Commonwealth Consolidated Acts

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 .