Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) In this section:
"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.
"associate" has the same meaning in relation to a person as that expression has in relation to a person in section 318.
"construction" includes manufacture.
"control" means effectively control.
"goods" includes whatever is capable of being owned or used.
"hire-purchase agreement" means a hire purchase agreement to which Division 240 of the Income Tax Assessment Act 1997 applies.
"lease" , in relation to property, includes:
(a) any arrangement under which a right to use the property is granted by the owner to another person; and
(b) any arrangement under which a right to use the property, being a right derived directly or indirectly from a right referred to in paragraph (a), is granted by a person to another person;
but does not include a hire - purchase agreement.
"owner" , in relation to property, includes a person who has taken, and holds, the property on hire under a hire - purchase agreement.
"person" includes a person in the capacity of a trustee.
"prescribed time" means one o'clock in the afternoon, by standard time in the Australian Capital Territory, on 24 June 1982.
Note: This section applies to deductions under Division 40 (Capital allowances) and Division 43 (Capital works) of the Income Tax Assessment Act 1997 as if you were the owner of an asset you hold (under that Division) instead of any other person: see section 40 - 135 of that Act.
(1A) This section does not apply to property that is put to a tax preferred use (within the meaning of the Income Tax Assessment Act 1997 ) if the tax preferred use:
(a) starts on or after 1 July 2007; and
(b) does not occur under a legally enforceable arrangement entered into before 1 July 2007.
(1B) This section does not apply to property that is put to a tax preferred use (within the meaning of the Income Tax Assessment Act 1997 ) if:
(a) the tax preferred use starts on or after 1 July 2007; and
(b) the tax preferred use occurs under a legally enforceable arrangement that was entered into before 1 July 2007; and
(c) an election is made under item 71 of Schedule 1 to the Tax Laws Amendment (2007 Measures No. 5) Act 2007 to have subitem 71(2) of that Schedule apply to the property.
(1C) This section does not apply to property on or after 1 July 2007 if:
(a) Division 16D applied to the property immediately before 1 July 2007; or
(b) this section did not apply to the property immediately before 1 July 2007 and Division 16D would apply to the property on or after 1 July 2007 but for subsection 159GH(2).
For the purposes of applying paragraph (b), disregard the operation of section 159GL.
(1D) Subparagraph (4)(a)(iii) and sub - subparagraph (4)(b)(ii)(D) do not apply to property acquired by a taxpayer if:
(a) the property is acquired by the taxpayer on or after 1 July 2007; and
(b) the property is not acquired under a legally enforceable arrangement entered into before 1 July 2007.
(2) In this section, a reference to the acquisition of property by a person is a reference to:
(a) the person becoming the owner of the property; or
(b) the construction of the property for the person by another person or other persons on premises of the first - mentioned person.
(3) In this section, a reference to property being held for use includes a reference to property that is installed ready for use and held in reserve.
(3B) For the purpose of this section, disregard an acquisition or disposal of property by way of the transfer of the property for the provision or redemption of a security. Consequently this section applies as if the person who was the owner of the property before the transfer continues to be the owner after the transfer.
(4) Subject to subsections (1A), (1B), (1C), (1D) and (8), this section applies, in relation to a taxpayer, to property acquired or constructed by the taxpayer, being property acquired by the taxpayer under a contract entered into after the prescribed time or property constructed by the taxpayer, construction having commenced after that time, if:
(a) at a time when the property is owned by the taxpayer, a person (which person is in this section referred to as the end - user ) holds rights as lessee under a lease of the property, and:
(i) in a case where the end - user is not a resident of Australia--while the lease is in force, the property is, or is to be, used by a person other than the taxpayer wholly or principally outside Australia;
(ii) while the lease is in force, the property is, or is to be, used by a person other than the taxpayer otherwise than wholly and exclusively for the purpose of producing assessable income; or
(iii) in a case where the property was acquired by the taxpayer--the property was, prior to its acquisition by the taxpayer, owned, and used or held for use, by the end - user; or
(b) in a case to which paragraph (a) does not apply:
(i) at a time when the property is owned by the taxpayer, the property is, or is to be, used (whether or not by the taxpayer) wholly or partly in or in connection with the production, supply, carriage, transmission or delivery of goods or the provision of services; and
(ii) a person other than the taxpayer (which person is in this section also referred to as the end - user ) controls, will control, or is or will be able to control, directly or indirectly, that use of the property, and:
(A) in a case where the end - user is not a resident of Australia--that use of the property takes place, or is to take place, wholly or principally outside Australia;
(B) in a case where some or all of the goods are, or are to be, produced for the end - user or supplied, carried, transmitted or delivered to or for the end - user, or some or all of the services are, or are to be, provided to or for the end - user--any of those goods or services are, or are to be, used by the end - user otherwise than wholly and exclusively for the purpose of producing assessable income;
(C) in relation to the production, supply, carriage, transmission or delivery of goods, or the provision of services, as mentioned in subparagraph (i), the end - user derives, or is to derive, no income or income that is wholly or partly exempt from income tax; or
(D) in a case where the property was acquired by the taxpayer--the property was, prior to its acquisition by the taxpayer, owned, and used or held for use, by the end - user.
(5) In subparagraph (4)(a)(iii) and sub - subparagraph (4)(b)(ii)(D), a reference to the end - user is a reference to the end - user, any of the end - users (where there are 2 or more end - users), any associate of the end - user or of any of those end - users, or any 2 or more such persons.
(6) For the purposes of subsection (4), property shall be taken not to have been, prior to its acquisition by the taxpayer, owned, and used or held for use, by a person if:
(a) the property was first used or held for use by the person at a time within 6 months before the acquisition of the property by the taxpayer; and
(b) at that time there was in existence an arrangement that the property would be sold to another person and leased by that person to the first - mentioned person.
(7) Where:
(a) the end - user consists of all or any of the partners in a partnership; and
(b) a condition of paragraph (4)(a) or (b), as the case may be, is satisfied in relation to any of the partners in the partnership;
that condition shall be taken to be satisfied in relation to all the partners in the partnership.
(8) This section does not apply to property, in relation to a taxpayer, unless the whole or a predominant part of the cost of the acquisition or construction, as the case may be, of the property by the taxpayer is financed directly or indirectly by a debt or debts (which debt is, or debts are, referred to in this subsection as the non - recourse debt ) and the rights of the creditor or creditors as against the taxpayer in the event of default in the repayment of principal or payment of interest:
(a) are limited wholly or predominantly to any or all of the following:
(i) rights (including the right to moneys payable) in relation to any or all of the following:
(A) the property or the use of the property;
(B) goods produced, supplied, carried, transmitted or delivered, or services provided, by means of the property;
(C) the loss or disposal of the whole or a part of the property or of the taxpayer's interest in the property;
(ii) rights in respect of a mortgage or other security over the property;
(iii) rights arising out of any arrangement relating to the financial obligations of the end - user of the property towards the taxpayer, being financial obligations in relation to the property;
(b) are in the opinion of the Commissioner capable of being so limited, having regard to either or both of the following:
(i) the assets of the taxpayer;
(ii) any arrangement to which the taxpayer is a party; or
(c) where paragraphs (a) and (b) do not apply--are limited by reason that not all of the assets of the taxpayer (not being assets that are security for debts of the taxpayer other than the non - recourse debt) would be available for the purpose of the discharge of the whole of the non - recourse debt (including the payment of interest) in the event of any action or actions by the creditor or creditors against the taxpayer arising out of that debt.
(9) Where:
(a) property has been financed by a debt or debts as mentioned in subsection (8); and
(b) the rights of the creditor or creditors as against the taxpayer are, or are capable of being, limited as mentioned in that subsection;
the Commissioner may treat those rights as not being, or capable of being, so limited if the Commissioner is of the opinion, having regard to the circumstances in which the debt was, or debts were, incurred and any other matters that the Commissioner thinks relevant, that it would be reasonable to do so.
(10) Subject to subsections (11), (12), (13) and (15), where this section has applied to property, in relation to a taxpayer, at any time, the taxpayer shall be deemed not to have occupied or used the property, or held the property for use, at that time, for the purpose of producing assessable income or in carrying on a business for that purpose.
(11) Where this section has applied to property, in relation to a taxpayer, at any time during a year of income by reason of subparagraph (4)(a)(ii) or sub - subparagraph (4)(b)(ii)(B), and for any part of that time the end - user held, occupied or used the property referred to in that subparagraph, or held it for use, or used any goods or services referred to in that sub - subparagraph, as the case may be, partly for the purpose of producing assessable income, the taxpayer shall be deemed, for the whole of the time during the year of income when this section applied to the property, to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose, to the extent that the Commissioner considers appropriate.
(12) Where this section has applied to property, in relation to a taxpayer, at any time during a year of income by reason of sub - subparagraph (4)(b)(ii)(C), and for any part of that time the end - user derived assessable income in relation to the production, supply, carriage, transmission or delivery of goods, or the provision of services, as mentioned in subparagraph (4)(b)(i), the taxpayer shall be deemed, for the whole of the time during the year of income when this section applied to the property, to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose, to the extent that the Commissioner considers appropriate.
(13) Where:
(a) this section has applied to property, in relation to a taxpayer, at any time during a year of income by reason of subparagraph (4)(a)(ii) or sub - subparagraph (4)(b)(ii)(B) or (C);
(b) the end - user referred to in that subparagraph or sub - subparagraph, as the case may be, consisted of all or any of the partners in a partnership; and
(c) for any part of that time one or more of the partners in the partnership was a person in respect of whom, but for the operation of subsection (7), that subparagraph or sub - subparagraph, as the case may be, would not have applied;
the taxpayer shall be deemed, for the whole of the time during the year of income when this section applied to the property, to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose, to the extent that the Commissioner considers appropriate.
(14) In considering, for the purposes of subsection (13), the extent to which the taxpayer shall be deemed to have held, occupied or used property, or held if for use, for the purpose of producing assessable income, or in carrying on a business for that purpose, the Commissioner shall have regard:
(a) to the interest or interests of the partner or partners referred to in paragraph (13)(c) in the net income, or the partnership loss, of the partnership of the year of income corresponding to the year of income referred to in paragraph (13)(a);
(b) the extent to which, for any part of the time referred to in paragraph (13)(a), a partner or partners other than the partner or partners referred to in paragraph (13)(c) held, occupied or used the property, or held it for use, or used the goods or services referred to in sub - subparagraph (4)(b)(ii)(B), as the case may be, for the purpose of producing assessable income; and
(c) the extent to which, for any part of the time referred to in paragraph (13)(a), a partner or partners other than the partner or partners referred to in paragraph (13)(c) derived assessable income in relation to the production, supply, carriage, transmission or delivery of goods, or the provision of services, as mentioned in subparagraph (4)(b)(i).
(15) Notwithstanding anything contained in subsections (10), (11) and (13), at any time when this section applies to property by reason of subparagraph (4)(a)(ii), the property shall be deemed not to be held, occupied or used, or held for use, by the taxpayer for the purpose of producing assessable income, or in carrying on a business for that purpose, if, at that time:
(a) 2 or more end - users hold rights as lessees under the lease of the property;
(b) one or more of the end - users (which end - user is, or end - users are, referred to in this subsection as the exempt end - user ) is a company, or are companies, the income of which is ordinarily exempt from income tax;
(c) the property is, or is to be, used wholly or principally in or in connection with the conduct of operations or transactions of a kind that the exempt end - user ordinarily engages in;
(d) the exempt end - user controls, will control, or is or will be able to control, directly or indirectly, that use of the property; and
(e) in relation to those operations or transactions, the exempt end - user derives, or is to derive, no income or income that is exempt from income tax.
(16) Where a taxpayer has incurred expenditure for repairs to property to which this section applies or has applied in relation to the taxpayer and, but for this section, a deduction would be allowable under section 25 - 10 (Repairs) of the Income Tax Assessment Act 1997 in respect of that expenditure, so much of the expenditure as the Commissioner considers appropriate shall be deemed not to be allowable, having regard to:
(a) the period for which the taxpayer owned the property before the repairs were commenced and any part of that period during which this section applies or applied to the property in relation to the taxpayer; and
(b) in a case to which subsection (11), (12) or (13) of this section applies or applied--the extent to which, for the time during the part of the period referred to in paragraph (a), the taxpayer was deemed to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose.
(17) Where a taxpayer has incurred expenditure in borrowing money to finance the acquisition or construction of property to which this section applies or has applied in relation to the taxpayer and a deduction has been allowed, or would but for this section be allowable, under section 25 - 25 (Borrowing expenses) of the Income Tax Assessment Act 1997 in relation to that expenditure, so much of the deduction as the Commissioner considers appropriate shall be deemed not to have been, or not to be, allowable, as the case may be, having regard to:
(a) the period for which the money was borrowed or, by the operation of subsection 25 - 25(6) of that Act, is deemed to have been borrowed and any part of that period during which this section applies, applied or, in the opinion of the Commissioner, will apply to the property; and
(b) in a case to which subsection (11), (12), or (13) of this section applies or applied--the extent to which, for the time during the part of the period referred to in paragraph (a), the taxpayer is, or in the opinion of the Commissioner will be, deemed to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose.
(18) Where a taxpayer has incurred expenditure for the preparation, registration and stamping of a lease, or of an assignment or surrender of a lease, of property to which this section applies or has applied in relation to the taxpayer and a deduction has been allowed, or would but for this section be allowable, under section 25 - 20 (Lease document expenses) of the Income Tax Assessment Act 1997 in respect of that expenditure, so much of the deduction as the Commissioner considers appropriate shall be deemed not to have been, or not to be, allowable, as the case may be, having regard to:
(a) the period of the lease and any part of that period during which this section applies, applied or, in the opinion of the Commissioner, will apply to the property; and
(b) in a case to which subsection (11), (12) or (13) of this section applies or applied--the extent to which, for the time during the part of the period mentioned in paragraph (a), the taxpayer is, or in the opinion of the Commissioner will be, deemed to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose.
(19) 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 subsection 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 subsection also referred to as the relevant year of income );
(b) a deduction was 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 ) would not have been taken into account for the purpose of that calculation if this section applied in relation to particular property acquired or constructed by the partnership;
(d) this section does not apply in relation to the property by reason only that the property was acquired by the partnership under a contract entered into at or before the prescribed time or was constructed by the partnership, construction having commenced at or before that time; and
(e) the taxpayer became a partner in the partnership under a contract entered into by the taxpayer after the prescribed time;
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.
(20) 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 subsection 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 subsection also referred to as the relevant year of income );
(b) a deduction was 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 ) would not have been taken into account for the purpose of that calculation if this section applied in relation to particular property acquired or constructed by the partnership;
(d) this section does not apply in relation to the property by reason only that the property was acquired by the partnership under a contract entered into at or before the prescribed time or was constructed by the partnership, construction having commenced at or before that time;
(e) the taxpayer became a partner in the partnership under a contract entered into by the taxpayer before the prescribed time; and
(f) after the prescribed time, the taxpayer made or agreed to make a contribution or contributions (which contribution is or contributions are in this subsection 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;
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) , where:
"A" is the amount of the relevant deduction.
"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 another partner, and not the taxpayer, had made or agreed to make the additional contribution.
(21) For the purposes of determining if this section applies to property, the income of a prescribed excluded STB (within the meaning of Division 1AB) is taken to be exempt.