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Limited recourse debt arrangements

Last updated 7 April 2020

If expenditure on a depreciating asset is financed or refinanced wholly or partly by limited recourse debt (including a notional loan under certain hire purchase or instalment sale agreements of goods), excessive deductions for capital allowances are to be included as assessable income. This will occur where the limited recourse debt terminates after 27 February 1998 but has not been paid in full by the debtor. Because the debt has not been paid in full, the capital allowance deductions allowed for the expenditure exceed the deductions that would be allowable if the unpaid amount of the debt was not counted as capital expenditure of the debtor. Special rules apply in working out whether the debt has been fully paid.

If you are not sure what constitutes a limited recourse debt or how to work out your adjustment to assessable income, contact your recognised tax adviser or the Tax Office.