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-B - When this Division applies to you and an asset

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Overall test

SECTION 250-35 Exceptions to section 250-30

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Debt interests

250-35(1)
Section 250-30 does not apply if the *arrangement (either alone or together with any arrangement in relation to the *tax preferred use of the asset or the provision of *financial benefits in relation to the tax preferred use of the asset) is a *debt interest.

250-35(2)
In applying subsection (1), disregard subsection 974-130(4) .

Member of tax preferred sector having certain rights in relation to the asset

250-35(3)
Section 250-30 does not apply if:

(a) a *member of the tax preferred sector has:

(i) a right, obligation or contingent obligation to purchase or acquire the asset or a legal or equitable interest in the asset; or

(ii) a right to require the transfer of the asset or a legal or equitable interest in the asset; or

(iii) a residual or reversionary interest in the asset that will arise or become exercisable at or after the end of the *arrangement period; and

(b) the consideration for the purchase, acquisition or transfer of the right, obligation or interest is not fixed as the *market value of the asset at the time of the purchase, acquisition or transfer.

To avoid doubt, this subsection does not apply to the asset merely because your interest in the asset is one that ceases to exist after the passage of a particular period of time.

Member of tax preferred sector providing financing

250-35(4)
Section 250-30 does not apply if a *member of the tax preferred sector provides financing, or support for financing, in relation to your interest in the asset (including by way of a loan, a guarantee, an indemnity, a security, hedging or undertaking to provide *financial benefits in the event of the termination of an *arrangement).

Finance leases, non-cancellable operating leases, service concessions and similar arrangements

250-35(5)
Section 250-30 does not apply if an *arrangement in relation to the *tax preferred use of the asset, or the provision of *financial benefits in relation to the tax preferred use of the asset, is or involves:

(a) a finance lease; or

(b) a non-cancellable operating lease; or

(c) a service concession or similar arrangement;

that generally accepted accounting principles, as in force at the start of the *arrangement period, require to be included as an asset or a liability in your balance sheet.

Financial benefits irregular, not based on comparable market-based rates or not reflecting value of tax preferred use of asset

250-35(6)
Section 250-30 does not apply if the *financial benefits that have been, or are to be provided, to you (or a *connected entity) by *members of the tax preferred sector in relation to the *tax preferred use of the asset:

(a) are not provided on a regular periodic basis (and at least annually); or

(b) are not based on comparable market-based rates, or

(c) do not reflect the value of the tax preferred use of the asset.

Special rules if tax preferred use is a lease or hire of the asset

250-35(7)
If the *tax preferred use of the asset is a lease or hire of the asset (or the use of the asset under a lease or hire arrangement), section 250-30 does not apply if:

(a) the asset is so specialised that the *end user could not carry out one or more of its functions effectively without the asset; and

(b) you would be unlikely to be able to re-lease, re-hire or resell the asset to another person who is not a *member of the tax preferred end user group.

Note:

For particular arrangements that are treated as leases, see section 250-80 .

Special rules if tax preferred use is not a lease or hire of the asset

250-35(8)
If the *tax preferred use of the asset is not the lease or hire of the asset (or the use of the asset under a lease or hire arrangement), section 250-30 does not apply if:

(a) a *member of the tax preferred sector has a right, if particular circumstances occur, to manage, or to assume control over, the asset (other than temporarily for the purpose of ensuring public health or safety, protecting the environment or continuing the supply of an essential service); or

(b) the asset is so specialised that it is unlikely that it could effectively be put to any use other than the tax preferred use; or

(c) neither you (nor a *connected entity) has effective day to day control and physical possession of the asset.

Note:

For particular arrangements that are treated as leases, see section 250-80 .

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