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Sale and leaseback arrangements

Last updated 13 July 2020

If you acquired plant on or after 9 May 2001 or another depreciating asset after 1 July 2001 but the user of the asset does not change or is an associate of the former user – such as under a sale and leaseback arrangement – you must use the same method of working out the decline in value that the former holder used.

If the former holder used the diminishing value method, you must use the effective life the former holder used if they used the diminishing value method. If they used the prime cost method, you must use any remaining period of the effective life used by them. If you cannot readily ascertain the method that the former holder used or if they did not use a method, you must use the diminishing value method. You must use an effective life determined by the Commissioner if you cannot find out the effective life that the former holder used or if they did not use an effective life.

You must recalculate the effective life of the depreciating asset if the asset's cost increases by 10% or more in any income year, including the year in which you start to hold it – see How to recalculate effective life.