CHAPTER 3
-
SPECIALIST LIABILITY RULES
PART 3-10
-
FINANCIAL TRANSACTIONS
History
Part 3-10 inserted by No 72 of 2001.
Division 250
-
Assets put to tax preferred use
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-E
-
Taxation of deemed loan
History
Subdiv 250-E inserted by
No 164 of 2007
, s 3 and Sch 1 item 1, effective 25 September 2007. For application provision, see note under Div
250
heading.
Balancing adjustment
SECTION 250-275
Balancing adjustment
Complete cessation or transfer
250-275(1)
Use the following method statement to make the balancing adjustment if paragraph
250-265(1)(a)
or (b) applies.
Method statement for balancing adjustment
Step 1.
Add up the following:
(a) the total of all the *financial benefits provided to you under the *financial arrangement;
(b) the amount or value of any other consideration you receive in relation to the transfer or cessation referred to in subsection
250-265(1)
;
(c) the total of the amounts that have been allowed to you as deductions, because of circumstances that have occurred before the transfer or cessation, for losses from the arrangement;
(d) the total of the other amounts that would have been allowed to you as deductions, because of circumstances that have occurred before the transfer or cessation, for losses from the arrangement if all your losses from the arrangement were allowable as deductions.
Step 2.
Add up the following:
(a) the total of all the *financial benefits you have provided under the *financial arrangement;
(b) the amount or value of any other consideration you provide in relation to the transfer or cessation referred to in subsection
250-265(1)
;
(c) the total of the amounts that have been included in your assessable income, because of circumstances that have occurred before the transfer or cessation, as gains from the arrangement;
(d) the total of the other amounts that would have been included in your assessable income, because of circumstances that have occurred before the transfer or cessation, as gains from the arrangement if all your gains from the arrangement were assessable.
Step 3.
Compare the amount obtained under Step 1 (the
Step 1 amount
) with the amount obtained under Step 2 (the
Step 2 amount
). If the Step 1 amount exceeds the Step 2 amount, an amount equal to the excess is taken, as a balancing adjustment, to be a gain you make from the *financial arrangement for the purposes of this Subdivision. If the Step 2 amount exceeds the Step 1 amount, an amount equal to the excess is taken, as a balancing adjustment, to be a loss that you make from the arrangement. If the Step 1 amount and the Step 2 amount are equal, no balancing adjustment is made.
Proportionate transfer of all rights and/or obligations under financial arrangement
250-275(2)
If subparagraph
250-265(1)(c)(i)
applies, you make the balancing adjustment by applying the method statement in subsection (1) but reduce:
(a)
the amounts referred to in paragraphs (a), (c) and (d) in step 1; and
(b)
the amounts referred to in paragraphs (a), (c) and (d) in step 2;
by applying the proportion referred to in subparagraph
250-265(1)(c)(i)
to them.
Transfer of specifically identified right or obligation under financial arrangement
250-275(3)
If subparagraph
250-265(1)(c)(ii)
applies, you make the balancing adjustment by applying the method statement in subsection (1) as if the references to:
(a)
the amounts referred to in paragraphs (a), (c) and (d) in step 1; and
(b)
the amounts referred to in paragraphs (a), (c) and (d) in step 2;
were references to those amounts to the extent to which they are reasonably attributable to the right or obligation referred to in subparagraph
250-265(1)(c)(ii)
.
Proportionate transfer of specifically identified right or obligation under financial arrangement
250-275(4)
If subparagraph
250-265(1)(c)(iii)
applies, you make the balancing adjustment by applying the method statement:
(a)
as if the references to:
(i)
the amounts referred to in paragraphs (a), (c) and (d) in step 1; and
(ii)
the amounts referred to in paragraphs (a), (c) and (d) in step 2;
were references to those amounts to the extent to which they are reasonably attributable to the right or obligation referred to in subparagraph
250-265(1)(c)(iii)
; and
(b)
by reducing those amounts by applying the proportion referred to in subparagraph
250-265(1)(c)(iii)
to them.
Attribution must reflect appropriate and commercially accepted valuation principles
250-275(5)
Any attribution made under subsection (3) or paragraph (4)(a) must reflect appropriate and commercially accepted valuation principles that properly take into account:
(a)
the nature of the rights and obligations under the *financial arrangement; and
(b)
the risks associated with each *financial benefit, right and obligation under the arrangement; and
(c)
the time value of money.
Income year for which gain or loss is made
250-275(6)
The gain or loss you are taken to make under subsection (1), (2), (3) or (4) is a gain or loss for the income year in which the event referred to in subsection
250-265(1)
occurs.
History
S 250-275 inserted by
No 164 of 2007
, s 3 and Sch 1 item 1, effective 25 September 2007. For application provision, see note under Div
250
heading.
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