TAXATION LAWS AMENDMENT ACT (NO. 4) 1997 NO. 174 OF 1997

Commonwealth Numbered Acts

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TAXATION LAWS AMENDMENT ACT (NO. 4) 1997 NO. 174 OF 1997 - SCHEDULE 9--Leases

of luxury cars Part 1--Amendment of the Income Tax Assessment Act 1997

1 Section 10-5 (table)

Insert in its appropriate alphabetical position determined on a letter-by-letter basis:

leases of luxury cars

accrual amounts Schedule 2E (42A-35(1))

adjustment amounts (lessee) Schedule 2E (42A-70(2))

adjustment amounts (lessor) Schedule 2E (42A-65(2))

profit on actual sale Schedule 2E (42A-35(3))

profit on notional sale Schedule 2E (42A-35(2))

2 Section 12-5 (table)

Insert in its appropriate alphabetical position determined on a letter-by-letter basis:

leases of luxury cars

accrual amounts Schedule 2E (42A-50)

adjustment amounts (lessee) Schedule 2E (42A-70(1))

adjustment amounts (lessor) Schedule 2E (42A-65(3))

lease payments not deductible Schedule 2E (42A-55)

payments to acquire car not deductible Schedule 2E (42A-85
and 42A-100)

3 After subsection 25-35(4)

Insert:

Limit on deductions for bad debts under leases of luxury cars

(4A) There is a limit to how much you can deduct under this section for debts you write off that relate to lease payments that have become or will become liable to be made under a lease of a *car to which Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 applies.

(4B) The most you can deduct for an income year is:

* the finance charge for the notional loan you are taken to have made to the lessee;

reduced by:

* each amount that you have deducted, or can deduct, for an earlier income year under this section (or section 63 of the Income Tax Assessment Act 1936 ) for debts relating to lease payments that have become or will become liable to be made under the lease.
(4C) An expression (except car ) has the same meaning in subsection (4A) or (4B) as in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 .
4 Subsection 28-12(1) (note)
Renumber the note as note 1.
5 At the end of subsection 28-12(1)
Add:

Note 2: In certain circumstances the lessee of a luxury car is taken to be its owner (see subsection 42A-15(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 ).
6 At the end of subsection 28-45(1)
Add:

Note: The cost to a lessee of a luxury car to which Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 applies is to be worked out under section 42A-20 in that Division.
7 At the end of subsection 28-90(6)
Add:

Note: In certain circumstances the lessee of a luxury car is taken to be its owner (see subsection 42A-15(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 ).
8 At the end of section 41-65
Add:
(4) If a transaction relating to a *luxury car to which Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 applies has been entered into between parties who were not dealing with each other at arm's length, there are special rules applying under section 42A-20 in that Division.
9 Section 42-15 (note)
Renumber the note as note 1.
10 At the end of section 42-15
Add:

Note 2: In certain circumstances the lessee of a luxury car is taken to be its owner (see subsection 42A-15(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 ).
11 Subsection 42-30(3) (table, item 1, after paragraph (a))
Insert:

(aa) you are taken to have ceased to be its owner as mentioned in subsection 42A-15(3) or 42A-80(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 ; or
(ab) you are taken to have disposed of it as mentioned in subsection 42A-15(1), 42A-90(2) or 42A-105(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 .
12 At the end of section 42-55
Add:
Leases of luxury cars
(7) Schedule 2E to the Income Tax Assessment Act 1936 has special rules in respect of the depreciation of certain leased *luxury cars.
13 Section 42-65 (table, after item 9)
Insert:

9A

that is a *luxury car of which you are taken to be the owner under subsection 42A-15(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

the amount worked out under subsection 42A-20(1) or (2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 or subsection 42-90(2) of this Act

car discount (42-70)
car limit (42-80)
double deduction (42-85)
prev. dep. limit (42-90)

9B

that is a *luxury car that you are taken to acquire as mentioned in subsection 42A-90(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

the amount applying under subsection 42A-90(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

car discount (42-70)
car limit (42-80)
double deduction (42-85)
prev. dep. limit (42-90)

9C

that is a *luxury car that you acquire as mentioned in subsection 42A-90(4) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

the amount applying under subsection 42A-90(4) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 or subsection 42-90(2) of this Act

9D

that is a *luxury car that you are taken to acquire as mentioned in subsection 42A-105(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

the amount worked out under subsection 42A-105(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

9E

that is a *luxury car that you acquire as mentioned in subsection 42A-105(4) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

the amount worked out under subsection 42A-105(4) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 or subsection 42-90(2) of this Act

14 Paragraph 42-70(1)(c)
After "section 42-345", insert "or under section 57AF of the Income Tax Assessment Act 1936 ".
15 At the end of section 42-75
Add:

Note: In the case of a non-arm's length transaction in respect of a luxury leased car, special rules apply under section 42A-20 in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 .
16 Subsection 42-80(1)
After "car depreciation limit", insert "or the limit in section 57AF of the Income Tax Assessment Act 1936 ".
17 Paragraph 42-90(2)(b)
After "42-G", insert "or under subsection 59(2) of the Income Tax Assessment Act 1936 ".
18 At the end of subsection 42-90(2)
Add:

; and (d) any balancing adjustment that would have been included in that entity's assessable income for the plant if balancing adjustment relief under section 58 or any of subsections 59(2A) to (2D) had not applied.
19 Section 42-205 (table, after item 5)
Insert:

5A

that is a *luxury car that you are taken to have disposed of under subsection 42A-15(1) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

the amount worked out under section 42A-20 in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

car limit (42-215)

5B

that is a *luxury car of which you are taken to have ceased to be the owner under subsection 42A-15(3) or 42A-80(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

the amount worked out under section 42A-20 in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

car limit (42-215)

5C

that is a *luxury car that you are taken to have disposed of under subsection 42A-90(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

the amount worked out under subsection 42A-90(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

car limit (42-215)

5D

that is a *luxury car that you are taken to have disposed of under subsection 42A-105(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

the amount worked out under subsection 42A-105(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936

car limit (42-215)

20 Section 42-215
After "section 42-80", insert "or by applying section 57AF of the Income Tax Assessment Act 1936 ".
21 After subsection 42-235(1)
Insert:

Note: In certain circumstances the lessee of a luxury car is taken to be its owner (see subsection 42A-15(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 ).
22 At the end of section 42-250
Add:

Note: In certain circumstances the lessee of a luxury car is taken to be its owner (see subsection 42A-15(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 ).
23 Subsection 995- 1(1)
Insert:
luxury car has the same meaning as in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 .

Part 2--Amendment of the Income Tax Assessment Act 1936
24 Subsection 42A-10(3)
After "this Act", insert "(including, to avoid doubt, the Income Tax Assessment Act 1997 )".
25 Section 42A-40
Repeal the section, substitute:
SECT 42A-40 Treatment of lease payments (1) The lease payments that the lessor receives, or is entitled to receive, under the lease:

(a) are not to be included in the lessor's assessable income of any year of income; but
(b) are not taken to be exempt income of the lessor.
(2) However, those lease payments are taken into account in calculating accrual amounts that are included in the lessor's assessable income under section 42A-35.
(3) A loss or outgoing incurred by the lessor in deriving any such lease payments is not taken to be a loss or outgoing incurred by the lessor in relation to gaining or producing exempt income.
26 Subparagraph 42A-90(4)(a)(ii)
After "subsection 59(2)", insert "or under Subdivision 42F or 42G of the Income Tax Assessment Act 1997 ".
27 Subparagraph 42A-105(4)(a)(ii)
After "subsection 59(2)", insert "or under Subdivision 42F or 42G of the Income Tax Assessment Act 1997 ".
28 At the end of section 42A-120
Add "or section 42-80 of the Income Tax Assessment Act 1997 ".
29 Section 42A-130 (at the end of the definition of other payments )
Add ", less any of those amounts that are refunded by the lessor to the lessee".

Part 3--Application of amendments
30 Application
(1) The amendments made by Part 1 of this Schedule apply to assessments for the 1997-98 income year and later income years.
(2) The amendments made by Part 2 of this Schedule (apart from item 25) apply to assessments for the 1997-98 year of income and later years of income.
(3) The amendment made by item 25 applies in relation to leases to which Schedule 2E to the Income Tax Assessment Act 1936 applies.

[ Minister's second reading speech made in
House of Representatives on 26 June 1997
Senate on 1 October 1997]

(91/97)

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9A	that is a luxury car of which you are taken to be the owner under subsection 42A-15(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936*	the amount worked out under subsection 42A-20(1) or (2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 or subsection 42-90(2) of this Act	car discount (42-70) car limit (42-80) double deduction (42-85) prev. dep. limit (42-90)
9B	that is a luxury car that you are taken to acquire as mentioned in subsection 42A-90(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936*	the amount applying under subsection 42A-90(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936	car discount (42-70) car limit (42-80) double deduction (42-85) prev. dep. limit (42-90)
9C	that is a luxury car that you acquire as mentioned in subsection 42A-90(4) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936*	the amount applying under subsection 42A-90(4) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 or subsection 42-90(2) of this Act
9D	that is a luxury car that you are taken to acquire as mentioned in subsection 42A-105(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936*	the amount worked out under subsection 42A-105(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936
9E	that is a luxury car that you acquire as mentioned in subsection 42A-105(4) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936*	the amount worked out under subsection 42A-105(4) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936 or subsection 42-90(2) of this Act

5A	that is a luxury car that you are taken to have disposed of under subsection 42A-15(1) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936*	the amount worked out under section 42A-20 in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936	car limit (42-215)
5B	that is a luxury car of which you are taken to have ceased to be the owner under subsection 42A-15(3) or 42A-80(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936*	the amount worked out under section 42A-20 in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936	car limit (42-215)
5C	that is a luxury car that you are taken to have disposed of under subsection 42A-90(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936*	the amount worked out under subsection 42A-90(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936	car limit (42-215)
5D	that is a luxury car that you are taken to have disposed of under subsection 42A-105(2) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936*	the amount worked out under subsection 42A-105(3) in Division 42A of Schedule 2E to the Income Tax Assessment Act 1936	car limit (42-215)