CGT Determination Number 27

TD 27

Capital Gains:What value is given to leased equipment for the purpose of section 160ZZS ?

• Please note that the PDF version is the authorised version of this ruling.
  This ruling contains references to repealed provisions, some of which may have been rewritten. The ruling still has effect. Paragraph 32 in TR 2006/10 provides further guidance on the status and binding effect of public rulings where the law has been repealed or repealed and rewritten. The legislative references at the end of the ruling indicate the repealed provisions and, where applicable, the rewritten provisions.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

FOI status:

1. The appropriate value to be attributed to leased equipment is the market value of the lease and not the capitalised value of the underlying equipment.

2. The market value of the lease would be the amount for which the lessee could dispose of the lease at arm's length.

Example:

In July 1985, a company enters into a (4) four year lease of equipment. The equipment is valued at $800,000.

The company has no residual entitlement to the equipment at the end of the lease.

On 1 July 1988, upon change of the major shareholders in the company, section 160ZZS operates to deem assets of the company acquired before 20 September 1985 to have been acquired on 1 July 1988, at their market value (IT 2340).

The value of the underlying equipment at 1 July 1988 is $1,000,000 and the market value of the lease is $50,000.

The lease is deemed by section 160ZZS to be an asset acquired on 1 July 1988 with a cost base of $50,000.

Commissioner of Taxation
28 November 1991

References

ATO references:
NO CGT Cell

Related Rulings/Determinations:

CGT 11
IT 28;
IT 2340

Subject References:
Leased equipment;
Market value

Legislative References:
160ZZS