Draft Taxation Determination

TD 94/D42

Income tax: will a lessor be entitled to claim the investment allowance if it has entered into a lease agreement prior to 1 July 1994, and the lease agreement is treated as a purchase order?

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been finalised by TD 94/59.

FOI status:

Preamble

1. Yes. Provided that entering into the lease commits the lessor before 1 July 1994 to the acquisition of the asset and provided the other requirements of the investment allowance provisions are met.

2. IT 2158 discusses circumstances where a contract may contain terms and conditions that affect whether and when a contract has been entered into for the acquisition of the asset.

Example

Leasing Co. 'L' has an agreement with Manufacturer Co. 'M' under which, when L enters into a lease agreement with a lessee, M treats the lease agreement as a firm and immediate order for the acquisition of the leased asset by L.

L will be able to claim the investment allowance in relation to all eligible assets which are the subject of such leases entered into by L before 1 July 1994, provided that the other requirements of the investment allowance provisions are met. This is so whether or not M and L are related entities or in common ownership.

The same effect would be achieved if the leasing company and the manufacturing company were the same entity. As a leasing company must carry on the business of banking or of borrowing money and providing finance as at least its principal business, it will be rare for a leasing company to be a manufacturer as well.

Commissioner of Taxation
21/4/94

References

ATO references:
NO NAT 94/1969-1

Related Rulings/Determinations:

IT 2148

Subject References:
investment allowance
leased property

Legislative References:
ITAA 82AT