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-E - Taxation of deemed loan  

Balancing adjustment

SECTION 250-275   Balancing adjustment  

Complete cessation or transfer

250-275(1)  
Use the following method statement to make the balancing adjustment if paragraph 250-265(1)(a) or (b) applies. Method statement for balancing adjustment


Step 1.

Add up the following:

  • (a) the total of all the *financial benefits provided to you under the *financial arrangement;
  • (b) the amount or value of any other consideration you receive in relation to the transfer or cessation referred to in subsection 250-265(1) ;
  • (c) the total of the amounts that have been allowed to you as deductions, because of circumstances that have occurred before the transfer or cessation, for losses from the arrangement;
  • (d) the total of the other amounts that would have been allowed to you as deductions, because of circumstances that have occurred before the transfer or cessation, for losses from the arrangement if all your losses from the arrangement were allowable as deductions.

  • Step 2.

    Add up the following:

  • (a) the total of all the *financial benefits you have provided under the *financial arrangement;
  • (b) the amount or value of any other consideration you provide in relation to the transfer or cessation referred to in subsection 250-265(1) ;
  • (c) the total of the amounts that have been included in your assessable income, because of circumstances that have occurred before the transfer or cessation, as gains from the arrangement;
  • (d) the total of the other amounts that would have been included in your assessable income, because of circumstances that have occurred before the transfer or cessation, as gains from the arrangement if all your gains from the arrangement were assessable.

  • Step 3.

    Compare the amount obtained under Step 1 (the Step 1 amount ) with the amount obtained under Step 2 (the Step 2 amount ). If the Step 1 amount exceeds the Step 2 amount, an amount equal to the excess is taken, as a balancing adjustment, to be a gain you make from the *financial arrangement for the purposes of this Subdivision. If the Step 2 amount exceeds the Step 1 amount, an amount equal to the excess is taken, as a balancing adjustment, to be a loss that you make from the arrangement. If the Step 1 amount and the Step 2 amount are equal, no balancing adjustment is made.

    Proportionate transfer of all rights and/or obligations under financial arrangement

    250-275(2)  
    If subparagraph 250-265(1)(c)(i) applies, you make the balancing adjustment by applying the method statement in subsection (1) but reduce:


    (a) the amounts referred to in paragraphs (a), (c) and (d) in step 1; and


    (b) the amounts referred to in paragraphs (a), (c) and (d) in step 2;

    by applying the proportion referred to in subparagraph 250-265(1)(c)(i) to them.

    Transfer of specifically identified right or obligation under financial arrangement

    250-275(3)  
    If subparagraph 250-265(1)(c)(ii) applies, you make the balancing adjustment by applying the method statement in subsection (1) as if the references to:


    (a) the amounts referred to in paragraphs (a), (c) and (d) in step 1; and


    (b) the amounts referred to in paragraphs (a), (c) and (d) in step 2;

    were references to those amounts to the extent to which they are reasonably attributable to the right or obligation referred to in subparagraph 250-265(1)(c)(ii) .

    Proportionate transfer of specifically identified right or obligation under financial arrangement

    250-275(4)  
    If subparagraph 250-265(1)(c)(iii) applies, you make the balancing adjustment by applying the method statement:


    (a) as if the references to:


    (i) the amounts referred to in paragraphs (a), (c) and (d) in step 1; and

    (ii) the amounts referred to in paragraphs (a), (c) and (d) in step 2;
    were references to those amounts to the extent to which they are reasonably attributable to the right or obligation referred to in subparagraph 250-265(1)(c)(iii) ; and


    (b) by reducing those amounts by applying the proportion referred to in subparagraph 250-265(1)(c)(iii) to them. Attribution must reflect appropriate and commercially accepted valuation principles

    250-275(5)  
    Any attribution made under subsection (3) or paragraph (4)(a) must reflect appropriate and commercially accepted valuation principles that properly take into account:


    (a) the nature of the rights and obligations under the *financial arrangement; and


    (b) the risks associated with each *financial benefit, right and obligation under the arrangement; and


    (c) the time value of money. Income year for which gain or loss is made

    250-275(6)  
    The gain or loss you are taken to make under subsection (1), (2), (3) or (4) is a gain or loss for the income year in which the event referred to in subsection 250-265(1) occurs.


     

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