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Assets put to a tax-preferred use

Last updated 24 October 2011

Division 250 of the ITAA 1997 applies to the leasing of assets and other similar arrangements to tax-preferred end users (such as tax-exempt entities and non-residents).

If Division 250 applies to an arrangement, capital allowance deductions will be denied for the asset and the arrangement will be treated as a deemed loan that is taxed as a financial arrangement on a compounding accruals basis. Division 250 applies to all relevant arrangements where the tax-preferred use of an asset starts on or after 1 July 2007. However, Division 250 does not apply if the use occurs under a legally enforceable arrangement that was entered into before 1 July 2007.

Division 250 also does not apply if you are a small business entity for the income year in which the arrangement period for the tax-preferred use of the asset starts, and you choose to deduct amounts under Subdivision 328-D (capital allowances for small business entities) for the asset for that income year. Division 250 also does not apply to certain relatively short-term and lower value arrangements. Go to our website at www.ato.gov.au for more information.

Attention

Note

When you have completed your Business and professional items schedule for individuals 2010, you will need to transfer:

  • your Net personal services income (PSI) amount (if any) from A item P1 on your schedule to A item 14 on page 13 of your tax return (supplementary section)
  • your Net income or loss from business amounts from Y and Z item P8 on your schedule to B and C (respectively) item 15 on page 14 of your tax return (supplementary section).
End of attention

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