Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 250 - Assets put to tax preferred use  

Subdivision 250-B - When this Division applies to you and an asset  

Predominant economic interest

SECTION 250-115   Limited recourse debt test  

250-115(1)  
You lack a predominant economic interest in an asset at a particular time if more than the allowable percentage of the cost of your acquiring or constructing the asset is financed (directly or indirectly) by a *limited recourse debt or debts.

250-115(2)  
For the purposes of subsection (1):


(a) the amount of a *limited recourse debt is to be reduced by the value of any *debt property (other than the *financed property) that is provided as security for the debt; and


(b) if the limited recourse debt finances the acquisition or construction of 2 or more assets, only the amount of the debt that is reasonably attributable to the asset referred to in subsection (1) is to be taken into account.

250-115(3)  
For the purposes of subsection (1), the allowable percentage is:


(a) 80% if the asset is taken to be *put to a tax preferred use because of subparagraph 250-60(1)(b)(i) or (2)(b)(i) (end use by *tax preferred entities); or


(b) 55% if the asset is taken to be put to a tax preferred use because of subparagraph 250-60(1)(b)(ii) or (2)(b)(ii) (end use by foreign residents or businesses).

250-115(4)  
This section does not apply to the asset if:


(a) you are a *corporate tax entity; and


(b) the *tax preferred use of the asset is not the lease or hire of the asset (and is not the use of the asset under a lease or hire arrangement); and


(c) the asset is *put to the tax preferred use wholly or principally in Australia; and


(d) no *member of the tax preferred sector provides financing, or support for financing, in relation to your interest in the asset (including by way of a loan, a guarantee, an indemnity, a security, hedging or undertaking to provide *financial benefits in the event of the termination of an *arrangement).

250-115(5)  
Paragraph (4)(b) does not apply if:


(a) the asset is real property (or an interest in real property); and


(b) the *tax preferred use of the asset is a lease; and


(c) the space within the property that is occupied by tenants who are *members of the tax preferred sector is less than half of the total space within the property that is either occupied by tenants or available to be occupied by tenants.

250-115(6)  
This section also does not apply to the asset if:


(a) you hold the asset as a trustee; and


(b) the asset is real property (or an interest in real property); and


(c) the *tax preferred use of the asset is a lease; and


(d) the space within the property that is occupied by tenants who are *members of the tax preferred sector is less than half of the total space within the property that is either occupied by tenants or available to be occupied by tenants; and


(e) the asset is *put to the tax preferred use wholly or principally in Australia; and


(f) no member of the tax preferred sector provides financing, or support for financing, in relation to your interest in the asset (including by way of a loan, a guarantee, an indemnity, a security, hedging or undertaking to provide *financial benefits in the event of the termination of an *arrangement).


 

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