Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 250.160

General rule

  (1)   Subject to subsections   (3) and (4), a * financial benefit is subject to deemed loan treatment if:

  (a)   the financial benefit:

  (i)   has been; or

  (ii)   will, assuming normal operating conditions, be; or

  (iii)   can, assuming normal operating conditions, reasonably be expected to be;

    provided to you (or a * connected entity); and

  (b)   the financial benefit has been, will be or can reasonably be expected to be * provided directly or indirectly by a * member of the tax preferred sector in relation to the * tax preferred use of the asset; and

  (c)   the right to receive, or the obligation to provide, the financial benefit is * cash settlable; and

  (d)   the financial benefit has not been, will not be or can be expected not to be provided by one of your connected entities.

Note:   Paragraph   (d) stops a financial benefit passing between you and any of your connected entities from being counted twice.

End value also taken to be financial benefit subject to deemed loan treatment

  (2)   The relevant percentage of a reasonable estimate of the * end value of the asset is also taken to be a * financial benefit that is subject to deemed loan treatment if:

  (a)   the asset is not to be purchased or acquired by, or transferred to, a * member of the tax preferred sector at the end of the * arrangement period under a legally enforceable * arrangement; or

  (b)   the asset:

  (i)   is, or is to become, a * privatised asset; or

  (ii)   would be, or would become, a privatised asset if it were a * depreciating asset; or

  (iii)   would be a privatised asset if the asset were a depreciating asset and paragraphs 58 - 5(2)(a) and 58 - 5(4)(a) were not limited to acquisitions of depreciating assets that occurred on or after 1   July 2001.

The relevant percentage is the * disallowed capital allowance percentage if section   250 - 150 applies. Otherwise it is 100%.

Note:   See section   250 - 180 for how to work out the end value of the asset.

Financial benefits only subject to deemed loan treatment to the extent to which they represent a return on investment

  (3)   The * financial benefit is subject to deemed loan treatment only to the extent to which it reasonably represents a return of, or on, an investment in the asset (as distinct, for example, from representing consideration for the provision of services or the recovery of production costs), having regard to:

  (a)   the * market value of the asset; and

  (b)   the discount rate applicable under subsection   250 - 105(2); and

  (c)   your costs in relation to funding your interest in the asset; and

  (d)   any other relevant matter.

The regulations may provide rules to be applied in determining the extent to which a financial benefit reasonably represents a return of or on an investment in the asset.

Only financial benefits provided after Division starts applying to you and the asset

  (4)   If the * tax preferred use of the asset starts before this Division starts applying to you and the asset, only * financial benefits provided after this Division starts applying to you and the asset are subject to deemed loan treatment .