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Legal database

Income Tax Assessment Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-1 - ASSESSABLE INCOME  

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Division 20 - Amounts included to reverse the effect of past deductions  

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Subdivision 20-B - Disposal of a car for which lease payments have been deducted  

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The usual case

SECTION 20-120  

20-120   Meaning of notional depreciation  

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This is how to work out the notional depreciation for a lease period: Method statement

Step 1.

Compare:

  • • the * car ' s * cost to the lessor for the purposes of Subdivision 40-C (which is about working out the cost of * depreciating assets);

    • with:

  • • the car ' s * termination value for the purposes of section 40-300 when the lessor disposed of it.


    • Step 2.

    If the car ' s cost exceeds the car ' s termination value, multiply the excess by:

  • • the number of days in the lease period;

    • divided by:

  • • the number of days the lessor owned the car.


    • Step 3.

    The result is the notional depreciation for the lease period.


    Step 4.

    If the car ' s cost does not exceed the car ' s termination value, the notional depreciation for the lease period is zero.

    Note 1:

    The notional depreciation for the lease period represents:

  • • the amount you could have deducted for the car ' s decline in value if, instead of leasing it, you had owned it and used it solely for the purpose of producing assessable income for that period;

    • adjusted by:

  • • the balancing adjustment you would have made if you had disposed of the car at the end of that period.
    • Note 2:

    The car ' s cost to the lessor is worked out differently if the lessor acquired it in the 1996-97 income year or an earlier income year: see section 20-105 of the Income Tax (Transitional Provisions) Act 1997 .

    Note 3:

    The car ' s termination value is worked out differently if the lessor disposed of it in the 1996-97 income year or an earlier income year: see section 20-110 of the Income Tax (Transitional Provisions) Act 1997 .
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