INCOME TAX ASSESSMENT ACT 1997 - SECT 45.5 Disposal of leased plant or lease

INCOME TAX ASSESSMENT ACT 1997 - SECT 45.5

  (1)   An amount is included in your assessable income if:

  (a)   you have deducted or can deduct an amount for the decline in value of * plant; and

  (b)   for most of the time when you * held the plant, you leased it to another entity; and

  (c)   all or part of the lease period occurred on or after 22   February 1999; and

  (d)   on or after that day, you dispose of the plant or an interest in the plant, and that disposal constitutes a * balancing adjustment event; and

  (e)   the sum of the following amounts is more than the plant's * written down value or of that part of it that is attributable to that interest:

  (i)   the money you receive or are entitled to receive for the disposal;

  (ii)   the amount of any reduction in a liability of yours as a result of the disposal;

  (iii)   the * market value of any other benefit you receive or are entitled to receive as a result of the disposal.

  (2)   The amount included is the excess referred to in paragraph   (1)(e). It is included for the income year in which the disposal occurred.

Example:   Sean owns a leased asset. The asset has a written down value of $20,000. He has an outstanding loan for the asset of $60,000.

  Sean sells a 50% interest in the asset to Leprechaun Pty Ltd for $40,000. Leprechaun agrees to take over 50% of Sean's obligation to make debt service payments.

  The excess referred to in paragraph   45 - 5(1)(e) is:

  That amount is included in Sean's assessable income.

  This amount would be reduced if part of it is included in Sean's assessable income under another provision (see subsection   45 - 5(5)).

Note 1:   There is a reduction of the amount included for certain plant acquired before 21   September 1999: see section   45 - 30.

Note 2:   There is a limit on the amount included for plant for which there is a CGT exemption: see section   45 - 35.

  (3)   An amount is also included in your assessable income if:

  (a)   you have deducted or can deduct an amount for the * plant's decline in value; and

  (b)   for most of the time when you * held the plant, you leased it to another entity; and

  (c)   all or part of the lease period occurred on or after 22   February 1999; and

  (d)   on or after that day, you dispose of:

  (i)   your interest in the plant, or part of it; or

  (ii)   a right under, or an interest in, the lease;

    and that disposal does not constitute a * balancing adjustment event.

  (4)   The amount included is the sum of the following amounts:

  (a)   the money you receive or are entitled to receive for the disposal;

  (b)   the amount of any reduction in a liability of yours as a result of the disposal;

  (c)   the * market value of any other benefit you receive or are entitled to receive as a result of the disposal;

It is included for the income year in which the disposal occurred.

  (5)   However, an amount is not included in your assessable income under this section to the extent that:

  (a)   it is included in that assessable income under a provision of this Act outside this Division; or

  (b)   you apply it under section   40 - 365 (about offsetting balancing adjustments); or

  (c)   roll - over relief is available for the disposal under section   40 - 340.

Note:   There are special rules for disposals between 22   February 1999 and 21   September 1999: see Division   45 of the Income Tax (Transitional Provisions) Act 1997 .