Document ID: chunk:federal_register_of_legislation:C2004C01257:clause:2_1:p1
Version: federal_register_of_legislation:C2004C01257
Segment Type: clause
Provision Reference: sch 2 cl 1 (pt 1/2)
Character Range: 6469–9363

1  After Part 3‑5
Insert:

Part 3‑10—Financial transactions

[The next Division is Division 240.]

Division 240—Arrangements treated as a sale and loan

Table of Subdivisions

 Guide to Division 240
240‑A Application and scope of Division
240‑B The notional sale and notional loan
240‑C Amounts to be included in notional seller's assessable income
240‑D Deductions allowable to notional buyer
240‑E Notional interest and arrangement payments
240‑F The end of the arrangement
240‑G Adjustments if total amount assessed to notional seller differs from amount of finance charge
240‑H Application of Division 16E to certain arrangements
240‑I Provisions applying to hire purchase agreements

Guide to Division 240

240‑1  What this Division is about

For income tax purposes, some arrangements (such as hire purchase agreements) are recharacterised as a sale of property, combined with a loan, by the notional seller to the notional buyer, to finance the purchase price.

240‑3  How the recharacterisation affects the notional seller

Effect of notional sale

 (1) The consideration for the notional sale is either the price stated as the cost or value of the property or its arm's length value. If the notional seller is disposing of the property as trading stock, the normal consequences of disposing of trading stock follow. In particular, the notional seller will be assessed on the sale price.

 (2) Where the property is not trading stock the notional seller's assessable income will include any profit made by the notional seller on the notional sale or on the sale of the property after a notional re‑acquisition.

Effect of notional loan

 (3) The notional seller's assessable income will include notional interest over the period of the loan.

Other effects

 (4) These effects displace the income tax consequences that would otherwise arise from the arrangement. For example, the actual payments to the notional seller are not included in its assessable income. Also, the notional seller loses the right to deduct amounts under Division 40 (about capital allowances).

240‑7  How the recharacterisation affects the notional buyer

Effect of notional purchase

 (1) The cost of the acquisition is either the price stated as the cost or value of the property or its arm's length value. If the notional buyer is acquiring the property as trading stock, the normal consequences of acquiring trading stock follow. In particular, the notional buyer can usually deduct the purchase price.

 (2) If the property is not trading stock, the notional buyer may be able to deduct amounts for the expenditure under Division 40 (about capital allowances).

Effect of notional loan

 (3) The notional buyer may be able to deduct notional interest payments over the period of the loan.

Other effects

 (4) These effects displace the income tax consequences that would otherwise arise from