to the eligible amount; or

(b) in any other case - the amount that in the opinion of the Commissioner was, or would have been, at the commencement of the application period, the market value at the end of the application period of so much of the item of eligible property as is attributable to the eligible amount.

159GK(5)   [Further capital expenditure on eligible property]  

Where an amount of eligible capital expenditure is incurred in relation to an item of eligible property at any time after this Division commences to apply in relation to the item of eligible property, this section applies in respect of that expenditure as if this Division had commenced to apply in relation to the item of eligible property at the time at which the expenditure was incurred.

159GK(6)   [Definitions]  

In this section:

(a) ``likely application period'' , in relation to an application of this Division, means the period that, having regard to the provisions of the qualifying arrangement referred to in section 159GH and to any other relevant circumstances, was, at the time at which that application of this Division commenced, the likely length of the application period; and

(b) ``likely arrangement payment'' , in relation to a likely application period, means an arrangement payment that, having regard to the provisions of the qualifying arrangement referred to in section 159GH and to any other relevant circumstances, was, at the time at which the likely application period commenced, likely to become liable to be made during the likely application period.