Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p2
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 2/3)
Character Range: 4058228–4061143

warrants).

235‑845  Interactions with other provisions
 (1) Section 106‑50 (about absolutely entitled beneficiaries) does not apply to an *instalment trust asset.
 (2) Section 106‑60 (about securities, charges and encumbrances) does not apply to an *instalment trust asset.
 (3) Nothing in this Subdivision limits Division 247 (which is about capital protected borrowings).
Note: Division 247 may apply to an arrangement to which this Subdivision applies.

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 interest
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