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This is a Bill, not an Act. For current law, see the Acts databases.
1998-99
The Parliament of
the
Commonwealth of
Australia
HOUSE OF
REPRESENTATIVES
Presented and read a first
time
Taxation Laws
Amendment Bill (No. 5) 1999
No. ,
1999
(Treasury)
A Bill
for an Act to amend the law relating to taxation and for related
purposes
ISBN: 0642 390592
Contents
Part 1—Insertion of Divisions 240 and
243 4
Income Tax Assessment Act
1997 4
Part 2—Consequential amendments: arrangements treated as a sale and
loan 39
Income Tax Assessment Act
1936 39
Income Tax Assessment Act
1997 39
Part 3—Consequential amendments: limited recourse
debt 48
Income Tax Assessment Act
1936 48
Income Tax Assessment Act
1997 48
Part 4—Property transferred by way of
security 54
Income Tax Assessment Act
1997 54
Income Tax Assessment Act
1936 55
Part 5—Application of
amendments 57
A Bill for an Act to amend the law relating to taxation
and for related purposes
The Parliament of Australia enacts:
This Act may be cited as the Taxation Laws Amendment Act (No. 5)
1999.
This Act commences on the day on which it receives the Royal
Assent.
Each Act that is specified in a Schedule to this Act is amended or
repealed as set out in the applicable items in the Schedule concerned, and any
other item in a Schedule to this Act has effect according to its
terms.
1 At the end of Item 192 of Schedule
1
Add:
(4) However, this Item only applies if the property is housing provided
by, or on behalf of, an always-exempt person at a rate below the market rate
or:
(a) the property is:
(i) occupied principally by an always-exempt person or the government of a
foreign country; or
(ii) used principally by a person who is providing services to an
always-exempt person, or the government of a foreign country, for the provision
of those services; and
(b) the property is not ineligible Item 192 property.
(5) The following are ineligible Item 192
properties:
(a) shops and shopping centres;
(b) hotels;
(c) casinos;
(d) apartment blocks;
(e) properties mainly consisting of, or of a kind similar to, properties
covered by one or more of the preceding paragraphs;
(f) properties of a kind prescribed for the purposes of this
definition.
2 Application
The amendment made by this Schedule applies to dealings after 2 April 1998,
unless the goods concerned were acquired on or before 2 April 1998 by the person
who uses the goods as mentioned in item 192 of Schedule 1 to the Sales Tax
(Exemptions and Classifications) Act 1992.
Part
1—Insertion of Divisions 240
and 243
Income
Tax Assessment Act 1997
Insert:
[The next Division is Division 240.]
Guide to Division 240
240-A Application and scope of Division
240-B The notional sale and notional loan
240-C Amounts to be included in notional seller’s assessable
income
240-D Deductions allowable to notional buyer
240-E Notional interest and arrangement payments
240-F The end of the arrangement
240-G Adjustments if total amount assessed to notional seller differs from
amount of finance charge
240-H Application of Division 16E to certain arrangements
240-I Provisions applying to hire purchase agreements
For income tax purposes, some arrangements (such as hire purchase
agreements) are recharacterised as a sale of property, combined with a loan, by
the notional seller to the notional buyer, to finance the purchase
price.
Effect of notional sale
(1) The consideration for the notional sale is either the price stated as
the cost or value of the property or its arm’s length value. If the
notional seller is disposing of the property as trading stock, the normal
consequences of disposing of trading stock follow. In particular, the notional
seller will be assessed on the sale price.
(2) Where the property is not trading stock the notional seller’s
assessable income will include any profit made by the notional seller on the
notional sale or on the sale of the property after a notional
re-acquisition.
Effect of notional loan
(3) The notional seller’s assessable income will include notional
interest over the period of the loan.
Other effects
(4) These effects displace the income tax consequences that would
otherwise arise from the arrangement. For example, the actual payments to the
notional seller are not included in its assessable income. Also, the notional
seller loses the right to deduct amounts for depreciation (under Division 42) or
under any of the other capital allowances (listed in Division 40).
Effect of notional purchase
(1) The cost of the acquisition is either the price stated as the cost or
value of the property or its arm’s length value. If the notional buyer is
acquiring the property as trading stock, the normal consequences of acquiring
trading stock follow. In particular, the notional buyer can usually deduct the
purchase price.
(2) If the property is not trading stock, the notional buyer may be able
to deduct depreciation (under Division 42), or to deduct amounts for the
expenditure under one of the other capital allowances (listed in Division
40).
Effect of notional loan
(3) The notional buyer may be able to deduct notional interest payments
over the period of the loan.
Other effects
(4) These effects displace the income tax consequences that would
otherwise arise from the arrangement. For example, the notional buyer cannot
deduct the actual payments to the notional seller.
Table of sections
Operative provisions
240-10 Application of this Division
240-15 Scope of Division
An *arrangement is treated as a notional
sale and *notional loan if:
(a) the arrangement is listed in the table below; and
(b) the arrangement relates to the kind of property listed in the table;
and
(c) any conditions listed in the table are satisfied.
Special provisions that apply to particular arrangements are also listed in
the table.
|
This Division applies to: |
||||
|---|---|---|---|---|
|
|
*Arrangements of this
kind: |
That relate to this kind of property: |
If these conditions are satisfied: |
Special provisions: |
|
1 |
*Hire purchase agreement |
Any goods |
None |
See Subdivision 240-H |
This Division has effect for the purposes of this Act and for the
purposes of the Income Tax Assessment Act 1936 other than:
(a) Parts 3-1 and 3-3 of this Act and Part IIIA of the Income Tax
Assessment Act 1936 (capital gains tax); and
(b) Division 11A of Part III of the Income Tax Assessment Act
1936 (certain payments to non-residents etc.).
Operative provisions
240-17 Who is the notional seller and the notional
buyer?
240-20 Notional sale of property by notional seller and
notional acquisition of property by notional buyer
240-25 Notional loan by notional seller to notional
buyer
(1) An entity is the notional seller if it is a party to the
*arrangement and:
(a) actually owns the property; or
(b) is the owner of the property because of a previous operation of this
Division.
(2) An entity is the notional buyer if it is a party to the
*arrangement and, under the arrangement, has
the *right to use the property.
Example: If the arrangement is a hire purchase agreement,
the finance provider will be the notional seller and the hirer will be the
notional buyer.
(1) The *notional seller is taken to have
disposed of the property by way of sale to the
*notional buyer, and the notional buyer is
taken to have acquired it, at the start of the
*arrangement.
(2) The *notional buyer is taken to own
the property until:
(a) the *arrangement ends; or
(b) the notional buyer becomes the
*notional seller under a later
*arrangement to which this Division
applies.
(1) On entering into the *arrangement,
the *notional seller is taken to have made a
loan (the notional loan) to the
*notional buyer.
(2) The notional loan is for a period:
(a) starting at the start of the
*arrangement; and
(b) ending on the day on which the arrangement is to cease to have effect
or, if the arrangement is of indefinite duration, on the day on which it would
be reasonable to conclude, having regard to the terms and conditions of the
arrangement, that the arrangement will cease to have effect.
(3) The notional loan is of an amount (the notional loan
principal) equal to the consideration for the sale of the property less
any amount paid, or credited by the *notional
seller as having been paid, by the *notional
buyer to the notional seller, at or before the start of the
*arrangement, for the cost of the
property.
Note: Section 240-80 affects the amount of the notional loan
principal where the arrangement is an extension or renewal of another
arrangement.
(4) The notional loan is subject to payment of a charge (the finance
charge).
(5) The consideration for the sale of the property by the
*notional seller, and the cost of the
acquisition of the property by the *notional
buyer, are each taken to have been:
(a) if an amount is stated to be the cost or value of the property for the
purposes of the *arrangement and the notional
seller and the notional buyer were dealing with each other at
*arm’s length in connection with the
arrangement—the amount so stated; or
(b) otherwise—the amount that could reasonably have been expected to
have been paid by the notional buyer for the purchase of the property
if:
(i) the notional seller had actually sold the property to the notional
buyer at the start of the arrangement; and
(ii) the notional seller and the notional buyer were dealing with each
other at arm’s length in connection with the sale.
(6) The *notional loan principal is taken
to be repaid, and the *finance charge is taken
to be paid, by the making of the payments under the
*arrangement.
This Subdivision provides for the inclusion in the notional seller’s
assessable income of:
(a) amounts (notional interest) on account of the finance charge for the
notional loan that the notional seller is taken to have made to the notional
buyer; and
(b) any profit made by the notional seller:
(i) on the notional sale of the property to the notional buyer;
or
(ii) on a sale of the property after any notional re-acquisition of the
property by the notional seller.
Operative provisions
240-35 Amounts to be included in notional seller’s
assessable income
240-40 Arrangement payments not to be included in notional
seller’s assessable income
[This is the end of the Guide]
Notional interest
(1) The *notional seller’s
assessable income of an income year includes the
*notional interest for
*arrangement payment periods, and parts of
arrangement payment periods, in the income year.
Profit on notional sale
(2) If the property is not *trading stock
of the *notional seller and the consideration
for the notional sale of the property exceeds the cost of the acquisition of the
property by the notional seller, the excess is included in the notional
seller’s assessable income of the income year of the notional
sale.
Profit on actual sale after notional re-acquisition
(3) If:
(a) the *notional seller is taken under
this Division to have re-acquired the property from the
*notional buyer; and
(b) the notional seller afterwards sells the property; and
(c) the consideration for the sale exceeds the cost of the
re-acquisition;
the excess is included in the notional seller’s assessable income of
the income year in which the sale occurred.
(1) The *arrangement payments that the
*notional seller receives, or is entitled to
receive, under the *arrangement:
(a) are not to be included in the
*notional seller’s assessable income of
any income year; but
(b) are not taken to be *exempt income of
the notional seller.
(2) However, those *arrangement payments
are taken into account in calculating *notional
interest that is included in the *notional
seller’s assessable income under section 240-35.
(3) A loss or outgoing incurred by the
*notional seller in deriving any such
*arrangement payments is not taken to be a loss
or outgoing incurred by the notional seller in relation to gaining or producing
*exempt income.
This Subdivision provides that the notional buyer may, in certain
circumstances, be entitled to deductions for the notional interest for the
notional loan that the notional seller is taken to have made to the notional
buyer.
Operative provisions
240-50 Extent to which deductions are allowable to notional
buyer
240-55 Arrangement payments not to be allowable
deductions
[This is the end of the Guide]
(1) The *notional buyer is only entitled
to deduct *notional interest for an income year
to the extent that the notional buyer would, apart from this Division, have been
entitled to deduct *arrangement payments for
that income year if no part of those payments were capital in nature.
(2) The *notional buyer is entitled to
deduct *notional interest for
*arrangement payment periods, and parts of
arrangement payment periods, in the income year.
The *notional buyer is not entitled to
deduct *arrangement payments that the
*notional buyer makes under the
*arrangement, but those payments are taken into
account in calculating *notional interest that
may be deducted under section 240-50.
Table of sections
Operative provisions
240-60 Notional interest
240-65 Arrangement payments
240-70 Arrangement payment periods
(1) The *notional interest
for an *arrangement payment period is worked
out as follows:
Calculating *notional
interest
Step 1. Add the *notional interest
from previous *arrangement payment periods to
the *notional loan principal.
Step 2. Subtract any *arrangement
payments that have already been made or that are due but that have not been
made. The result is the outstanding notional loan principal as at
the start of the *arrangement payment
period.
Step 3. Work out the implicit interest rate. It is the
rate of compound interest for the *arrangement
payment period at which the *notional loan
principal equals the sum of:
(a) the present value of the *arrangement
payments payable by the *notional buyer under
the *arrangement; and
(b) the present value of any *termination
amounts.
Step 4. Multiply the outstanding
*notional loan principal by the implicit
interest rate. The result is the notional interest for the
*arrangement payment period.
(2) If only part of an *arrangement
payment period occurs during an income year, the
*notional interest for that part of the
arrangement payment period is so much of the notional interest for that
arrangement payment period as may appropriately be related to that income year
in accordance with generally accepted accounting principles.
(3) In calculating the implicit interest rate, if any of the relevant
amounts are not known at the start of the
*arrangement, a reasonable estimate of the
amount is to be made and is to be used for the purposes of calculating the
implicit interest rate for each income year of the
*notional seller.
(4) If a reasonable estimate cannot be made at that time, an estimate of
the amount is to be made at the end of each income year of the
*notional seller for the purposes of
calculating the implicit interest rate for each income year of the notional
seller.
An arrangement payment is an amount that the
*notional buyer is required to pay under the
*arrangement but does not include:
(a) an amount in the nature of a penalty payable for failure to make a
payment on time; or
(b) a *termination amount.
(1) An *arrangement payment
period is a period for which a payment under the
*arrangement is allocated or expressed to be
payable.
(2) However, if a period exceeds 6 months, the period is not an
*arrangement payment period but each of the
following parts of the period is a separate arrangement payment
period:
(a) the part of the period beginning at the start of that period and
ending 6 months later;
(b) each part of the period:
(i) beginning immediately after a part of the period that is an
arrangement payment period under paragraph (a) or under a previous
application of this paragraph; and
(ii) ending 6 months after the start of that later part or at the end of
the period, whichever first occurs.
Operative provisions
240-75 When is the end of the arrangement?
240-78 Termination amounts
240-80 What happens if the arrangement is extended or
renewed
240-85 What happens if an amount is paid by or on behalf of
the notional buyer to acquire the property
240-90 What happens if the notional buyer ceases to have the
right to use the property
(1) If the *arrangement is stated to
cease to have effect at a particular time, it is taken for the purposes of this
Division to end (even if it is extended or renewed) at the earlier of:
(a) that time; or
(b) the time at which the arrangement ceases to have effect (whether
because the arrangement is terminated or for any other reason).
Note: Section 240-80 deals with extensions and
renewals.
(2) An *arrangement is taken to have
ended if it is extended or renewed.
(3) If the *arrangement is of indefinite
duration, it ends at the time at which the arrangement ceases to have effect
even if the *arrangement is renewed.
Note: Section 240-80 deals with extensions and
renewals.
(4) An *arrangement is taken to have
ended if it is reasonable to conclude, having regard to the terms and conditions
of the *arrangement, that the arrangement has
ceased to have effect.
(5) An
*arrangement is also taken to have ended if the
property has been lost or destroyed.
A termination amount is an amount payable because an
*arrangement ends and includes:
(a) if, at the end of the arrangement, the
*notional buyer acquires the property from the
*notional seller—an amount payable to the
notional seller for the acquisition; or
(b) if, at the end of the arrangement, the property is lost or
destroyed—any amounts paid to the notional seller (whether by the notional
buyer or another entity) as a result of the loss or destruction of the property;
or
(c) otherwise—the value of the property at the end of the
arrangement.
(1) This section sets out what happens if, after the end of the
*arrangement, the
*notional buyer and
*notional seller extend or renew the
*arrangement.
(2) This Division applies as if the original
*arrangement has ended and the extended
arrangement or renewed arrangement is a separate arrangement (the new
arrangement).
(3) There is not, however, taken to be any disposal or acquisition as a
result of the original arrangement ending or of the new arrangement starting and
the *notional buyer does not cease to own the
property.
(4) Also, the *notional loan principal
for the new loan is:
(a) if the *arrangement as extended or
renewed states an amount as the cost or value of the property for the purposes
of the extension or renewal and the *notional
seller and the *notional buyer were dealing
with each other at *arm’s length in
connection with the extension or renewal—the amount so stated;
or
(b) otherwise—the amount that could reasonably have been expected to
have been paid by the notional buyer for the purchase of the property
if:
(i) the notional seller had actually sold the property to the notional
buyer when the arrangement was extended or renewed; and
(ii) the notional seller and notional buyer were dealing with each other
at arm’s length in connection with the sale.
(5) Subdivision 240-G applies to the
*notional loan for the original arrangement.
For that purpose, the *notional loan principal
for the new arrangement is taken to be a
*termination amount paid to the
*notional seller under the original
arrangement.
If, at or after the end of the
*arrangement, an amount is paid to the
*notional seller by, or on behalf of, the
*notional buyer to acquire the property, the
following provisions have effect:
(a) the amount paid is not included in the notional seller’s
assessable income;
(b) the notional buyer cannot deduct the payment;
(c) the notional buyer is taken to continue to own the property;
(d) the transfer to the notional buyer of legal title to the property is
not taken to be a disposal of the property by the notional seller.
(1) This section applies if, at the end of the
*arrangement:
(a) the arrangement is not extended or renewed in the way mentioned in
subsection 240-80(1); and
(b) no amount is paid to the *notional
seller by, or on behalf of, the *notional buyer
to acquire the property; and
(c) the property is not lost or destroyed.
(2) The property is taken to have been disposed of by the
*notional buyer by way of sale back to the
*notional seller, and to have been acquired by
the *notional seller, at the end of the
*arrangement.
(3) The consideration for the sale of the property by the
*notional buyer, and the cost of the
acquisition of the property by the *notional
seller, are each taken to be equal to the market value of the property at the
end of the *arrangement.
(4) Subsection (5) applies where the property is a
*car and if it:
(a) had been bought from the *notional
seller, when this Division first applied to an
*arrangement in respect of the car, by the
*notional buyer for a price equal to the
*notional loan principal; and
(b) had been first used by the notional buyer for any purpose in the
*financial year in which that time
occurred;
the cost of the car, for the purpose of calculating the depreciation
allowable to that person for the car, would have been reduced because of the
operation of section 42-80.
(5) Where an associate of the *notional
buyer acquires the *car, the cost of the car
for the purposes of the application of Division 42 to the associate is taken to
be whichever is the lesser of:
(a) the sum of:
(i) the amount that would have been the written down value of the car at
that time for the purposes of the application of that Division to the notional
buyer if the notional buyer were not taken under this Division to have disposed
of the car; and
(ii) any amount that is included in the notional buyer’s assessable
income under section 42-190 because the notional buyer is taken to have disposed
of the car; and
(iii) any amount that is treated as being deducted for depreciation of
another asset under section 42-285 or 42-290; or
(b) the cost of the acquisition of the car by the associate.
This Subdivision provides for adjustments if the sum of the amounts
included in the notional seller’s assessable income are greater or less
than the finance charge, worked out at the end of the arrangement, for the
notional loan.
Operative provisions
240-105 Adjustments for notional seller
240-110 Adjustments for notional buyer
[This is the end of the Guide]
(1) This section applies at the end of the
*arrangement.
(2) If the sum of:
(a) all amounts (other than *termination
amounts) that were paid or payable to the
*notional seller under the
*arrangement; and
(b) any termination amounts paid or payable to the notional
seller;
exceeds the amount worked out using the formula in subsection (4), the
excess is included in the notional seller’s assessable income of the
income year in which the arrangement ends.
Note: Subsection 240-80(5) provides that the amount of a
notional loan that is taken to be made by an extended or renewed arrangement is
a termination amount paid under the previous arrangement.
(3) If the amount worked out using the formula in subsection (4)
exceeds:
(a) all amounts (other than *termination
amounts) that were paid or payable to the
*notional seller under the
*arrangement; and
(b) any termination amounts paid or payable to the notional
seller;
the notional seller is entitled to deduct the excess in the income year in
which the arrangement ends.
Note: Subsection 240-80(5) provides that the amount of a
notional loan that is taken to be made by an extended or renewed arrangement is
a termination amount paid under the previous arrangement.
(4) The formula for the purposes of subsections (2) and (3)
is:
where:
assessed notional interest means the
*notional interest that has been or is to be
included in the *notional seller’s
assessable income of any income year.
(1) If:
(a) an amount is included in the
*notional seller’s assessable income of
an income year under subsection 240-105(2); or
(b) an amount would have been so included if the notional seller had been
subject to tax on assessable income;
the *notional buyer is entitled to deduct
a corresponding amount in the notional buyer’s income year.
(2) If:
(a) the *notional seller is entitled to
deduct an amount for an income year under subsection 240-105(3); or
(b) the notional seller would have been so entitled if the
*notional seller had been subject to tax on
assessable income;
a corresponding amount is included in the notional buyer’s assessable
income for the notional buyer’s income year.
(3) The *notional buyer is entitled to a
deduction, and is required to include an amount in his or her assessable income
only to the extent (if any) that the notional buyer would, apart from this
Division, have been entitled to deduct
*arrangement payments if no part of those
payments were capital in nature.
(1) Division 16E of the Income Tax Assessment Act 1936 applies in
relation to an arrangement (the assignment arrangement) between
the notional seller and another person (the holder) to transfer
the right to payments (the Division 240 payments) under an
arrangement that is treated as a sale and loan by this Division (the sale
and loan arrangement).
(2) In applying Division 16E, the following assumptions are to be
made:
(a) the assignment arrangement is the qualifying security;
(b) the notional seller is the issuer;
(c) the qualifying security is issued when the assignment arrangement is
entered into;
(d) the issue price is consideration provided to the notional seller under
the assignment arrangement;
(e) the Division 240 payments are payments made by the notional seller
under the assignment arrangement;
(f) no part of the payments represent periodic interest.
(3) This Subdivision does not apply if the assignment arrangement gives
rise to a termination of the sale and loan arrangement for the purposes of this
Division.
(4) To avoid doubt, Division 6A does not apply to an assignment
arrangement to which this Subdivision applies.
Operative provisions
240-115 Another person, or no person taken to own property
in certain cases
(1) This section sets out special modifications of the effect of this
Division that apply in relation to a *hire
purchase agreement unless:
(a) the notional buyer would have been the owner or the
*quasi-owner of the property if the
*arrangement had been a sale of the property;
and
(b) it is reasonably likely that the right, obligation or contingent
obligation to acquire the property will be exercised by, or in respect of, the
notional buyer.
Note: An example of a contingent obligation is a put
option.
(2) The modifications also apply if the
*notional buyer:
(a) disposes of his or her interest in the property; or
(b) enters into a lease covered by Division 42A of Schedule 2E to the
Income Tax Assessment Act 1936 under which he or she leases the property
to another person.
Modifications
(3) For the purpose of the *capital
allowance provisions, if, apart from the operation of this Division, an entity
other than the *notional seller would own the
property that is the subject of an agreement covered by this section, that
entity is taken to be the owner of the property.
(4) For the purpose of the *capital
allowance provisions, if, apart from the operation of this Division, the
*notional seller would own the property that is
the subject of an agreement covered by this section, no entity is taken to be
the owner of the property.
[The next Division is Division 243.]
Guide to Division 243
243-A Circumstances in which Division operates
243-B Working out the excessive deductions
243-C Amounts included in assessable income and deductions
243-D Special provisions
This Division tells you when you must include an additional amount in your
assessable income at the termination of a limited recourse debt arrangement. It
also tells you what the additional amount is.
Basically, the Division applies where the capital allowance deductions that
have been obtained for expenditure that is funded by the debt and the deductions
are excessive having regard to the amount of the debt that was repaid.
The reason for the adjustment is to ensure that, where you have not been
fully at risk in relation to an amount of expenditure, you do not get a net
deduction if you fail to pay that amount.
Operative provisions
243-15 When does this Division apply?
243-20 What is limited recourse debt?
243-25 When is a debt arrangement
terminated?
243-30 What is the financed property and the debt
property?
(1) This Division applies if:
(a) *limited recourse debt has been used
to wholly or partly finance or refinance expenditure; and
(b) at the time that the debt
*arrangement is terminated, the debt has not
been paid in full by the debtor; and
(c) the debtor can deduct an amount as a
*capital allowance (other than development
allowance or drought investment allowance) for the income year in which the
termination occurs, or has deducted or can deduct an amount for an earlier
income year, in respect of the expenditure or the
*financed property.
Note: This Division does not apply to certain limited
recourse debts that are used to refinance limited recourse debt to which this
Division has applied (see subsection 243-50(4)).
(2) However, unless the net *capital
allowance deductions have been excessive having regard to the amount of the debt
that remains unpaid (see section 243-35), no amount is included in the
debtor’s assessable income under this Division although future deductions
may be reduced.
(3) In working out if the debt has been paid in full, and in working out
the unpaid amount of the debt, the following amounts are to be treated as if
they were not payments in respect of the debt:
(a) any reduction in the debt as a result of the
*financed property being surrendered or
returned to the creditor at the termination of the debt;
(b) any payment to reduce the debt that is funded directly or indirectly
by *non-arm’s length limited recourse
debt or by proceeds from the disposal of the debtor’s interest in the
financed property.
However, any amounts accrued that are interest,
*notional interest or in the nature of interest
are taken not to be unpaid.
(4) In working out if the debt has been paid in full, and in working out
the unpaid amount of the debt, payments are to be attributed first to the
payment of any accrued amounts that are interest,
*notional interest or in the nature of
interest.
(5) A *notional loan is taken to be debt
that has been used to wholly or partly finance or refinance
expenditure.
Note: Notional loans arise under Division
240.
(1) A limited recourse debt is an obligation imposed by law
on an entity (the debtor) to pay an amount to another entity (the
creditor) where the rights of the creditor as against the debtor
in the event of default in payment of the debt or of interest are limited wholly
or predominantly to any or all of the following:
(a) rights (including the right to money payable) in relation to any or
all of the following:
(i) the *debt property or the use of the
debt property;
(ii) goods produced, supplied, carried, transmitted or delivered, or
services provided, by means of the debt property;
(iii) the loss or disposal of the whole or a part of the debt property or
of the debtor’s interest in the debt property;
(b) rights in respect of a mortgage or other security over the debt
property or other property;
(c) rights that arise out of any
*arrangement relating to the financial
obligations of an end-user of the *financed
property towards the debtor, and are financial obligations in relation to the
financed property.
(2) An obligation imposed by law on an entity (the debtor)
to pay an amount to another entity (the creditor) is also a
limited recourse debt if it is reasonable to conclude that the
rights of the creditor as against the debtor in the event of default in payment
of the debt or of interest are capable of being limited in the way mentioned in
subsection (1). In reaching this conclusion, have regard to:
(a) the assets of the debtor (other than assets that are indemnities or
guarantees provided in relation to the debt);
(b) any *arrangement to which the debtor
is a party;
(c) whether all of the assets of the debtor would be available for the
purpose of the discharge of the debt (other than assets that are security for
other debts of the debtor or any other entity);
(d) whether the debtor and creditor are dealing at
*arm’s length in relation to the
debt.
(3) An obligation imposed by law on an entity (the debtor)
to pay an amount to another entity (the creditor) is also a
limited recourse debt if there is no
*debt property and it is reasonable to conclude
that the rights of the creditor as against the debtor in the event of default in
payment of the debt or of interest are capable of being limited. In reaching
this conclusion, have regard to:
(a) the assets of the debtor (other than assets that are indemnities or
guarantees provided in relation to the debt);
(b) any *arrangement to which the debtor
is a party;
(c) whether all of the assets of the debtor would be available for the
purpose of the discharge of the debt (other than assets that are security for
other debts of the debtor or any other entity);
(d) whether the debtor and creditor are dealing at
*arm’s length in relation to the
debt.
(4) A *notional loan under a
*hire purchase agreement is also a
limited recourse debt.
Note: Notional loans arise under Division
240.
(5) However,
an obligation that is covered by subsection (1) is not a limited recourse debt
if the creditor’s recourse is not in practice limited due to the
creditor’s rights in respect of a mortgage or other security over property
of the debtor (other than the financed property) the value of which exceeds, or
is likely to exceed, the amount of the debt.
(6) Also, an obligation that is covered by subsection (1), (2) or (3) is
not a limited recourse debt if, having regard to all relevant circumstances, it
would be unreasonable for the obligation to be treated as limited recourse
debt.
(7) A *limited recourse debt is a
non-arm’s length limited recourse debt if the debtor and
creditor do not deal with each other at arm’s length in relation to the
debt.
(1) A debt arrangement is taken to have terminated if:
(a) it is actually terminated; or
(b) the debtor’s obligation to repay the debt is waived, novated or
otherwise varied so as to reduce, transfer or extinguish the debt; or
(c) an agreement is entered into to waive, novate or otherwise vary the
debtor’s obligation to repay the debt so as to reduce, transfer or
extinguish the debt; or
(d) the creditor ceases to have an entitlement to recover the debt from
the debtor (other than as a result of an arm’s length assignment of some
or all of the creditor’s rights under the debt arrangement); or
(e) the debtor ceases to be the owner or the
*quasi-owner of some or all of the
*debt property because that property is
surrendered to the creditor because of the debtor’s failure to pay the
whole or a part of the debt; or
(f) the debtor ceases to be the owner of a beneficial interest in some or
all of the debt property because the interest is surrendered to the creditor
because of the debtor’s failure to pay the whole or a part of the debt;
or
(g) the debt becomes a bad debt.
(2) However, a debt arrangement that is a
*notional loan is not taken to have terminated
merely because it has been renewed or extended.
Note: Notional loans arise under Division 240. Under that
Division, they are taken to have ended if they are renewed or
extended.
(3) Where a debt is terminated under paragraph (1)(b) or (c) as a result
of the debt being reduced, the remaining debt is taken to be a new debt to which
section 243-15 applies.
(1) Property is the financed property if the expenditure
referred to in paragraph 243-15(1)(a) is on the property, is on the acquisition
of the property, results in the creation of the property or is otherwise
connected with the property.
(2) If the debt agreement is a *notional
loan, the property that is the subject of the agreement is the financed
property.
Note: Notional loans arise under Division
240.
(3) Property is the debt property if:
(a) it is the *financed property;
or
(b) the property is provided as security for the debt.
Operative provisions
243-35 Working out the excessive deductions
(1) The *capital allowance deductions
have been excessive having regard to the amount of the debt that remains unpaid
if the amount worked out under subsection (2) exceeds the amount worked out
under subsection (4).
(2) This is how to work out the total net
*capital allowance deductions:
Working out the total net capital allowance deductions
Step 1. Add up all of the debtor’s
*capital allowance deductions (other than
development allowance or drought investment allowance) in respect of the
expenditure or the *financed property
(including deductions because of balancing adjustments) for the income year in
which the termination occurs or an earlier income year.
Step 2. Deduct from that any amount that is included in the
assessable income of the debtor of any income year by virtue of a provision of
this Act (other than this Division) as a result of the disposal of the
*financed property the effect of which is to
reverse a deduction covered by Step 1.
Step 3. Deduct from the result an amount equal to the sum of any
amounts included in the entity’s assessable income as a result of an
earlier application of this Division to the debt.
Step 4. Add to the result an amount equal to the sum of any
deductions to which the entity is entitled under section 243-45 (repayments of
the original debt after termination) or 243-50 (repayments of the replacement
debt) because of payments in respect of the debt.
(3) The reference in Step 2 to an amount that is included in the
assessable income of a taxpayer as a result of the disposal of the
*financed property includes a reference to an
amount:
(a) that is included under section 26AG of the Income Tax Assessment
Act 1936 as a result of the disposal of the financed property; or
(b) that is treated as being deducted for depreciation of another asset
under section 42-285 or 42-290.
Note: Division 20 deals with amounts included to reverse the
effect of past deductions.
(4) This is how to work out the total net capital allowance deductions
that would otherwise be allowable taking into account the amount of the debt
that is unpaid:
Working out the total net capital allowance deductions that would
otherwise be allowable
Work out the amount that would be worked out under subsection (2) if the
deductions and the amounts included in assessable income had been calculated
using the following assumptions:
(1) The original expenditure in respect of which deductions were calculated
was reduced by the amount of the debt that was unpaid by the debtor when the
debt was terminated. (In calculating the amount unpaid the following are to be
disregarded:
(a) any reduction in the amount as a result of the
*financed property being surrendered or
returned to the creditor at the termination of the debt;
(b) any reduction in the amount to the extent that it is funded directly
or indirectly by *non-arm’s length
limited recourse debt or by the consideration for the disposal of the
debtor’s interest in the financed property.)
(2) Deductions for income years after the income year in which the
termination occurred were also taken into account.
(3) The original expenditure in respect of which deductions were calculated
was increased by any amount that is paid by the debtor as consideration for
another person assuming a liability under the debt. (This assumption does not
apply to the extent that the consideration is funded directly or indirectly by
*non-arm’s length limited recourse debt
or by the consideration for the disposal of the debtor’s interest in the
*financed property.)
(4) Step 2 were omitted from subsection (2).
Operative provisions
243-40 Amount included in debtor’s assessable
income
243-45 Deduction for later payments in respect of
debt
243-50 Deduction for payments for replacement
debt
243-55 Effect of Division on later capital allowance
deductions
243-57 Effect of Division on later capital allowance
balancing adjustments
243-58 Adjustment where debt only partially used for
expenditure
The debtor’s assessable income for the income year in which the
termination occurs is to include the excess referred to in subsection
243-35(1).
Note: Section 243-60 applies in relation to certain
partnership debts.
(1) This section applies if:
(a) an amount was included in the debtor’s assessable income under
section 243-40 or a deduction was reduced under section 243-55; and
(b) the debtor makes a payment to the creditor, after the termination of
the debt arrangement, in respect of the debt (other than an amount to the extent
to which it is a payment of interest, of
*notional interest or in the nature of
interest).
(2) This is how to work out the amount of the deduction:
Working out the amount of the deduction
Step 1. Work out the amount that would be worked out under
subsection 243-35(2) if the debt were terminated immediately before the
payment.
Step 2. Work out the amount that would have been worked out under
subsection 243-35(4) at that time if the payment had been taken into
account.
Step 3. The amount of the deduction is the amount (if
any) by which the amount worked out under Step 2 exceeds the amount worked out
under Step 1.
(3) The amount can be deducted for the income year in which the payment is
made.
Limit on deductions
(4) The total amounts deducted under this section in respect of a debt,
and under section 243-50 in respect of a replacement debt, cannot exceed the sum
of:
(a) any amounts included in the debtor’s assessable income under
this Division in respect of the original debt; and
(b) any amount by which deductions in respect of the original debt were
reduced under section 243-55.
Payments where debt refinanced
(1) This section applies if:
(a) an amount was included in the debtor’s assessable income under
section 243-40 or a deduction was reduced under section 243-55; and
(b) an amount funded by a
*non-arm’s length limited recourse debt
(the replacement debt) was disregarded in calculations under
subsection 243-35(4); and
(c) the debtor makes a payment, after the termination of the original debt
arrangement, in respect of the replacement debt (other than to the extent to
which it is a payment of interest, of *notional
interest or in the nature of interest).
(2) This is how to work out the amount of the deduction:
Working out the amount of the deduction
Step 1. Work out the amount that would be worked out under
subsection 243-35(2) if the replacement debt were terminated immediately before
the payment.
Step 2. Work out the amount that would have been worked out under
subsection 243-35(4) at that time if the payment had been made in respect of the
original debt and it had been taken into account.
Step 3. The amount of the deduction is the amount (if
any) by which the amount worked out under Step 2 exceeds the amount worked out
under Step 1.
(3) The amount can be deducted for the income year in which the payment is
made.
Division not to apply to termination of replacement debt
(4) This Division does not apply to termination of the replacement debt
referred to in paragraph (1)(b).
Limit on deductions
(5) The total amounts deducted under section 243-45 in respect of the
original debt, or under this section in respect of the replacement debt, cannot
exceed the sum of:
(a) any amounts included in the debtor’s assessable income under
this Division in respect of the original debt; and
(b) any amount by which deductions in respect of the original debt were
reduced under section 243-55.
(1) This section applies where this Division (other than section 243-65)
has applied in relation to a debt and the debtor is entitled to a
*capital allowance deduction (other than
development allowance or drought investment allowance) in respect of the
expenditure or the *financed property in
relation to a time or period after the termination of the debt.
(2) The *capital allowance deduction is
reduced if the amount that would have been worked out under subsection 243-35(2)
would have exceeded the amount worked out under subsection 243-35(4) if the
following assumptions were applied in both subsections:
Assumptions to be applied
(1) That the debt was terminated at the time, or at the end of the period,
referred to in subsection (1) of this section.
(2) That the amount unpaid at the time, or at the end of the period, is
reduced by any amounts paid under a replacement debt.
(3) The debtor’s *capital allowance
deductions in respect of the expenditure or the
*financed property were increased by the amount
of the capital allowance deduction referred to in subsection (1) of this
section.
(3) The deduction is to be reduced by the amount of the excess.
(1) This section applies where this Division (other than section 243-65)
has applied in relation to a debt and an amount is later included in the
assessable income of an entity by virtue of a provision of this Act (other than
this Division) as a result of the disposal of the
*financed property the effect of which is to
reverse a deduction covered by Step 1 in subsection 243-35(2).
(2) Any amount that would be included in the debtor’s assessable
income is reduced if the amount that would have been worked out under subsection
243-35(4) would have exceeded the amount worked out under subsection 243-35(2)
if the following assumptions were applied in both subsections:
Assumptions to be applied
(1) That the debt was terminated at the time of the disposal of the
*financed property, referred to in subsection
(1) of this section.
(2) The amount in Step 2 in subsection 243-35(2) were increased by the
amount that would otherwise be included in the debtor’s assessable
income.
(3) The amount worked out under subsection 243-35(4) were reduced by any
amount by which:
(a) the amount arising as a result of the disposal that is taken into
account for the purposes of the provision mentioned in subsection (1);
exceeds:
(b) the unpaid amount of the debt immediately before the time of the
disposal of the *financed property, referred to
in subsection (1).
(3) The amount is to be reduced by the amount of the excess.
If the debt is only partially used to finance the expenditure, or the
property, in respect of which the *capital
allowance deductions referred to in Step 1 in subsection 243-35(2) are allowed,
the amount of any deduction, any reduction in a deduction or any amount included
in assessable income is to be so much as is reasonable taking into account the
proportion of the debt that is used for that purpose.
Operative provisions
243-60 Application of Division to
partnerships
243-65 Application where partner reduces
liability
243-70 Application of Division to companies ceasing to be
100% subsidiary
243-75 Application of Division where debt forgiveness rules
also apply
This Division applies to a partnership in respect of the
partnership’s debts and in respect of debts of a partner, and references
to a debtor include a reference to a partnership.
(1) This section applies to a debt in relation to a partner in a
partnership if:
(a) in connection with an *arrangement,
the partner’s liability to pay the debt is reduced or eliminated and the
partner’s interest in the partnership ceases or is varied or transferred;
and
(b) an excess would have been worked out under subsection 243-35(1) if, at
the time when the debt is reduced or eliminated, the debt had been terminated
and remained unpaid and this section had not applied.
(2) If this section applies to a debt in relation to a partner in a
partnership, an amount is to be included in his or her assessable
income.
(3) This is how to work out the amount to be included:
Working out the amount included
Step 1. Work out which income years the partner was a member of the
partnership and the partnership was entitled to a
*capital allowance deduction (other than
development allowance or drought investment allowance) in respect of the
expenditure or the *financed property
(including deductions because of balancing adjustments).
Step 2. For each of those income years, work out the proportion of
net income of the partnership or the partnership loss (as the case requires)
that was included in the assessable income of the partner or which the partner
could deduct.
Step 3. For each of those income years, multiply the
*capital allowance deductions (other than
development allowance or drought investment allowance) in respect of the
expenditure or the *financed property
(including deductions because of balancing adjustments) of the partnership by
the corresponding proportion worked out under Step 2. Sum all of the
amounts.
Step 4. Divide the sum by the total of the
*capital allowance deductions (other than
development allowance or drought investment allowance) in respect of the
expenditure or the *financed property
(including deductions because of balancing adjustments) of the partnership for
all of those income years.
Step 5. Work out the amount that would have been included in the
partnership’s assessable income under section 243-40 if the debt had been
terminated and remained unpaid and this section had not applied.
Step 6. Multiply the amount worked out in Step 5 by the factor
worked out in Step 4. The result is the amount to be included in the
partner’s assessable income.
(1) This section applies to a company if:
(a) the company ceases to be a *100%
subsidiary in relation to at least one other company; and
(b) at that time, the company is the debtor for a
*limited recourse debt that has not been paid
in full by the company; and
(c) the creditor’s rights under the debt are transferred or assigned
to another entity.
(2) If this section applies, this Division applies as if the debt were
terminated, and refinanced with
*non-arm’s length limited recourse debt,
at the time the company ceased to be a *100%
subsidiary of that other company.
(1) This section is to remove doubt about how this Division and Schedule
2C to the Income Tax Assessment Act 1936 apply where both apply to the
same debt.
(2) Where both apply:
(a) this Division is to be applied first and is to be applied disregarding
any operation of that Schedule; and
(b) any amounts included in assessable income under this Division are
taken into account under paragraph 245-85(1)(a) of that Schedule.
[The next Part is Part 3-45.]
Part
2—Consequential amendments:
arrangements treated as a sale and loan
Income
Tax Assessment Act 1936
2
Subsection 51AD(1) (definition of
hire-purchase
agreement)
Repeal the definition, substitute:
hire-purchase agreement means a hire purchase agreement to
which Division 240 of the Income Tax Assessment Act 1997
applies.
Repeal the subsection.
4
Subsection 82AQ(1) (definition of
hire-purchase
agreement)
Repeal the definition, substitute:
hire-purchase agreement means a hire purchase agreement to
which Division 240 of the Income Tax Assessment Act 1997
applies.
Repeal the paragraph.
Repeal the sections, substitute:
A hire purchase agreement means a hire purchase agreement
to which Division 240 of the Income Tax Assessment Act 1997
applies.
Note: Division 240 of the Income Tax Assessment Act
1997 sets out when property under a hire purchase agreement is disposed
of.
Income
Tax Assessment Act 1997
Insert in its appropriate alphabetical position, determined on a
letter-by-letter basis:
notional sales and loans
|
adjustment amounts (lessee) 240-110(2) |
|
adjustment amounts (lessor) 240-105(2) |
|
notional interest 240-35(1) |
|
profit on actual sale 240-35(3) |
|
profit on notional sale 240-35(2) |
Insert in its appropriate alphabetical position, determined on a
letter-by-letter basis:
notional sales and loans
|
adjustment amounts (lessee) 240-110(1) |
|
adjustment amounts (lessor) 240-105(3) |
|
arrangement payments, no deduction for 240-55 |
|
notional interest 240-50 |
|
payments to acquire property, no deduction for 240-85 |
Omit “or hired a *car under a
*hire purchase agreement”.
10
At the end of subsection 28-12(1)
Add:
Note 3: In certain circumstances (for example, under a hire
purchase agreement) the notional buyer of property is taken to be its owner (see
subsection 240-20(2)).
Omit “or hired it under a *hire
purchase agreement”.
Renumber the note as Note 1.
13
At the end of subsection 28-45(1)
Add:
Note 2: The cost of a car to which Division 240 applies is
to be worked out under section 240-25.
Omit “or are hiring it”.
Omit “, lease or hire” (wherever occurring), substitute
“or lease”.
Omit “, leased or hired”, substitute “or
leased”.
Omit “, or you are hiring it under a
*hire purchase agreement”.
Renumber the note as Note 1.
19
At the end of subsection 28-90(6)
Add:
Note 2: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
20
At the end of section 42-15
Add:
Note 3: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
21
Subsection 42-30(3) (after paragraph (ab) of table item 1)
Insert:
|
(ac)you are taken to have ceased to be its owner as mentioned in paragraph
240-20(2)(b); or |
|
(ad)you are taken to have disposed of it as mentioned in subsection
240-20(1) or 240-90(2); or |
22
At the end of section 42-55
Add:
Notional sales and notional loans
(9) Division 240 has special rules in respect of the
*arrangements that are taken to be a notional
sale and *notional loan.
23
Section 42-65 (after table item 9E)
Insert:
|
9F |
you are taken to acquire as mentioned in subsection 240-90(2) |
the amount applying under subsection 240-90(3) |
car discount (42-70) car limit (42-80) double deduction (42-85) prev. dep. limit (42-90) |
|
9G |
you acquire as mentioned in subsection 240-90(5) |
the amount applying under subsection 240-90(5) |
|
24
At the end of section 42-160
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
25
At the end of section 42-175
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
26
At the end of subsection 42-195(3)
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
27
Section 42-205 (after table item 5D)
Insert:
|
5E |
that you are taken to have disposed of under subsection 240-20(1) |
the amount worked out under subsection 240-25(5) |
car limit (42-215) |
|
5F |
of which you are taken to have ceased to be the owner under paragraph
240-20(2)(b) |
the amount worked out under subsection 240-25(5) |
car limit (42-215) |
|
5G |
that you are taken to have disposed of under subsection 240-90(2) |
the amount worked out under subsection 240-90(3) |
car limit (42-215) |
28
Subsection 42-235(1) (note)
Renumber the note as Note 1.
29
At the end of subsection 42-235(1)
Add:
Note 2: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
Renumber the note as note 1.
31
At the end of section 42-250
Add:
Note 2: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
32
At the end of subsection 42-330(1)
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
33
At the end of section 42-365
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
34
At the end of section 43-110
Add:
Note: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
35
At the end of subsection 104-15(1)
Add:
Note: Division 240 provides for the inclusion of amounts
under hire purchase agreements in assessable income.
Repeal the link note, substitute:
[The next Part is Part 3-10.]
37
At the end of subsection 330-480(1)
Note
4: In certain circumstances (for example, under a hire purchase agreement) the
notional buyer of property is taken to be its owner (see subsection
240-20(2)).
38 Subsection 330-480(2)
(note)
Omit “and 3”, substitute “, 3 and 4”.
39
At the end of subsection 387-305(1)
Add:
Note 3: In certain circumstances the notional buyer of
property is taken to be its owner (see subsection 240-20(2)).
Omit “or hired the *car under a
*hire purchase agreement”.
41
At the end of subsection 900-15(2)
Add:
Note: In
certain circumstances (for example, under a hire purchase agreement) the
notional buyer of property is taken to be its owner (see subsection
240-20(2)).
42 Subsection 900-30(7)
(note)
Renumber the note as Note 1.
43
At the end of subsection 900-30(7)
Add:
Note 2: In certain circumstances (for example, under a hire
purchase agreement) the notional buyer of property is taken to be its owner (see
subsection 240-20(2)).
Omit “or hired the *car under a
*hire purchase agreement”.
45
At the end of subsection 900-70(2)
Add:
Note: In certain circumstances (for example, under a hire
purchase agreement) the notional buyer of property is taken to be its owner (see
subsection 240-20(2)).
Omit “or hired the *car under a
*hire purchase agreement”.
47
At the end of subsection 900-80(2)
Add:
Note: In certain circumstances (for example, under a hire
purchase agreement) the notional buyer of property is taken to be its owner (see
subsection 240-20(2)).
48 Subsection 995-1(1)
Insert:
arrangement payment has the meaning given by section
240-65.
Insert:
arrangement payment period has the meaning given by section
240-70.
Insert:
finance charge has the meaning given by section
240-25.
51
Subsection 995-1(1) (subparagraph (a)(i) of the definition of
hire purchase
agreement)
Omit “or obligation”, substitute “, obligation or
contingent obligation”.
52 Subsection 995-1(1) (at the end of
subparagraph (a)(i) of the definition of hire purchase
agreement)
Add:
Note: An example of a contingent obligation is a put
option.
53 Subsection 995-1(1) (subparagraph (a)(iii) of
the definition of hire purchase agreement)
Omit “to purchase”, substitute “referred to in
subparagraph (a)(i)”.
54 Subsection 995-1(1)
Insert:
non-arm’s length limited recourse debt has the meaning
given by subsection 243-20(6).
55 Subsection 995-1(1)
Insert:
notional buyer has the meaning given by section
240-17.
Insert:
notional interest has the meaning given by section
240-60.
Insert:
notional loan has the meaning given by section
240-25.
Insert:
notional loan principal has the meaning given by section
240-25.
Insert:
notional seller has the meaning given by section
240-17.
Insert:
right to use includes the right to possess.
Insert:
termination amount has the meaning given by section
240-78.
Part
3—Consequential amendments:
limited recourse debt
Income
Tax Assessment Act 1936
62 At the end of subsection
160ZJA(2)
Add:
However, it does not include an amount included in a taxpayer’s
assessable income under Division 243 of the Income Tax Assessment Act
1997.
63 After subsection
160ZJA(2)
Insert:
(2A) The reference in paragraph (1)(c) to an amount that has been allowed
or is allowable as a deduction does not include an amount allowed under Division
243 of the Income Tax Assessment Act 1997.
64 At the end of subsection
160ZJB(2)
Add:
However, it does not include an amount included in a taxpayer’s
assessable income under Division 243 of the Income Tax Assessment Act
1997.
65 After subsection
160ZJB(2)
Insert:
(2A) The reference in paragraph (1)(c) to an amount that has been allowed
or is allowable as a deduction does not include an amount allowed under Division
243 of the Income Tax Assessment Act 1997.
Income
Tax Assessment Act 1997
Insert in its appropriate alphabetical position, determined on a
letter-by-letter basis:
limited recourse debt
|
excessive deduction amount (debtor) 243-40 |
|
excessive deduction amount (partner) 243-65 |
Insert in its appropriate alphabetical position, determined on a
letter-by-letter basis:
limited recourse debt
|
later payments 243-45 |
|
later payments (replacement debt) 243-50 |
68 Section 20-5
(before table item 3)
Insert:
|
2A |
Limited recourse debt that was used to finance expenditure deductible under
a capital allowance (or on property for which you have deducted or can deduct
amounts under a capital allowance) terminates: an amount is included in your
assessable income |
243-40 |
69 At the end of
section 42-55
Add:
Limited recourse debt
(10) Where you have had a deduction under this Division an amount may be
included in your assessable income if the expenditure was financed by limited
recourse debt that has terminated: see Division 243.
70 At the end of
section 43-50
Add:
(8) Where you have had a deduction under this Division an amount may be
included in your assessable income if the expenditure was financed by limited
recourse debt that has terminated: see Division 243.
71 At the end of
section 110-40
Add:
(4) Subsection (2) does not apply in relation to amounts that you have
deducted or can deduct under Division 243.
72 At the end of section
110-43
Add:
(4) Subsection (2) does not apply in relation to amounts that you have
deducted or can deduct under Division 243.
73 Paragraph 110-45(2)(a)
After “Part 3-3” insert “and Division
243”
74 After paragraph
110-45(2)(a)
Insert:
(ab) the deduction is under Division 243; or
75 Paragraph 110-50(2)(a)
After “Part 3-3” insert “and Division
243”
76 After paragraph
110-50(2)(a)
Insert:
(ab) the deduction is under Division 243; or
77 At the end of subsection
330-15(1)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
78 Section 330-80 (after note
1A)
Insert:
Note 1B: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
79 Section 330-370
(after note 1)
Insert:
Note 1A: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
80 At the end of
subsection 330-435(1)
Add:
Note: Where you have had a deduction under this Subdivision
an amount may be included in your assessable income if the expenditure was
financed by limited recourse debt that has terminated: see Division
243.
81 At the end of subsection
387-55(1)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
82 At the end of subsection
387-125(2)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
83 At the end of
subsection 387-165(5)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
84 At the end of
subsection 387-305(1)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
85 At the end of
subsection 387-355(2)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
86 Subsection
387-405(2) (note)
Renumber the note as Note 1.
87 At the end of subsection
387-405(2)
Add:
Note 2: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
Renumber the note as Note 1.
89 At the end of
section 387-460
Add:
Note 2: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
90 At the end of
subsection 400-15(3)
Add:
Note 3: Where you have had a deduction under this
Subdivision an amount may be included in your assessable income if the
expenditure was financed by limited recourse debt that has terminated: see
Division 243.
Insert:
debt property has the meaning given by section
243-30.
Insert:
financed property has the meaning given by section
243-30.
Insert:
limited recourse debt has the meaning given by section
243-20.
Part
4—Property transferred by
way of security
Income
Tax Assessment Act 1997
94
Section 40-5 (box relating to Common rule 3)
Omit “Anti-avoidance provisions”, substitute
“Provisions”.
95 Section 41-5
(heading to table column dealing with Common rule 3)
Omit “Anti-avoidance provisions”, substitute
“Provisions”.
96 Section 41-5
(table column dealing with Common rule 3)
Omit “Does not apply” (wherever occurring), substitute
“Applies (other than section 41-85)”.
Repeal the heading, substitute:
98
At the end of Subdivision 41-C
Add:
(1) If the rules for a *capital allowance
apply this Common rule, then for the purposes of those rules (including any
other Common rule that those rules apply) disregard an acquisition or disposal
of property by way of the transfer of the property for the provision or
redemption of a security.
(2) Consequently those rules apply as if the person who was the owner of
the property before the transfer continues to be the owner after the
transfer.
Omit “anti-avoidance—”.
Omit “anti-avoidance”.
Income
Tax Assessment Act 1936
Insert:
(3B) For the purpose of this section, disregard an acquisition or disposal
of property by way of the transfer of the property for the provision or
redemption of a security. Consequently this section applies as if the person who
was the owner of the property before the transfer continues to be the owner
after the transfer.
Insert:
(2) For the purpose of this section, disregard an acquisition or disposal
of property by way of the transfer of the property for the provision or
redemption of a security. Consequently this section applies as if the person who
was the owner of the property before the transfer continues to be the owner
after the transfer.
Insert:
For the purpose of this Subdivision, disregard an acquisition or disposal
of property by way of the transfer of the property for the provision or
redemption of a security. Consequently this Subdivision applies as if the person
who was the owner of the property before the transfer continues to be the owner
after the transfer.
104 At the end of
section 124K
Add:
(5) For the purpose of this Division, disregard an acquisition or disposal
of property by way of the transfer of the property for the provision or
redemption of a security. Consequently this Division applies as if the person
who was the owner of the property before the transfer continues to be the owner
after the transfer.
105 At the end of
Subdivision A of Division 10BA of Part III
Add:
For the purpose of this Division, disregard an acquisition or disposal of
property by way of the transfer of the property for the provision or redemption
of a security. Consequently this Division applies as if the person who was the
owner of the property before the transfer continues to be the owner after the
transfer.
106 At the end of
section 159GE
Add:
(10) For the purpose of this Division, disregard an acquisition or
disposal of property by way of the transfer of the property for the provision or
redemption of a security. Consequently this Division applies as if the person
who was the owner of the property before the transfer continues to be the owner
after the transfer.
Add:
(3) For the purpose of this Part, disregard an acquisition or disposal of
property by way of the transfer of the property for the provision or redemption
of a security. Consequently this Part applies as if the person who was the owner
of the property before the transfer continues to be the owner after the
transfer.
Note: The heading to section 673 is altered by omitting
“: quasi-ownership”.
Part
5—Application of
amendments
108 Amendments
related to arrangements treated as sale and loan
(1) Division 240 of the Income Tax Assessment Act 1997 applies to
arrangements entered into after 27 February 1998.
(2) The amendments made by Part 2 of this Schedule (other than by item 35)
apply to arrangements entered into after 27 February 1998.
(3) The amendment made by item 35 of this Schedule applies to assessments
for the 1998-99 income year and later income years.
109 Amendments
related to limited recourse debt
(1) Division 243 of the Income Tax Assessment Act 1997 applies to
debts that are terminated after 27 February 1998.
(2) The amendments made by Part 3 of this Schedule (other than by items 83
and 90) apply to debts that are terminated after 27 February 1998.
(3) The amendments made by items 83 and 90 of this Schedule apply to
assessments for the 1998-99 income year and later income years.
110 Amendments
related to property transferred as security
The amendments made by Part 4 of this Schedule apply to transfers of
property where the transaction under which the property was provided, or
redeemed, as security was entered into after 27 February 1998.