ATO ID 2002/1037: Division 40: hold - partnership depreciating asset subject to a call option
Date of decision: 12 July 2002
Year of income: 2000
Business line: Public Groups and International

Issue
Is the leasing partnership a holder of the depreciating assets under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes, the leasing partnership is a holder of the depreciating assets pursuant to Item 7 of the table in section 40-40 of the ITAA 1997.

Facts
A partnership purchased various depreciating assets under a manufacture and supply agreement. It immediately leased the assets on a commercial basis to an unrelated entity that had been awarded a franchise by another unrelated entity to operate a business in which the assets are used. As part of an arrangement with the partnership, the franchisor was granted a call option over the leased assets so that, on exercising the option to purchase the assets, the franchisor can make the assets available to a subsequent franchisee in certain circumstances.

Reasons for decision

Legislative references: Income Tax Assessment Act 1997 section 40-40
Subject references: Depreciating asset Division 40 Hold Partnership asset