Commonwealth Consolidated Acts

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INCOME TAX ASSESSMENT ACT 1997 - SECT 40.40

Meaning of hold a depreciating asset

    Use this table to work out who holds a * depreciating asset. An entity identified in column 3 of an item in the table as not holding a depreciating asset cannot hold the asset under another item.

 

Identifying the holder of a depreciating asset

Item

This kind of depreciating asset:

Is held by this entity:

1

A * car in respect of which a lease has been granted that was a * luxury car when the lessor first leased it

The lessee (while the lessee has the * right to use the car) and not the lessor

2

A * depreciating asset that is fixed to land subject to a * quasi - ownership right (including any extension or renewal of such a right) where the owner of the right has a right to remove the asset

The owner of the quasi - ownership right (while the right to remove exists)

3

An improvement to land (whether a fixture or not) subject to a * quasi - ownership right (including any extension or renewal of such a right) made, or itself improved, by any owner of the right for the owner's own use where the owner of the right has no right to remove the asset

The owner of the quasi - ownership right (while it exists)

4

A * depreciating asset that is subject to a lease where the asset is fixed to land and the lessor has the right to recover the asset

The lessor (while the right to recover exists)

5

A right that an entity legally owns but which another entity (the economic owner ) exercises or has a right to exercise immediately, where the economic owner has a right to become its legal owner and it is reasonable to expect that:

(a)   the economic owner will become its legal owner; or

(b)   it will be disposed of at the direction and for the benefit of the economic owner

The economic owner and not the legal owner

6

A * depreciating asset that an entity (the former holder ) would, apart from this item, hold under this table (including by another application of this item) where a second entity (also the economic owner ):

(a)   possesses the asset, or has a right as against the former holder to possess the asset immediately; and

(b)   has a right as against the former holder the exercise of which would make the economic owner the holder under any item of this table;

and it is reasonable to expect that the economic owner will become its holder by exercising the right, or that the asset will be disposed of at the direction and for the benefit of the economic owner

The economic owner and not the former holder

7

A * depreciating asset that is a partnership asset

The partnership and not any particular partner

8

* Mining, quarrying or prospecting information that an entity has and that is relevant to:

(a)   * mining and quarrying operations carried on, or proposed to be carried on by the entity; or

(b)   a * business carried on by the entity that includes * exploration or prospecting for * minerals or quarry materials obtainable by such operations;

whether or not it is generally available

The entity

9

Other * mining quarrying or prospecting information that an entity has and that is not generally available

The entity

10

Any * depreciating asset

The owner, or the legal owner if there is both a legal and equitable owner

Example 1:   Power Finance leases a luxury car to Kris who subleases it to Rachael. As lessee, item   1 makes Rachael the holder of the car. Power, as the legal owner, would normally hold the car under item   10.

  However, item   1 makes it clear that Power, as lessor, does not hold the car. As the lessee, item   1 would normally mean that Kris held the car but, again, she is also a lessor and so is not the holder (she also doesn't have the right to use the car during the sublease).

Example 2:   Sandra sells a packing machine to Jenny under a hire purchase agreement. Jenny holds the machine under item   6 because, although she is not the legal owner until she exercises her option to purchase, she possesses the machine now and can exercise an option to become its legal owner.

  Jenny is reasonably expected to exercise that option because the final payment will be well below the expected market value of the machine at the end of the agreement. Sandra, as the machine's legal owner, would normally be its holder under item   10 but item   6 makes it clear that the legal owner is not the holder.

Note 1:   Some assets may have holders under more than one item in the table.

Note 2:   As well as hire purchase agreements, items   5 and 6 cover cases like assets subject to chattel mortgages, sales subject to retention of title clauses and assets subject to bare trusts.


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