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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-1 - ASSESSABLE INCOME    View history reference

Division 20 - Amounts included to reverse the effect of past deductions    View history reference

Subdivision 20-B - Disposal of a car for which lease payments have been deducted    View history reference

The usual case

SECTION 20-120  

20-120  Meaning of notional depreciation  

 View history reference ITAA 36
This is how to work out the notional depreciation for a lease period:

Method statement

Step 1. 

Compare:

· the *car's *cost to the lessor for the purposes of Subdivision 40-C (which is about working out the cost of *depreciating assets);

with:

· the car's *termination value for the purposes of section 40-300 when the lessor disposed of it.

Step 2. 

If the car's cost exceeds the car's termination value, multiply the excess by:

· the number of days in the lease period;

divided by:

· the number of days the lessor owned the car.

Step 3. 

The result is the notional depreciation for the lease period.


Step 4. 

If the car's cost does not exceed the car's termination value, the notional depreciation for the lease period is zero.

Note 1:

The notional depreciation for the lease period represents:

· the amount you could have deducted for the car's decline in value if, instead of leasing it, you had owned it and used it solely for the purpose of producing assessable income for that period;

adjusted by:

· the balancing adjustment you would have made if you had disposed of the car at the end of that period.
Note 2:

The car's cost to the lessor is worked out differently if the lessor acquired it in the 1996-97 income year or an earlier income year: see section 20-105 of the Income Tax (Transitional Provisions) Act 1997.

Note 3:

The car's termination value is worked out differently if the lessor disposed of it in the 1996-97 income year or an earlier income year: see section 20-110 of the Income Tax (Transitional Provisions) Act 1997.


 



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