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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-10 - CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE  

Division 45 - Disposal of leases and leased plant    View history reference

Operative provisions  

SECTION 45-5  Disposal of leased plant or lease  

 View history reference

45-5(1)  

An amount is included in your assessable income if:


(a) you have deducted or can deduct an amount for the decline in value of *plant; and
 View history reference


(b) for most of the time when you *held the plant, you leased it to another entity; and
 View history reference


(c) all or part of the lease period occurred on or after 22 February 1999; and


(d) on or after that day, you dispose of the plant or an interest in the plant, and that disposal constitutes a *balancing adjustment event; and


(e) the sum of the following amounts is more than the plant's *written down value or of that part of it that is attributable to that interest:

(i) the money you receive or are entitled to receive for the disposal;

(ii) the amount of any reduction in a liability of yours as a result of the disposal;

(iii) the *market value of any other benefit you receive or are entitled to receive as a result of the disposal.
 View history reference

45-5(2)  

The amount included is the excess referred to in paragraph (1)(e). It is included for the income year in which the disposal occurred.

Example:

Sean owns a leased asset. The asset has a written down value of $20,000. He has an outstanding loan for the asset of $60,000.

Sean sells a 50% interest in the asset to Leprechaun Pty Ltd for $40,000. Leprechaun agrees to take over 50% of Sean's obligation to make debt service payments.

The excess referred to in paragraph 45-5(1)(e) is:
[$40,000 + $30,000 = $70,000] - $10,000 = $60,000

That amount is included in Sean's assessable income.

This amount would be reduced if part of it is included in Sean's assessable income under another provision (see subsection 45-5(5)).

Note 1:

There is a reduction of the amount included for certain plant acquired before 21 September 1999: see section 45-30.

Note 2:

There is a limit on the amount included for plant for which there is a CGT exemption: see section 45-35.

45-5(3)  

An amount is also included in your assessable income if:


(a) you have deducted or can deduct an amount for the *plant's decline in value; and
 View history reference


(b) for most of the time when you *held the plant, you leased it to another entity; and
 View history reference


(c) all or part of the lease period occurred on or after 22 February 1999; and


(d) on or after that day, you dispose of:


(i) your interest in the plant, or part of it; or

(ii) a right under, or an interest in, the lease;
and that disposal does not constitute a *balancing adjustment event.

45-5(4)  

The amount included is the sum of the following amounts:


(a) the money you receive or are entitled to receive for the disposal;


(b) the amount of any reduction in a liability of yours as a result of the disposal;


(c) the *market value of any other benefit you receive or are entitled to receive as a result of the disposal;
 View history reference

It is included for the income year in which the disposal occurred.

45-5(5)  

However, an amount is not included in your assessable income under this section to the extent that:


(a) it is included in that assessable income under a provision of this Act outside this Division; or


(b) you apply it under section 40-365 (about offsetting balancing adjustments); or
 View history reference


(c) roll-over relief is available for the disposal under section 40-340.
 View history reference

Note:

There are special rules for disposals between 22 February 1999 and 21 September 1999: see Division 45 of the Income Tax (Transitional Provisions) Act 1997.


 



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