Commonwealth Numbered Acts
[Index]
[Table]
[Search]
[Search this Act]
[Notes]
[Noteup]
[Previous]
[Next]
[Download]
[Help]
TAXATION LAWS AMENDMENT ACT (No. 2) 1985No. 123, 1985 - SECT 27
27. After Division 16C of the Principal Act the following Division is inserted
in Part III:
"Division 16D - Certain arrangements relating to the use of property
Interpretation
"159GE. (1) In this Division - 'arrangement' includes -
(a) any agreement, arrangement, understanding, promise or undertaking,
whether express or implied, and whether or not enforceable, or
intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal, action, course of action or course of
conduct whether unilateral or otherwise; 'arrangement payment', in
relation to an arrangement relating to the use, or the control of the
use, of an item of property, means so much of any payment liable to be
made under the arrangement as represents consideration for any one or
more of the following:
(a) the use of the item;
(b) the control of the use of the item;
(c) the sale or disposal of the item; 'arrangement period', in relation to
an item of eligible property that is, or is included in, arrangement
property in relation to an arrangement at a particular time, means the
period that is at that time the total period during which the
arrangement is likely to be in force in relation to that item of
eligible property (including any period before that time when the
arrangement was in force in relation to that item of eligible
property); 'arrangement property' means property that is, or is to be,
used, or the use of which is, or is to be, controlled, under an
arrangement; 'assessable arrangement payment' means an arrangement
payment that, apart from this Division, would be included in whole or
in part in the assessable income of a taxpayer of a year of income;
'associate' means -
(a) in relation to a person other than an exempt public body - any person
who is an associate, within the meaning of subsection 26AAB (14), in
relation to the person; and
(b) in relation to an exempt public body -
(i) a partner of the exempt public body or a partnership in which
the exempt public body is a partner;
(ii) if a person who is an associate of the exempt public body by
virtue of sub-paragraph (i) is a natural person - the spouse or
a child of that person;
(iii) a trustee of a trust estate where the exempt public body or
another person who is an associate of the exempt public body by
virtue of another sub-paragraph of this paragraph benefits or
is capable (whether by the exercise of a power of appointment
or otherwise) of benefiting under the trust, either directly or
through any interposed companies, partnerships or trusts; or
(iv) a company where -
(A) the company is, or its directors are, accustomed or under
an obligation, whether formal or informal, to act in
accordance with the directions, instructions or wishes of
the exempt public body, of a person who is an associate
of the exempt public body by virtue of another
sub-paragraph of this paragraph, of a company that is an
associate of the exempt public body by virtue of another
application of this subparagraph or of any 2 or more such
persons; or
(B) the exempt public body is, the persons who are associates
of the exempt public body by virtue of sub-sub-paragraph
(A) and the other subparagraphs of this paragraph are, or
the exempt public body and the persons who are associates
of the exempt public body by virtue of that
sub-sub-paragraph and those sub-paragraphs are, in a
position to cast, or control the casting of, more than
50% of the maximum number of votes that might be cast at
a general meeting of the company; 'capital expenditure
deduction' means a deduction under Division 10, 10AAA,
10AA, 10A, 10C or 10D; 'control' means effectively
control; 'depreciation deduction' means a deduction in
respect of depreciation under Division 3; 'Division 10,
10AA or 10A property' means property in relation to which
there has been incurred -
(a) allowable capital expenditure within the meaning of Division 10 or
10AA;
(b) expenditure taken into account in ascertaining an amount of residual
capital expenditure specified in paragraph 122C (1) (A); or
(c) capital expenditure specified in sub-section 124F (1) or 124JA (1);
'Division 10AAA property' means property in relation to which there
has been incurred capital expenditure to which Division 10AAA applies;
'Division 10C or 10D property' means property in relation to which
there has been incurred qualifying expenditure within the meaning of
Division 10C or 10D; 'effective life', in relation to an item of
eligible property at a particular time, means the period (if any) that
the Commissioner estimates will be, or would be, at that time the
effective life of the property after that time assuming that it is or
would be maintained in reasonably good order and condition; 'eligible
amount', in relation to an item of eligible property, means -
(a) where the item is an item of eligible depreciation property - the
amount that was the cost of the item of property to the taxpayer who
owns the item for the purposes of sub-section 62 (1) or that would
have been the cost of the item of property to the taxpayer for the
purposes of that sub-section if that sub-section had applied in
relation to the item of property, as the case requires; and
(b) where the item is an item of eligible capital expenditure property -
any amount of eligible capital expenditure in relation to the item of
property; 'eligible capital expenditure', in relation to an item of
eligible capital expenditure property, means expenditure by reason of
which the item of property is eligible capital expenditure property;
'eligible capital expenditure property' means Division 10, 10AA or 10A
property, Division 10AAA property or Division 10C or 10D property;
'eligible depreciation property' means plant or articles within the
meaning of section 54; 'eligible property' means -
(a) eligible depreciation property;
(b) Division 10, 10AA or 10A property;
(c) Division 10AAA property; or
(d) Division 10C or 10D property; 'eligible real property', means eligible
property that is -
(a) a building or a part of a building; or
(b) a structure that is a fixture or a part of such a structure; 'exempt
public body' means -
(a) the Commonwealth, a State or a Territory;
(b) a municipal corporation or other local governing body, the income of
which is wholly exempt from tax; or
(c) a public authority -
(i) that is constituted by or under a law of the Commonwealth, a
State or a Territory; and
(ii) the income of which is wholly exempt from tax; 'payment
portion', in relation to an arrangement payment in relation to
an eligible amount in relation to an item of eligible property,
means so much of the arrangement payment as the Commissioner
considers is attributable to the eligible amount in relation to
the item of eligible property; 'person' includes an exempt
public body; 'total notional principal', in relation to an
eligible amount in relation to an item of eligible property in
relation to an application period, means the sum of all
notional principal amounts (if any) in relation to payment
portions of arrangement payments in relation to the eligible
amount in relation to the application period.
"(2) For the purposes of the definition of 'arrangement period' in subsection
(1), a reference in that definition to the total period during which an
arrangement is, at a particular time, likely to be in force in relation to an
item of eligible property that at that time is, or is included in, arrangement
property in relation to the arrangement is a reference to -
(a) where at that time the total period during which the arrangement was,
or is, to be in force in relation to that item of eligible property
(including any period before that time when the arrangement was in
force in relation to that item) was or is specified in or
ascertainable in accordance with the arrangement - that period; and
(b) in any other case - such period as would have been, or is, at that
time the period during which the arrangement would be, or is, likely
to be in force in relation to the item of property (including any
period before that time when the arrangement was in force in relation
to the item), having regard to the provisions of the arrangement and
any other relevant circumstances in relation to the arrangement, or in
relation to the item of property.
"(3) Nothing in this Division prevents an item of eligible property from being
an item of eligible property by reason of the application of 2 or more
paragraphs of the definition of 'eligible property' in sub-section (1). "(4)
For the purposes of the definition of 'total notional principal' in
sub-section (1), where -
(a) under section 159GK there is an interest amount within the meaning of
that section in relation to a payment portion (not being a notional
final payment portion within the meaning of that section) in relation
to an arrangement payment; and
(b) the interest amount is less than the amount of the payment portion,
there shall be taken to be a notional principal amount in relation to
the payment portion of an amount equal to the difference between the
interest amount and the amount of the payment portion.
"(5) Where -
(a) under 2 or more successive arrangements relating to the use by a
person, or the control by a person of the use, of property owned by
another person, the same property is used by, or the use of the same
property is controlled by, the same person or by persons who, in
relation to each other, are associates; and
(b) the Commissioner considers that the arrangements should be taken, for
the purposes of this Division, to be a single arrangement, the
arrangements shall, for the purposes of this Division, be deemed to be
a single arrangement entered into at the same time as the first of the
arrangements, coming into force at the same time as the first of the
arrangements and continuing in force until the expiration of the
second or last, as the case requires, of the arrangements.
"(6) A reference in sub-section (5) to successive arrangements includes a
reference to -
(a) where the arrangement periods of 2 or more arrangements overlap -
those arrangements; and
(b) where there is a period between the expiration of an arrangement and
the commencement of another arrangement and the Commissioner considers
that the arrangements should be taken to be successive arrangements
for the purposes of that sub-section - those arrangements.
"(7) Where this Division applies in relation to an item of eligible property
in relation to a qualifying arrangement, a reference in this Division to the
application period in relation to that application of this Division in
relation to the item of eligible property is a reference to the period
commencing at the time at which this Division in that application commences to
apply and ending at the time at which this Division in that application ceases
to apply.
"(8) For the purposes of this Division, where one or more of the partners in a
partnership uses, or controls the use of, an item of property, each of the
partners in the partnership shall be taken to use, or to control the use of,
the item of property and the partnership shall be taken not to use, or to
control the use of, the item of property. Residual amounts
"159GF. (1) Subject to sub-section 159GJ (1), in this Division a reference to
the residual amount at a particular time (in this sub-section referred to as
the 'relevant time') in relation to the eligible amount by reason of which an
item of property is eligible depreciation property at the relevant time is a
reference to the eligible amount reduced by -
(a) where the item of property was not dealt with by the taxpayer who owns
the item in the prescribed manner at any time during the period (in
this sub-section referred to as the 'relevant period') before the
relevant time when it was owned by the taxpayer - the total amount of
depreciation that would, but for any deduction denying provision, have
been allowable to the taxpayer under Division 3 in respect of that
item of property for the relevant period if -
(i) at all times during the relevant period the taxpayer had wholly
and exclusively dealt with the item of property in the
prescribed manner;
(ii) the depreciation allowable for the relevant period were
calculated in accordance with paragraph 56 (1) (a); and
(iii) section 57AG did not apply in relation to the item of property;
(b) where the item of property was wholly and exclusively dealt with by
the taxpayer who owns the item in the prescribed manner at all times
during the relevant period - the total amount of depreciation that was
or, but for any deduction denying provision, would have been, allowed
or allowable to the taxpayer in respect of the item of property for
that period under Division 3; and
(c) in any other case - the total amount of depreciation that, but for any
deduction denying provision, would have been allowable to the taxpayer
who owns the item of property in respect of the item under Division 3
for the relevant period if -
(i) the taxpayer had wholly and exclusively dealt with the item of
property in the prescribed manner at all times during the
relevant period;
(ii) in respect of any part of the relevant period for which
depreciation was or, but for any deduction denying provision,
would have been allowed or allowable under Division 3 - the
depreciation were allowable on the same basis and at the same
percentage as was or would have been allowed or allowable for
that part of the relevant period; and
(iii) in respect of any other part (in this sub-paragraph referred to
as the 'relevant part') of the relevant period - the
depreciation were allowable -
(A) where the relevant part was immediately succeeded by
another part of the relevant period in respect of which
depreciation was or, but for any deduction denying
provision, would have been allowed or allowable under
Division 3 - on the same basis and at the same percentage
as was or would have been allowed or allowable in respect
of that other part; and
(B) in any other case - on the same basis and at the same
percentage as was or, but for any deduction denying
provision, would have been allowed or allowable under
Division 3 in respect of the part of the relevant period
for which depreciation was or would have been allowed or
allowable, being the part that immediately preceded the
relevant part.
"(2) For the purposes of sub-section (1) -
(a) an item of eligible depreciation property shall be taken to be dealt
with by a taxpayer in the prescribed manner at a particular time if -
(i) the item of property is used by the taxpayer at that time for
the purpose of producing assessable income; or
(ii) the item of property is, at that time, installed ready for use
for the purpose of producing assessable income and held in
reserve by the taxpayer; and
(b) a reference to a deduction denying provision is a reference to a
provision of this Act that would have the effect of denying an
entitlement in whole or in part to a deduction otherwise wholly
allowable under this Act.
"(3) Subject to sub-section 159GJ (2), where any of the following amounts (in
this sub-section referred to as the 'attributable amount'):
(a) an amount of residual previous capital expenditure within the meaning
of Division 10 or 10AA;
(b) an amount of residual capital expenditure within the meaning of
Division 10, 10AA or 10A;
(c) an amount of residual (1 May 1981 to 18 August 1981) capital
expenditure within the meaning of Division 10 or 10AA;
(d) an amount of residual (19 August 1981 to 19 July 1982) capital
expenditure within the meaning of Division 10 or 10AA;
(e) so much as is unrecouped of an amount of allowable (post 19 July 1982)
capital expenditure within the meaning of Division 10 or 10AA,
ascertained as at the end of a year of income, is attributable in
whole or in part to an amount of expenditure (in this sub-section
referred to as the 'relevant expenditure') by reason of which an item
of property is Division 10, 10AA or 10A property, in this Division a
reference to the residual amount at any time during the year of income
in relation to the relevant expenditure is a reference to so much of
the attributable amount as is attributable to the relevant
expenditure.
"(4) Subject to sub-section 159GJ (3), in this Division a reference to the
residual amount at a particular time in relation to an amount of expenditure
by reason of which an item of property is Division 10AAA property is a
reference to the amount of expenditure reduced by any part of that expenditure
that has been allowed or is allowable as a deduction under Division 10AAA from
the assessable income of any taxpayer of a year of income preceding the year
of income in which the particular time occurs.
"(5) Subject to sub-section 159GJ (4), in this Division a reference to the
residual amount at a particular time in relation to an amount of expenditure
by reason of which an item of property is Division 10C or 10D property is a
reference to the residual capital expenditure within the meaning of Division
10C or 10D, as the case may be, at that time in relation to the amount of
expenditure. Qualifying arrangements
"159GG. (1) For the purposes of this Division, where at any time (in this
sub-section referred to as the 'relevant time') any of the following
conditions is satisfied in relation to an arrangement relating to the use by a
person (in this sub-section referred to as the 'end-user'), or to the control
by a person (in this sub-section also referred to as the 'end-user') of the
use, of property owned by another person who is a party to the arrangement,
being property that is or includes an item of eligible property:
(a) the arrangement contains provision to the effect that -
(i) if -
(A) on the termination or expiration of the arrangement, the
owner sells or otherwise disposes of the whole of the
arrangement property, or part of the arrangement property
that is or includes the item of eligible property, to any
person; and
(B) the owner or an associate receives in respect of the sale
or disposal no consideration, or consideration of an
amount less than an amount (in this sub-paragraph
referred to as the 'guaranteed residual value') specified
in, or ascertainable under, the provision, the end-user
or an associate will pay to the owner or an associate an
amount equal to the guaranteed residual value, or to the
amount by which the guaranteed residual value exceeds the
consideration, as the case may be;
(ii) at or after the termination or expiration of the arrangement,
the whole of the arrangement property or part of the
arrangement property that is or includes the item of eligible
property is to be transferred (whether or not for any
consideration) to the end-user or an associate;
(iii) the end-user or an associate has or will have the right to
purchase or to require the transfer of the whole of the
arrangement property or part of the arrangement property that
is or includes the item of eligible property; or
(iv) the arrangement period in relation to the item of eligible
property in relation to the arrangement is a period that
exceeds 1 year and the end-user or an associate will be liable
to carry out, to expend money in respect of or to reimburse the
owner or an associate for expenditure in respect of, repairs
that may be required to the whole of the arrangement property
or to part of the arrangement property that is or includes the
item of eligible property;
(b) the arrangement period in relation to the item of eligible property in
relation to the arrangement is equal to or greater than -
(i) where the item is an item of eligible real property - 50% of
the effective life of that item at the commencement of the
arrangement period; or
(ii) in any other case - 75% of the effective life of that item at
the commencement of the arrangement period;
(c) the sum of -
(i) the payment portions of arrangement payments that were liable
to be made at or before the relevant time in relation to the
eligible amount, or in relation to all of the eligible amounts
(including any eligible amount in respect of expenditure
incurred after the commencement of the arrangement period), in
relation to the item of eligible property; and
(ii) the payment portions of arrangement payments that, having
regard to the provisions of the arrangement and any other
relevant circumstances, are or were, at the relevant time,
likely to become liable to be made after the relevant time in
relation to the eligible amount, or in relation to all of the
eligible amounts (including any eligible amount in respect of
expenditure that, having regard to the provisions of the
arrangement and any other relevant circumstances, is or was
likely to be incurred during the arrangement period), in
relation to the item of eligible property, is equal to or
greater than 90% of the sum of -
(iii) the residual amount in relation to the eligible amount, or the
sum of the residual amounts in relation to the eligible
amounts, in respect of which expenditure was incurred before
the commencement of the arrangement period in relation to the
item of eligible property, as ascertained at the commencement
of the arrangement period; and
(iv) the amount of any expenditure that was, or is likely to be,
incurred during the arrangement period, being expenditure
giving rise to an eligible amount in relation to the item of
eligible property, the arrangement shall be taken to be, or to
have been, a qualifying arrangement in relation to the item of
eligible property -
(d) at the relevant time; and
(e) at all times before the relevant time when the arrangement was in
force in relation to the item of eligible property.
"(2) For the purposes of this Division, where -
(a) an item of eligible property is, or is included in, arrangement
property in relation to an arrangement relating to the use by a person
(in this sub-section referred to as the 'end-user'), or to the control
by a person (in this sub-section also referred to as the 'enduser') of
the use, of property owned by another person who is a party to the
arrangement; and
(b) the ownership of the item of eligible property is transferred to the
end-user or an associate within 1 year after the arrangement ceases to
be in force (whether by termination or expiration) in relation to the
item of eligible property, the arrangement shall be taken to have been
a qualifying arrangement in relation to the item of eligible property
at all times during the period during which the arrangement was in
force in relation to the item of eligible property.
"(3) For the purposes of sub-sections (1) and (2) -
(a) a lease to a person of property owned by another person shall be taken
to be an arrangement relating to the use by the person of property
owned by the other person; and
(b) any arrangement entered into in relation to the lease referred to in
paragraph (a) shall be taken to be part of the arrangement referred to
in that paragraph.
"(4) Where, but for this sub-section, an arrangement would be a qualifying
arrangement in relation to an item of eligible property at a particular time
(in this sub-section referred to as the 'relevant time') and the Commissioner,
having regard to -
(a) the circumstances by reason of which the arrangement is a qualifying
arrangement in relation to that item of eligible property; and
(b) any other relevant circumstances, considers it unreasonable that the
arrangement should be a qualifying arrangement at the relevant time in
relation to the item of eligible property, the arrangement shall be
taken not to be a qualifying arrangement at the relevant time in
relation to the item of eligible property.
"(5) Where an arrangement is a qualifying arrangement in relation to an item
of eligible property at a particular time (in this sub-section referred to as
the 'relevant time') and the arrangement ceases to be a qualifying arrangement
in relation to that item of eligible property at a later time, the arrangement
shall not be taken not to have been a qualifying arrangement in relation to
that item of eligible property at the relevant time by reason of it ceasing to
be a qualifying arrangement in relation to that item of eligible property at
the later time. Application of Division in relation to property
"159GH. (1) Subject to sub-section (2), where -
(a) at a particular time (in this sub-section referred to as the 'relevant
time') an arrangement is a qualifying arrangement under sub-section
159GG (1) or (2) in relation to an item of eligible property; and
(b) either of the following conditions is satisfied:
(i) the qualifying arrangement was entered into after 5 o'clock in
the afternoon, by standard time in the Australian Capital
Territory, on 15 May 1984 and the end-user referred to in
sub-section 159GG (1) or (2) is an exempt public body;
(ii) the arrangement was entered into after 5 o'clock in the
afternoon, by legal time in the Australian Capital Territory,
on 16 December 1984 and the use of the property referred to in
sub-section 159GG (1) or (2) takes place, or will take place,
outside Australia and is, or will be, wholly or partly for the
purpose of producing exempt income, this Division applies in
relation to the item of eligible property at the relevant time.
"(2) This Division does not apply in relation to an item of eligible property
at a particular time if at that time section 51AD applies to the item of
eligible property in relation to a taxpayer. Effect of application of Division
on certain deductions, &c.
"159GJ. (1) Where this Division applies in relation to an item of eligible
depreciation property -
(a) if -
(i) but for this section, Subdivision B of Division 3 would apply,
or would have applied, in relation to the item of eligible
property in relation to a taxpayer; and
(ii) this Division commences to apply before the expiration of 12
months after the item of property was first used, or installed
ready for use, by the taxpayer, Subdivision B of Division 3
does not apply, and shall be deemed never to have applied, in
relation to the item of eligible property in relation to the
taxpayer;
(b) in relation to any year of income the whole of which is included in or
comprises the application period - no depreciation deduction shall be
allowable to any taxpayer in relation to the item of property for that
year of income;
(c) in relation to any other year of income in which the whole or a part
of the application period occurs -
(i) in relation to any part (in this sub-section referred to as the
'pre-application part') of the year of income that precedes the
application period - there shall be allowable to a taxpayer as
a depreciation deduction in relation to the item of property -
(A) where this Division has not previously applied in
relation to the item of property - the same depreciation
deduction (if any) as would, apart from this Division, be
allowable to the taxpayer; and
(B) in any other case - the same depreciation deduction (if
any) as would, but for this application of this section,
be allowable to the taxpayer;
(ii) in relation to the part of the year of income during which this
Division applies - no depreciation deduction shall be allowable
to any taxpayer in relation to the item of property; and
(iii) in relation to any part (in this sub-section referred to as the
'post-application part') of the year of income that occurs
after the application period (not being a part that occurs
after the commencement of a subsequent application period) -
(A) the residual amount in relation to the item of eligible
depreciation property at any time (in this
sub-subparagraph referred to as the 'relevant time')
during the post-application part is an amount ascertained
in accordance with the formula A + B - C, where -
A is the amount that, but for this application of this section, would be the
residual amount at the relevant time in relation to the eligible amount (in
this sub-paragraph referred to as the 'relevant eligible amount') by reason of
which the item is an item of eligible depreciation property;
B is -
(a) where paragraph (b) of this component does not apply - the amount
that, in determining the residual amount in component A, would be
taken into account as depreciation under sub-section 159GF (1) in
respect of the application period; and
(b) where, in determining the residual amount in component A, depreciation
taken into account in respect of the post-application part would be
calculated in accordance with paragraph 56 (1) (a) - the amount that,
in determining the residual amount in component A, would be taken into
account under sub-section 159GF (1) as depreciation in respect of the
application period and the part of the post-application part before
the relevant time; and
C is -
(a) where paragraph (a) of component B applies - an amount equal to the
total notional principal in relation to the relevant eligible amount
in relation to the application period; and
(b) where paragraph (b) of component B applies - the sum of -
(i) the total notional principal in relation to the relevant
eligible amount in relation to the application period; and
(ii) the amount that, in determining the residual amount in
component A, would be taken into account as depreciation under
sub-section 159GF (1) in respect of the part of the
post-application part before the relevant time if the
depreciated value of the item of eligible depreciation property
at the beginning of the year of income in which this Division
ceases to apply were equal to the residual amount at the
beginning of the application period as reduced by the total
notional principal in relation to the relevant eligible amount
in relation to the application period;
(B) for the purposes of any application of sub-section 56 (2)
or section 59 in relation to the item of property in
relation to the post-application part - the depreciated
value, within the meaning of Division 3, of the item of
property at any time during the postapplication part
shall be taken to be an amount equal to the residual
amount in relation to the relevant eligible amount at
that time as ascertained in accordance with
sub-sub-paragraph (A); and
(C) the depreciation deduction (if any) allowable to a
taxpayer in relation to the item of property in relation
to the post-application part is the depreciation
deduction that would be allowable in respect of that
period if this Division did not apply and, in the case of
an item of property in relation to which paragraph 56 (1)
(a) would, apart from this Division, apply, if the
depreciated value, within the meaning of Division 3, of
the item of property at the beginning of the year of
income were equal to the residual amount, as ascertained
under sub-sub-paragraph (A), in relation to the relevant
eligible amount at the commencement of the
post-application part;
(d) the residual amount at any time (in this paragraph referred to as the
'relevant time') after the year of income in which the application
period ends (not being a time after the commencement of a subsequent
application period) in relation to the eligible amount (in this
paragraph referred to as the 'relevant eligible amount') by reason of
which the item is an item of eligible depreciation property is the
amount that would be the residual amount in relation to the relevant
eligible amount in relation to the relevant time under
subsub-paragraph (1) (c) (iii) (A) if the post-application part
referred to in that sub-sub-paragraph extended to include the relevant
time; and
(e) for the purpose of the application of Division 3 in relation to the
item of property at any time after the year of income in which the
application period ends - there shall be taken to have been allowed as
a depreciation deduction in relation to the item of property in
relation to the application period an amount equal to the total
notional principal in relation to the eligible amount by reason of
which the item of property is eligible depreciation property in
relation to the application period.
"(2) Where this Division applies in relation to an item of Division 10, 10AA
or 10A property -
(a) no deduction is allowable to any taxpayer under Division 10, 10AA or
10A in relation to any amount of expenditure (not being expenditure
incurred after the application period) by reason of which the item is
Division 10, 10AA or 10A property for any year of income in which the
whole or a part of the application period occurs;
(b) the residual amount at any time after the application period (not
being a time after the commencement of a subsequent application
period) in relation to an amount of expenditure (not being expenditure
incurred after the application period) by reason of which the item is
Division 10, 10AA or 10A property is an amount equal to the amount
that, but for this paragraph, would be the residual amount at that
time in relation to the amount of expenditure under sub-section 159GF
(3) reduced by an amount equal to the total notional principal in
relation to the amount of expenditure in relation to the application
period and any prior application period; and
(c) for the purposes of the application of Division 10, 10AA or 10A in
relation to an amount of expenditure (not being expenditure incurred
after the application period) by reason of which the item is Division
10, 10AA or 10A property at any time after the application period,
there shall be taken to have been allowed in respect of the amount of
expenditure a deduction under whichever of those Divisions applies in
respect of the amount of expenditure of an amount equal to the total
notional principal in relation to the amount of expenditure in
relation to the application period.
"(3) Where this Division applies in relation to an item of Division 10AAA
property -
(a) no deduction is allowable to any taxpayer under Division 10AAA in
relation to any amount of expenditure (not being expenditure incurred
after the application period) by reason of which the item is Division
10AAA property for any year of income in which the whole or a part of
the application period occurs;
(b) the residual amount at any time after the application period (not
being a time after the commencement of a subsequent application
period) in relation to an amount of expenditure (not being expenditure
incurred after the application period) by reason of which the item is
Division 10AAA property is an amount equal to the amount that, but for
this paragraph, would be the residual amount at that time in relation
to the amount of expenditure under sub-section 159GF (4) reduced by an
amount equal to the total notional principal in relation to the amount
of expenditure in relation to the application period and any prior
application period; and
(c) for the purposes of the application of Division 10AAA in relation to
an amount of expenditure (not being expenditure incurred after the
application period) by reason of which the item is Division 10AAA
property for any year of income after the year of income in which this
Division ceases to apply - it shall be taken to be a requirement of
Division 10AAA that the deduction allowable under that Division in
respect of the amount of expenditure does not exceed the residual
amount in relation to the amount of expenditure as ascertained in
accordance with paragraph (b).
"(4) Where this Division applies in relation to an item of Division 10C or 10D
property -
(a) in relation to any year of income the whole of which is included in or
comprises the application period - no deduction shall be allowable to
any taxpayer under Division 10C or 10D in relation to any amount of
expenditure by reason of which the item is Division 10C or 10D
property for that year of income;
(b) in relation to any other year of income in which the whole or a part
of the application period occurs -
(i) in relation to any part (in this sub-section referred to as the
'pre-application part') of the year of income that precedes the
application period - there shall be allowable to the taxpayer
as a deduction under Division 10C or 10D, as the case requires,
in relation to an amount of expenditure by reason of which the
item is Division 10C or 10D property -
(A) where this Division has not previously applied in
relation to the amount of expenditure - the same
deduction (if any) as would, apart from this Division, be
allowable under that Division; and
(B) in any other case - the same deduction (if any) as would,
but for this application of this section, be allowable
under that Division;
(ii) in relation to the part of the year of income during which this
Division applies - no deduction shall be allowable to any
taxpayer under Division 10C or 10D in relation to any amount of
expenditure by reason of which the item is Division 10C or 10D
property; and
(iii) in relation to any part (in this sub-section referred to as the
'post-application part') of the year of income that occurs
after the application period (not being a part that occurs
after the commencement of a subsequent application period) -
(A) the residual amount at any time during the
postapplication part in relation to an amount of
expenditure (not being expenditure incurred after the
application period) by reason of which the item is
Division 10C or 10D property is an amount equal to the
amount that, but for this paragraph, would be the
residual amount at that time in relation to the amount of
expenditure under sub-section 159GF (5) reduced by an
amount equal to the total notional principal in relation
to the amount of expenditure in relation to the
application period and any prior application period;
(B) for the purposes of any application of section 124ZE or
124ZK in relation to an amount of expenditure (not being
expenditure incurred after the application period) by
reason of which the item is Division 10C or 10D property
at any time during the post-application part - the
residual capital expenditure, within the meaning of
Division 10C or 10D, as the case requires, in relation to
the amount of expenditure shall be taken to be an amount
equal to the residual amount at that time in relation to
the amount of expenditure as ascertained in accordance
with sub-sub-paragraph (A); and
(C) the deduction (if any) allowable to a taxpayer in
relation to an amount of expenditure (not being
expenditure incurred after the application period) by
reason of which the item is Division 10C or 10D property
under Division 10C or 10D, as the case requires, in
relation to the post-application part is the deduction
(if any) that would be allowable to the taxpayer under
that Division in respect of that period if this Division
(other than this sub-sub-paragraph) did not apply and if
it were a requirement of that Division that the deduction
did not exceed the residual amount in relation to the
amount of expenditure as ascertained in accordance with
sub-sub-paragraph (A);
(c) the residual amount at any time after the year of income in which the
application period ends (not being a time after the commencement of a
subsequent application period) in relation to an amount of expenditure
(not being expenditure incurred after the application period) by
reason of which the item is Division 10C or 10D property is the amount
that, but for this paragraph, would be the residual amount at that
time in relation to the amount of expenditure under sub-section 159GF
(5) reduced by an amount equal to the total notional principal in
relation to the amount of expenditure in relation to the application
period and any prior application period; and
(d) in the application of Division 10C or 10D in relation to any year of
income after the year of income in which this Division ceases to
apply, in relation to an amount of expenditure (not being expenditure
incurred after the application period) by reason of which the item is
Division 10C or 10D property it shall be taken to be a requirement of
Division 10C or 10D that the deduction (if any) allowable to a
taxpayer under that Division in respect of the amount of expenditure
does not exceed the residual amount in relation to the amount of
expenditure as ascertained in accordance with paragraph (c). Effect of
application of Division on assessability of arrangement payments
"159GK. (1) Where this Division applies in relation to an item of eligible
property in relation to which there is an assessable arrangement payment or
assessable arrangement payments in relation to a taxpayer in respect of the
application period, there shall be included in the assessable income of the
taxpayer so much only of any payment portion of each assessable arrangement
payment in relation to an eligible amount as does not exceed the interest
amount (if any) in relation to the payment portion.
"(2) For the purposes of sub-section (1), a reference to the interest amount
in relation to a payment portion of an assessable arrangement payment in
relation to an eligible amount is a reference to the amount (if any)
ascertained in accordance with the formula A(1+B)t - A, where -
A is the eligible principal in relation to the payment portion;
B is -
(a) where the sum of the payment portions of the likely arrangement
payments in relation to the eligible amount in respect of the likely
application period (including any notional final payment portion of an
arrangement payment) exceeds the residual amount, as ascertained at
the commencement of the application period, in relation to the
eligible amount - the fraction that is the effective annual interest
rate, ascertained at the commencement of the application period
referred to in sub-section (1), at which the sum of the present values
of the payment portions equals the residual amount; and
(b) in any other case - nil; and
t is the number of whole days in the arrangement payment period divided by
365.
"(3) For the purposes of sub-section (2) -
(a) a reference in that sub-section to the eligible principal in relation
to a payment portion of an arrangement payment in relation to an
eligible amount is a reference to -
(i) where the arrangement payment is the first arrangement payment
in the likely application period referred to in that
sub-section - the residual amount in relation to the eligible
amount, as ascertained at the commencement of the arrangement
payment period in relation to the arrangement payment; and
(ii) in the case of any other arrangement payment - an amount
ascertained in accordance with the formula A - B + C, where -
A is the eligible principal in relation to the payment portion of the
immediately preceding arrangement payment;
B is the amount of the payment portion of the immediately preceding
arrangement payment; and
C is the interest amount in relation to the payment portion of the immediately
preceding arrangement payment; and
(b) a reference in that sub-section to the arrangement payment period in
relation to an arrangement payment is a reference to -
(i) where the arrangement payment is the first arrangement payment
liable to be made in respect of the application period referred
to in that sub-section - the period commencing at the beginning
of the application period and ending at the time at which the
arrangement payment is liable to be made; and
(ii) in the case of any other arrangement payment - the period
commencing at the time at which the immediately preceding
arrangement payment was liable to be made and ending at the
time at which the arrangement payment concerned is liable to be
made.
"(4) Where the qualifying arrangement in relation to an item of eligible
property in relation to which this Division applies does not provide for the
sale or disposal of the item to a person who is a party to the qualifying
arrangement or to an associate, for the purposes of this section an
arrangement payment (not being an assessable arrangement payment) that
includes a payment portion (which portion is in this section referred to as a
'notional final payment portion') in relation to any eligible amount by reason
of which the item is an item of eligible property shall be taken to be liable
to be made at the end of the likely application period of an amount equal to -
(a) where the qualifying arrangement is a qualifying arrangement by reason
of the application of sub-paragraph 159GG (1) (a) (i) - so much of the
guaranteed residual value referred to in that subparagraph as is
attributable to the eligible amount; or
(b) in any other case - the amount that in the opinion of the Commissioner
was, or would have been, at the commencement of the application
period, the market value at the end of the application period of so
much of the item of eligible property as is attributable to the
eligible amount.
"(5) Where an amount of eligible capital expenditure is incurred in relation
to an item of eligible property at any time after this Division commences to
apply in relation to the item of eligible property, this section applies in
respect of that expenditure as if this Division had commenced to apply in
relation to the item of eligible property at the time at which the expenditure
was incurred.
"(6) In this section -
(a) 'likely application period', in relation to an application of this
Division, means the period that, having regard to the provisions of
the qualifying arrangement referred to in section 159GH and to any
other relevant circumstances, was, at the time at which that
application of this Division commenced, the likely length of the
application period; and
(b) 'likely arrangement payment', in relation to a likely application
period, means an arrangement payment that, having regard to the
provisions of the qualifying arrangement referred to in section 159GH
and to any other relevant circumstances, was, at the time at which the
likely application period commenced, likely to become liable to be
made during the likely application period. Special provision relating
to Division 10C or 10D property
"159GL. (1) Where -
(a) section 159GH applies in relation to an item of Division 10C or 10D
property; and
(b) at the time at which that section commenced to apply in relation to
the item of property, the sum of the present values of the net
Division 16D amounts, for each year of income during which the whole
or a part of the likely application period occurs, in relation to an
amount of expenditure by reason of which the property is Division 10C
or 10D property will be less than the sum of the present values, at
that time, of the net Division 10C or 10D amounts for each such year
of income in relation to the expenditure, sections 159GJ and 159GK do
not apply in relation to the amount of expenditure in relation to the
application period.
"(2) In sub-section (1) -
(a) a reference to the net Division 10C or 10D amounts for a year of
income in relation to an amount of expenditure by reason of which an
item of property is Division 10C or 10D property is a reference to the
sum of the payment portions of any assessable arrangement payments
likely to become liable to be made in relation to the amount of
expenditure in relation to that year of income reduced by the
deduction (if any) that, but for this Division, would be allowable
under Division 10C or 10D for the year of income in respect of the
amount of expenditure;
(b) a reference to the net Division 16D amounts for a year of income in
relation to an amount of expenditure by reason of which an item of
property is Division 10C or 10D property is a reference to the sum of
so much of the payment portions of any assessable arrangement payments
likely to become liable to be made during the year of income in
relation to the amount of expenditure as would, but for this section,
be included in the assessable income of any taxpayer of the year of
income under section 159GK; and
(c) 'likely application period' has the same meaning as in section 159GK.
Special provision where cost of plant, &c., is also eligible capital
expenditure
"159GM. Where -
(a) at a particular time (in this section referred to as the 'relevant
time') an item of eligible property is both eligible depreciation
property and eligible capital expenditure property; and
(b) the expenditure by reason of which the item of property is eligible
capital expenditure property is the amount that was the cost of the
item of property to the taxpayer who incurred the expenditure for the
purpose of sub-section 62 (1) or that would have been the cost to the
taxpayer for the purpose of that sub-section if that subsection
applied in relation to the item of property, for the purpose of
ascertaining the residual amount at the relevant time in relation to
the amount of expenditure -
(c) if a capital expenditure deduction would, apart from this Division, be
allowable to a taxpayer in respect of the amount of eligible capital
expenditure in relation to the year of income in which the relevant
time occurs - the item of eligible property shall be taken to be at
the relevant time an item of eligible capital expenditure property and
not an item of eligible depreciation property; and
(d) in any other case - the item of eligible property shall be taken to be
at the relevant time an item of eligible depreciation property and not
an item of eligible capital expenditure property. Effect of use of
property under qualifying arrangement for producing assessable income
"159GN. (1) Where -
(a) this Division applies in relation to an item of eligible property by
reason of the application of sub-paragraph 159GH (1) (b) (i) in
relation to the use by an exempt public body, or the control by an
exempt public body of the use, of the item of eligible property under
a qualifying arrangement;
(b) the exempt public body jointly uses, or jointly controls the use of,
the item of eligible property together with another person, or one or
more other persons, who are not exempt public bodies;
(c) the item of eligible property is or will be used during the
arrangement period in relation to the qualifying arrangement for
producing income of an amount that, having regard to the provisions of
the qualifying arrangement and any other relevant circumstances, is
not likely to be less than the total amount of the arrangement
payments under the qualifying arrangement in relation to the item of
eligible property; and
(d) the income, or a part of the income, referred to in paragraph (c) will
be included in the assessable income of one or more persons (which
person, or each of which persons, is in this sub-section referred to
as an 'assessable person'), the following provisions have effect:
(e) where all of the income referred to in paragraph (c) will be included
in the assessable income of one or more persons - sections 159GJ and
159GK do not apply in relation to the item of eligible property;
(f) where paragraph (e) does not apply -
(i) there is allowable to a taxpayer so much of any deduction that,
but for this section, would not, by reason of the application
of section 159GJ, BE allowable to the taxpayer in relation to
any eligible amount in relation to the item of eligible
property in respect of the application period as is ascertained
in accordance with the formula AB, where -
A is the amount of the deduction that, but for this section would not, by
reason of the application of section 159GJ, be allowable to the taxpayer; and
B is the assessable person fraction for the purposes of the application of
this Division concerned;
(ii) for the purposes of section 159GJ, a reference in that section
to the total notional principal in relation to an eligible
amount in relation to the item of eligible property in respect
of the application period shall be taken to be a reference to
the amount that, but for this sub-paragraph, would be the total
notional principal, as increased by the amount of any deduction
allowable under sub-paragraph (i) of this paragraph in relation
to the eligible amount in respect of the application period;
and
(iii) for the purposes of the application of section 159GK, any
eligible amount in relation to the item of property in respect
of the application period shall be ascertained in accordance
with the formula AB, where -
A is the amount that, but for this section, would be the eligible amount; and
B is the non-assessable person fraction in relation to the application of this
Division concerned.
"(2) For the purposes of sub-section (1) -
(a) a reference in that sub-section to the assessable person fraction in
relation to an application of this Division in relation to an item of
eligible property is a reference to the interest of all of the
assessable persons in the income referred to in paragraph (1) (c)
expressed as a fraction of the interests of all of the persons
entitled to that income; and
(b) a reference in that sub-section to the non-assessable person fraction
in relation to an application of this Division in relation to an item
of eligible property is a reference to the fraction ascertained by
subtracting the assessable person fraction in relation to that
application of this Division in relation to the item of eligible
property from the number 1.
"(3) Where -
(a) this Division applies in relation to an item of eligible property by
reason of the application of sub-paragraph 159GH (1) (b) (ii) in
relation to the use of the item of property outside Australia partly
for the purpose of producing exempt income; and
(b) that use is also partly for the purpose of producing assessable
income, the following provisions have effect:
(c) there is allowable to a taxpayer so much of any deduction that, but
for this section, would not, by reason of the application of section
159GJ, be allowable to the taxpayer in relation to any eligible amount
in relation to the item of eligible property in respect of the
application period as is ascertained in accordance with the formula
AB, where -
A is the amount of the deduction that, but for this section would not, by
reason of the application of section 159GJ, be allowable to the taxpayer; and
B is the assessable income fraction for the purposes of the application of
this Division concerned;
(d) for the purposes of section 159GJ, a reference in that section to the
total notional principal in relation to an eligible amount in relation
to the item of eligible property in respect of the application period
shall be taken to be a reference to the amount that, but for this
paragraph, would be the total notional principal, as increased by the
amount of any deduction allowable under paragraph (c) of this
sub-section in relation to the eligible amount in respect of the
application period; and
(e) for the puposes of the application of section 159GK, any eligible
amount in relation to the item of property in respect of the
application period shall be ascertained in accordance with the formula
AB, where -
A is the amount that, but for this section, would be the eligible amount; and
B is the exempt income fraction in relation to the application of this
Division concerned.
"(4) For the purposes of sub-section (3) -
(a) a reference in that sub-section to the assessable income fraction in
relation to an application of this Division in relation to an item of
eligible property is a reference to the amount of the assessable
income referred to in paragraph (3) (b) expressed as a fraction of the
sum of that assessable income and the exempt income referred to in
paragraph (3) (a); and
(b) a reference in that sub-section to the exempt income fraction in
relation to an application of this Division in relation to an item of
eligible property is a reference to the fraction ascertained by
subtracting the assessable income fraction in relation to that
application of this Division in relation to the item of eligible
property from the number 1. Special provisions relating to
partnerships
"159GO. (1) Where -
(a) the individual interest of a taxpayer in the net income of a
partnership has been or is to be included in the assessable income of
the taxpayer of a year of income (in this sub-section referred to as
the 'relevant year of income'), or the individual interest of a
taxpayer in a partnership loss has been allowed or is allowable as a
deduction from the assessable income of the taxpayer of a year of
income (in this sub-section also referred to as the 'relevant year of
income');
(b) either a deduction or an arrangement payment, or both, were taken into
account in calculating that net income or partnership loss;
(c) the deduction or a part of the deduction (which deduction or part of
the deduction, as the case may be, is referred to in this subsection
as the 'relevant deduction'), or the arrangement payment or a part of
the arrangement payment (which arrangement payment or part of the
arrangement payment, as the case may be, is referred to in this
sub-section as the 'relevant arrangement payment'), would not have
been taken into account for the purpose of that calculation if this
Division applied in relation to the partnership in relation to
particular property that is arrangement property in relation to a
qualifying arrangement;
(d) this Division does not apply in relation to the partnership in
relation to the property by reason only that the qualifying
arrangement was entered into before the time (in this sub-section
referred to as the 'earliest application time') referred to in
whichever sub-paragraph of paragraph 159GH (1) (b) would be applicable
if this Division applied as mentioned in paragraph (c); and
(e) the taxpayer became a partner in the partnership under a contract
entered into by the taxpayer after the earliest application time, the
following provisions have effect:
(f) there shall be included in the assessable income of the taxpayer of
the relevant year of income an amount that bears to the amount of the
relevant deduction the same proportion as the individual interest of
the taxpayer in that net income bears to that net income or, as the
case requires, as the individual interest of the taxpayer in that
partnership loss bears to that partnership loss;
(g) there shall be allowable as a deduction in the assessment of the
taxpayer of the relevant year of income an amount that bears to the
amount of the relevant arrangement payment the same proportion as the
individual interest of the taxpayer in that net income bears to that
net income or, as the case requires, as the individual interest of the
taxpayer in that partnership loss bears to that partnership loss.
"(2) Where -
(a) the individual interest of a taxpayer in the net income of a
partnership has been or is to be included in the assessable income of
the taxpayer of a year of income (in this sub-section referred to as
the 'relevant year of income'), or the individual interest of a
taxpayer in a partnership loss has been allowed or is allowable as a
deduction from the assessable income of the taxpayer of a year of
income (in this sub-section also referred to as the 'relevant year of
income');
(b) either a deduction or an arrangement payment, or both, were taken into
account in calculating that net income or partnership loss;
(c) the deduction or a part of the deduction (which deduction or part of
the deduction, as the case may be, is referred to in this sub-section
as the 'relevant deduction'), or the arrangement payment or a part of
the arrangement payment (which arrangement payment or part of the
arrangement payment, as the case may be, is referred to in this
sub-section as the 'relevant arrangement payment'), would not have
been taken into account for the purpose of that calculation if this
Division applied in relation to the partnership in relation to
particular property that is arrangement property in relation to a
qualifying arrangement;
(d) this Division does not apply in relation to the partnership in
relation to the property by reason only that the qualifying
arrangement was entered into before the time (in this sub-section
referred to as the 'earliest application time') referred to in
whichever sub-paragraph of paragraph 159GH (1) (b) would be applicable
if this Division applied as mentioned in paragraph (c);
(e) the taxpayer became a partner in the partnership under a contract
entered into by the taxpayer before the earliest application time;
(f) after the earliest application time, the taxpayer made or agreed to
make a contribution or contributions (which contribution is or
contributions are in this sub-section referred to as the 'additional
contribution') to the capital of the partnership in addition to any
contribution or contributions to the capital of the partnership that,
under a contract or contracts entered into at or before that time, the
taxpayer had made or agreed to make; and
(g) by reason of making or agreeing to make the additional contribution,
the individual interest of the taxpayer in that net income or
partnership loss, being that individual interest expressed as a
fraction of the aggregate of the individual interests of the partners
in that net income or partnership loss, is greater than it would
otherwise have been, the following provisions have effect:
(h) where a deduction was taken into account in calculating that net
income or partnership loss - there shall be included in the assessable
income of the taxpayer of the relevant year of income an amount
ascertained in accordance with the formula A(B - C);
(j) where an arrangement payment was taken into account in calculating
that net income or partnership loss - there shall be allowable as a
deduction in the assessment of the taxpayer of the relevant year of
income an amount ascertained in accordance with the formula A(B - C),
where -
A is the amount of the relevant deduction or of the relevant arrangement
payment, as the case requires;
B is the individual interest of the taxpayer in that net income or partnership
loss, being that individual interest expressed as a fraction of the aggregate
of the individual interests of the partners in that net income or partnership
loss; and
C is the fraction that would be B if that fraction were ascertained on the
basis of the individual interests of the partners immediately before the
earliest application time and the net income or partnership loss at that time
were equal to the net income or partnership loss of the relevant year of
income.".
AustLII: Copyright Policy
| Disclaimers
| Privacy Policy
| Feedback