INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 5 - Leases  

SECTION 160ZSA   ELECTION TO TREAT GRANT OF LONG TERM LEASE AS DISPOSAL OF FREEHOLD INTEREST OR HEAD LEASE  

160ZSA(1)   [Grant of new lease]  

If:

(a) either of the following subparagraphs applies:

(i) after 16 November 1988, a taxpayer (in this section called the ``lessor'' ) who holds an estate in fee simple (in this section called the ``freehold interest'' ) grants a lease (in this section called the ``new lease'' ) of the whole or a part of the area to which the freehold interest relates;

(ii) after 16 November 1988, a taxpayer (in this section also called the ``lessor'' ) who holds a lease of land (in this section called the ``head lease'' ) grants a sublease (in this section also called the ``new lease'' ) of the whole or a part of the area to which the head lease relates; and

(b) the new lease is an eligible long term lease; and

(c) the lessor makes an election in accordance with subsection (2) that this section apply in relation to the grant of the new lease;

the following provisions have effect for the purposes of this Part:

(d) section 160ZS does not apply in relation to the lessor in relation to the grant of the new lease;

(e) subsections 160ZT(1), (1A) and (1B) do not apply in relation to the lessor in relation to the new lease;

(f) this subsection (other than paragraph (n)) is to be disregarded for the purposes of the application of this Part (including section 160ZS and subsections 160ZT(1), (1A) and (1B)) in relation to the lessee under the new lease;

(g) the lessor is to be taken, at the time of the grant of the new lease, to have disposed of:

(i) in a case where the area to which the new lease relates is only part of the area to which the freehold interest or head lease relates:

(A) the part of the freehold interest or head lease that corresponds to that area; and

(B) any building or other improvement that is taken to be an asset separate from the freehold interest or head lease and that is in that area; or

(ii) in a case where the area to which the new lease relates is the whole of the area to which the freehold interest or head lease relates:

(A) the freehold interest or head lease; and

(B) any building or other improvement that is taken to be an asset separate from the freehold interest or head lease and that is in that area;

(h) the consideration received by the lessor in respect of each of those disposals is whichever is the greatest of the following:

(i) so much of the market value of the freehold interest or head lease, immediately before the grant of the new lease, as is attributable to the area, building or improvement concerned;

(ii) so much of the market value of the freehold interest or head lease, immediately before the grant of the new lease, (ascertained on the assumption that the grant of the new lease was never proposed to take place) as is attributable to the area, building or improvement concerned;

(iii) so much of the premium paid or payable for the grant of the new lease as is attributable to the area, building or improvement concerned;

(j) the lessor is to be taken to have immediately re-acquired each asset, or part of an asset, disposed of without having paid or given any consideration in respect of the re-acquisition;

(k) in determining the cost base, indexed cost base or reduced cost base to the lessor of a re-acquired asset or part of an asset, no account is to be taken of any liability that arose before the re-acquisition or any costs or expenditure that were incurred before the re-acquisition;

(m) any expenditure incurred by the lessor in obtaining:

(i) the consent of the lessee to the variation or waiver of any of the terms of the new lease; or

(ii) the forfeiture or surrender of the new lease;

is to be taken, for the purposes of ascertaining the cost base, the indexed cost base or the reduced cost base to the lessor of the re-acquired asset covered by sub-subparagraph (g)(i)(A) or (ii)(A), to be expenditure to which paragraph 160ZH(1)(c), (2)(c) or (3)(c), as the case may be, applies;

(n) if the new lease relates to one or more units of property for which depreciation is or was allowable to the lessor under section 54 of this Act or Division 42 (Depreciation) of the Income Tax Assessment Act 1997 in respect of any year of income:

(i) the new lease is not to be taken to relate to any such unit of property; and

(ii) the lessor is to be taken, in addition to granting the new lease, to have granted a separate lease of each such unit of property; and

(iii) the lessor is not to be taken to have disposed of any such unit of property because of paragraph (g); and

(iv) in determining the market value or premium mentioned in subparagraph (h)(i), (ii) or (iii), any such unit of property is to be disregarded.

160ZSA(2)   [Election]  

An election for the purposes of subsection (1) must be made on or before the date of lodgment of the lessor's return of income for the later of the following years of income:

(a) the year of income in which the grant of the new lease took place;

(b) the year of income in which this section commenced;

or within such further period as the Commissioner allows.

160ZSA(3)   [Eligible long term lease]  

The new lease is an eligible long term lease if, and only if:

(a) the new lease was granted for a term of at least 50 years; and

(b) at the time the new lease was granted, it was reasonable to expect that the new lease would continue for at least 50 years; and

(c) the terms of the new lease are substantially the same as:

(i) if the new lease is a sublease - the terms of the head lease; or

(ii) if the new lease is not a sublease - the terms applying to the lessor in respect of the land to which the new lease relates.

160ZSA(4)   [Reference to building]  

A reference in this section to a building includes a reference to a part of a building.