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-D - Deemed loan treatment of financial benefits provided for tax preferred use  

SECTION 250-160   Financial benefits that are subject to deemed loan treatment  

General rule

250-160(1)  
Subject to subsections (3) and (4), a *financial benefit is subject to deemed loan treatment if:


(a) the financial benefit:


(i) has been; or

(ii) will, assuming normal operating conditions, be; or

(iii) can, assuming normal operating conditions, reasonably be expected to be;
provided to you (or a *connected entity); and


(b) the financial benefit has been, will be or can reasonably be expected to be *provided directly or indirectly by a *member of the tax preferred sector in relation to the *tax preferred use of the asset; and


(c) the right to receive, or the obligation to provide, the financial benefit is *cash settlable; and


(d) the financial benefit has not been, will not be or can be expected not to be provided by one of your connected entities.

Note:

Paragraph (d) stops a financial benefit passing between you and any of your connected entities from being counted twice.

End value also taken to be financial benefit subject to deemed loan treatment

250-160(2)  
The relevant percentage of a reasonable estimate of the *end value of the asset is also taken to be a *financial benefit that is subject to deemed loan treatment if:


(a) the asset is not to be purchased or acquired by, or transferred to, a *member of the tax preferred sector at the end of the *arrangement period under a legally enforceable *arrangement; or


(b) the asset:


(i) is, or is to become, a *privatised asset; or

(ii) would be, or would become, a privatised asset if it were a *depreciating asset; or

(iii) would be a privatised asset if the asset were a depreciating asset and paragraphs 58-5(2)(a) and 58-5(4)(a) were not limited to acquisitions of depreciating assets that occurred on or after 1 July 2001.

The relevant percentage is the *disallowed capital allowance percentage if section 250-150 applies. Otherwise it is 100%.

Note:

See section 250-180 for how to work out the end value of the asset.

Financial benefits only subject to deemed loan treatment to the extent to which they represent a return on investment

250-160(3)  
The *financial benefit is subject to deemed loan treatment only to the extent to which it reasonably represents a return of, or on, an investment in the asset (as distinct, for example, from representing consideration for the provision of services or the recovery of production costs), having regard to:


(a) the *market value of the asset; and


(b) the discount rate applicable under subsection 250-105(2) ; and


(c) your costs in relation to funding your interest in the asset; and


(d) any other relevant matter.

The regulations may provide rules to be applied in determining the extent to which a financial benefit reasonably represents a return of or on an investment in the asset.

Only financial benefits provided after Division starts applying to you and the asset

250-160(4)  
If the *tax preferred use of the asset starts before this Division starts applying to you and the asset, only *financial benefits provided after this Division starts applying to you and the asset are subject to deemed loan treatment .


 

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