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-F - Treatment of asset when Division ceases to apply to the asset

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SECTION 250-285 Treatment of asset after Division ceases to apply to the asset

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250-285(1)
For the purposes of Division 40 , if:

(a) this Division applies to you and an asset; and

(b) the *arrangement period for the *tax preferred use of the asset ends at a particular time; and

(c) the asset would have had an *adjustable value at that time, for the purposes of Division 40 , if this Division had never applied to the asset;

the adjustable value of the asset, immediately after the end of the arrangement period, is taken to be equal to the amount worked out using the following method statement:

Method statement

Step 1.

Work out whether section 250-150 applies.

Step 2.

If section 250-150 does not apply, the amount is the *end value of the asset at the end of the arrangement period.

Step 3.

If section 250-150 does apply, the amount is worked out by:

(a) multiplying the *end value of the asset at the end of the *arrangement period by the *disallowed capital percentage; and

(b) then multiplying the adjustable value of the asset at the end of the arrangement period (worked out under section 40-85 ) by 100% minus the disallowed capital percentage); and

250-285(2)
If:

(a) this Division applies to you and an asset; and

(b) the *arrangement period for the *tax preferred use of the asset ends; and

(c) a net amount is included in your assessable income in relation to the *financial benefits that are *subject to the deemed loan treatment (taking into account the adjustments under Subdivision 250-E in relation to the financial benefits that are subject to the deemed loan treatment);

the *cost base, and the *reduced cost base, of the asset are each taken to be reduced at the end of the arrangement period by an amount equal to the difference between:

(d) the total amounts or values of the financial benefits that were subject to deemed loan treatment; and

(e) the net amount referred to in paragraph (c).

Note:

See subsection (6) in relation to the application of paragraph (d).

250-285(3)
If:

(a) this Division applies to you and an asset; and

(b) the *arrangement period for the *tax preferred use of the asset ends; and

(c) a net amount is allowed to you as a deduction in relation to the *financial benefits that are *subject to the deemed loan treatment (taking into account the adjustments under Subdivision 250-E in relation to the financial benefits that are subject to the deemed loan treatment);

the *cost base, and the *reduced cost base, of the asset are each taken to be reduced at the end of the arrangement period by an amount equal to the sum of:

(d) the total amounts or values of the financial benefits that were subject to deemed loan treatment; and

(e) the net amount referred to in paragraph (c).

Note:

See subsection (6) in relation to the application of paragraph (d).

250-285(4)
If:

(a) this Division applies to you and an asset; and

(b) the *arrangement period for the *tax preferred use of the asset ends; and

then, in determining the profit or loss on the sale of the asset, a deduction equal to the difference between the following is taken to have been allowed for expenditure by you in connection with the asset:

(d) the total amounts or values of the financial benefits that were subject to deemed loan treatment; and

(e) the net amount referred to in paragraph (c).

Note:

See subsection (6) in relation to the application of paragraph (d).

250-285(5)
If:

(a) this Division applies to you and an asset; and

(b) the *arrangement period for the *tax preferred use of the asset ends; and

then, in determining the profit or loss on the sale of the asset, a deduction equal to the sum of the following is taken to have been allowed for expenditure by you in connection with the asset:

(d) the total amounts or values of the financial benefits that were subject to deemed loan treatment; and

(e) the net amount referred to in paragraph (c).

Note:

See subsection (6) in relation to the application of paragraph (d).

250-285(6)
In applying paragraphs (2)(d), (3)(d), (4)(d) and (5)(d), disregard subsection 250-160(2) (reasonable estimate of end value treated as financial benefit subject to deemed loan treatment).

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