Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 240 - Arrangements treated as a sale and loan  

Guide to Division 240  

SECTION 240-7   How the recharacterisation affects the notional buyer  

Effect of notional purchase

240-7(1)    
The cost of the acquisition is either the price stated as the cost or value of the property or its arm's length value. If the notional buyer is acquiring the property as trading stock, the normal consequences of acquiring trading stock follow. In particular, the notional buyer can usually deduct the purchase price.

240-7(2)    
If the property is not trading stock, the notional buyer may be able to deduct amounts for the expenditure under Division 40 (about capital allowances).

Effect of notional loan

240-7(3)    
The notional buyer may be able to deduct notional interest payments over the period of the loan.

Other effects

240-7(4)    
These effects displace the income tax consequences that would otherwise arise from the arrangement. For example, the notional buyer cannot deduct the actual payments to the notional seller.