Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-10 - FINANCIAL TRANSACTIONS

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Division 250 - Assets put to tax preferred use

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History

Div 250 inserted by No 164 of 2007 , s 3 and Sch 1 item 1, effective 25 September 2007. No 164 of 2007 , s 3 and Sch 1 item 71 contains the following application provision:

Application
(1)
Subject to subitems (4), (6) and (8), Division 250 applies in relation to a tax preferred use of an asset if, and only if, the tax preferred use:

(a) starts on or after 1 July 2007; and

(b) does not occur under a legally enforceable arrangement that was entered into before 1 July 2007.

(2)
This subitem applies to an asset that is put to a tax preferred use if:

(a) the tax preferred use starts on or after 1 July 2007; and

(b) the tax preferred use occurs under a legally enforceable arrangement that was entered into before 1 July 2007; and

(c) but for this subitem:

(i) section 51AD would apply to the asset in relation to a taxpayer; or

(ii) Division 16D would apply to the asset; and

(d) you elect to have this subitem apply to the asset.

(3)
An election under paragraph (2)(d) in relation to an asset that is put to a tax preferred use:

(a) must be made by the day you lodge your income tax return for the income year in which the tax preferred use starts; and

(b) must be made for the whole of the arrangement period for the tax preferred use of the asset; and

(c) must extend to all assets that are, or are to be, put to a tax preferred use under the arrangement under which the asset is put to that use; and

(d) is irrevocable.

(4)
If subitem (2) applies:

(a) section 51AD and Division 16D do not apply to the asset; and

(b) Division 250 applies to the tax preferred use of the asset.

(5)
This subitem applies to an asset that is put to a tax preferred use if:

(a) the tax preferred use starts on or after 1 July 2007; and

(b) the tax preferred use occurs under a legally enforceable arrangement that was entered into before 1 July 2007; and

(c) immediately before 1 July 2007:

(i) section 51AD did not apply to the asset in relation to a taxpayer; and

(ii) Division 16D did not apply to the asset; and

(d) the arrangement referred to in paragraph (b) is materially altered on or after 1 July 2007; and

(e) but for this subitem and subitem (6):

(i) section 51AD would apply to the asset in relation to a taxpayer immediately after the alteration; or

(ii) Division 16D would apply to the asset immediately after the alteration.

For the purposes of applying paragraph (c), assume that the asset was in existence and was being put to the tax preferred use immediately before 1 July 2007.

(6)
If subitem (5) applies:

(a) section 51AD and Division 16D do not apply to the asset; and

(b) Division 250 applies to the tax preferred use of the asset after the alteration instead.

(7)
This subitem applies to an asset that is put to a tax preferred use if:

(a) the tax preferred use started before 1 July 2007; and

(b) immediately before 1 July 2007:

(i) section 51AD did not apply to the asset in relation to a taxpayer; and

(ii) Division 16D did not apply to the asset; and

(c) the arrangement under which the tax preferred use of the asset occurs is materially altered on or after 1 July 2007; and

(d) but for this subitem and subitem (8):

(i) section 51AD would apply to the asset in relation to a taxpayer immediately after the alteration; or

(ii) Division 16D would apply to the asset immediately after the alteration.

(8)
If subitem (7) applies:

(a) section 51AD and Division 16D do not apply to the asset; and

(b) Division 250 applies to the tax preferred use of the asset after the alteration instead.

(9)
For the purposes of applying subparagraphs (5)(c)(ii) and (e)(ii) and (7)(b)(ii) and (d)(ii), disregard the operation of section 159GL of the Income Tax Assessment Act 1936 .

(10)
For the purposes of applying Division 250 to the tax preferred use of an asset in accordance with subitem (6) or (8), the arrangement period for the tax preferred use of the asset is taken to start on the day on which the alteration referred to in paragraph (5)(d) or (7)(c) occurs.

(11)
Section 51AD does not apply to an asset for the income year commencing on 1 July 2007, or a later income year, if:

(a) the asset is put to a tax preferred use under a legally enforceable arrangement; and

(b) the arrangement was entered into before 1 July 2007; and

(c) the tax preferred use of the asset starts on or after 1 July 2003 and before 1 July 2007.

…

(13)
In this item:
arrangement
has the same meaning as in the Income Tax Assessment Act 1997 .

asset
includes property (within the meaning of section 51AD and Division 16D ).

Division 16D
means Division 16D of Part III of the Income Tax Assessment Act 1936 .

Division 250
means Division 250 of the Income Tax Assessment Act 1997 .

section 51AD
means section 51AD of the Income Tax Assessment Act 1936 .

tax preferred use
has the same meaning as in the Income Tax Assessment Act 1997 .

Subdivision 250-D - Deemed loan treatment of financial benefits provided for tax preferred use

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SECTION 250-155 Arrangement treated as loan

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Loan with characteristics provided for in this section taken to exist

250-155(1)
If this Division applies to you and an asset at a particular time in an income year, a *financial arrangement in the form of a loan (with the characteristics provided for in this section) is taken to exist at that time for the purposes of working out your taxable income for that income year.

Note:

See Subdivision 250-E for the taxation treatment of the financial arrangement.

Lender

250-155(2)
You are taken to be the lender in relation to the loan.

Amount lent and unpaid at the start of the arrangement period

250-155(3)
The amount worked out under subsection (4) is taken to be the amount that you have lent, and that the borrower has not repaid, at the start of the *arrangement period.

250-155(4)
The amount is worked out by taking:

(a) the amount that, at the start of the *arrangement period, is:

(i) the *adjustable value of the asset if subparagraph 250-15(d)(i) applies; or

(ii) the amount worked out under subsection (5) if subparagraph 250-15(d)(ii) applies; or

(b) if section 250-150 applies - the amount that, at the start of the arrangement period, is the *disallowed capital allowance percentage of:

(i) the adjustable value of the asset if subparagraph 250-15(d)(i) applies; or

(ii) the amount worked out under subsection (5) if subparagraph 250-15(d)(ii) applies;

and deducting the sum of all *financial benefits that are *subject to deemed loan treatment and that have become due and payable before the start of the arrangement period.

250-155(5)
If subparagraph 250-15(d)(ii) applies, the amount worked out under this subsection for the purposes of subsection (4) is:

Item	If the expenditure referred to in that subparagraph is …	the amount is …
1	capital expenditure under Division 40	the amount of the capital expenditure in respect of which a deduction has not been allowed (disregarding this Division) under the relevant Subdivision of Division 40
2	capital expenditure under Division 43	the * undeducted construction expenditure in relation to the capital expenditure

Amounts paid to you by borrower under the loan

250-155(6)
Any *financial benefit that:

(a) a person provides; and

(b) is *subject to deemed loan treatment;

is taken to be an amount that the borrower pays you under the loan.

Note 1:

Section 250-160 tells you which financial benefits are subject to the deemed loan treatment.

Note 2:

These benefits may be ones that are provided either to you or to a connected entity.

Period of the loan

250-155(7)
The *arrangement period is taken to be the period of the loan.

Applying Subdivision 250-E to the loan

250-155(8)
For the purposes of applying Subdivision 250-E to the loan:

(a) you are taken to have an overall gain from the loan and that overall gain is taken to be sufficiently certain at the time when you start to have the loan; and

(b) the amount of that overall gain is taken to be the sum of the *financial benefits that are *subject to the deemed loan treatment less the amount worked out under subsection (4); and

(c) you are taken:

(i) to start to have the loan at the start of the *arrangement period; and

(ii) to cease to have the loan at the end of the arrangement period; and

(d) any right that you (or a connected entity) have to a financial benefit that is subject to deemed loan treatment is taken to be a right that you have under the loan; and

(e) if a *connected entity transfers to another person a right to a financial benefit subject to deemed loan treatment:

(i) you are taken to transfer the right to that other person; and

(ii) any consideration that the connected entity receives in relation to the transfer is taken to be consideration that you receive in relation to the transfer; and

(f) if a right that a connected entity has to a financial benefit subject to deemed loan treatment ceases and the connected entity receives consideration in relation to that cessation - you are taken to receive that consideration in relation to the cessation; and

(g) you are taken to start to have the loan, or to cease to have the loan, as consideration for something if you start to have the rights to the financial benefits that are subject to deemed loan treatment, or cease to have those rights, as consideration for that thing; and

(h) in applying sections 250-265 to 250-275 :

(i) the amount that you are taken, under subsections (3), (4) and (5), to have lent are the only financial benefits that you provide under the loan; and

(ii) the financial benefits you have received under the loan are taken to include financial benefits that are subject to deemed loan treatment that a person is, at the end of the arrangement period, liable to provide to you.

250-155(9)
If, under subsection 250-160(2) , a particular percentage of a reasonable estimate of the *end value of the asset was taken to be a *financial benefit that is *subject to the deemed loan treatment, subsection 250-275(1) applies to the loan at the end of the *arrangement period as if you had received under the loan a financial benefit equal to the relevant percentage of the end value of the asset.

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