INCOME TAX ASSESSMENT ACT 1997
LIABILITY RULES OF GENERAL APPLICATION
Pt 2-1 inserted by No 121 of 1997.
Div 20 inserted by No 121 of 1997.
The associate case
Your assessable income includes the
profit you make on disposing of a
include an amount in your assessable income because of the disposal; and
(b) the car was designed mainly for carrying passengers; and
(c) the car was leased to you or your
(d) you, your associate or another entity can deduct for the income year any of the lease payments paid or payable by the lessee, or have deducted or can deduct any of them for an earlier income year, under this Act; and
(i) you, your associate, or entities including you or your associate, acquired the car from the lessor; or
(ii) another entity acquired the car from the lessor under an
arrangement that enabled you or your associate to acquire the car.
Even if subsection (1) does not apply, an amount may be included in your assessable income if you disposed of an interest in a car (rather than the car itself): see section
In some cases you do
include an amount in your assessable income:
if there has been an earlier disposal of the car for market value: see section
if you inherited the car: see section
if the car was let on hire in the circumstances set out in section
However, the amount included cannot exceed the smallest of these limits:
(a) the total lease payments for the lease that you, your
associate or another entity have deducted or can deduct under this Act for an income year;
(b) the amount of
notional depreciation for the lease period;
(c) if an entity other than you, or if entities including you, acquired the
car from the lessor
the amount by which the
consideration receivable for the disposal of the car by you exceeds the total of:
(i) the car
s cost to that entity, or those entities; and
(ii) any capital expenditure that entity, or any of those entities, incurred on the car after that acquisition and before you acquired it.
If, because of more than one lease of the car, there is more than one way to work out the amount to be included, you only include the largest amount: see section
In some cases you reduce the amount to be included:
if there has been an earlier disposal of the car, or of an interest in it: see section
if another provision requires you to include an amount because of the disposal: see section
Your associate leases a car for 5 years and then acquires it from the lessor for $4,000. Your associate sells it to you for $3,000. You sell it for $10,000.
Your profit is $10,000 (the consideration receivable) less $3,000 (the car
s cost to you) = $7,000.
The first 2 limits on the amount to be included in your assessable income are $9,000 (total deductible lease payments for the lease) and $8,000 (notional depreciation for the lease period).
Since your associate acquired the car from the lessor, the third limit is $10,000 (the consideration receivable by you) less $4,000 (the car
s cost to the associate) = $6,000.
The amount you include in your assessable income
exceed the smallest of the limits. So, you do not include your profit of $7,000. Instead, you include $6,000 (the smallest of the limits).
You increase the first 2 limits if you, or your associate, have previously leased the
car from the same lessor, or from an associate of that lessor.
You increase the first limit by the total lease payments for each previous lease of that kind that you, your
associate or another entity have deducted or can deduct under this Act for an income year.
You increase the second limit by the amount of
notional depreciation for the period of each previous lease of that kind.
S 20-125 inserted by No 121 of 1997.