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?
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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:
draft only - for commentPreamble
| Draft Taxation Determinations (TDs) present the preliminary, though considered, views of the ATO. Draft TDs may not be relied on; only final TDs are authoritative statements of the ATO. |
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