CGT Determination Number 27 TD 27 - Capital Gains:What value is given to leased equipment for the purpose of section 160ZZS ?







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


Related rulings: CGT 11 IT 28; IT 2340
Legislative references: 160ZZS
Subject references: Leased equipment; Market value