F.1.3 Transitional rules

The general principle is that Division 250 will regulate arrangements going forward e.g. where a contract is signed after 01 July 2007 and first asset use (tax-preferred asset use) starts after 01 July 2007. A number of transitional rules have been legislated and they are complex. Possibly the most relevant situations are likely to be:

Election. Deal signed before 01 July 2007 but first asset use (tax-preferred asset use) starts after 01 July 2007, then a once off, all embracing, irrevocable taxpayer election can be made to have Div 250 apply where either S 51 AD or Div 16 D would have applied;

Material Alteration. Existing deal - The arrangement was entered into pre-01 July 2007. Neither S 51 AD or Div 16 D applied pre 01 July 2007. If there was a material alteration to the arrangement after 01 July 2007, and but for Div 250, S 51 AD or Div 16 D would now apply, then Div 250 applies post the alteration; or

S 51 AD switched off from 01 July 2003. For income years commencing on or after 01 July 2007, Section 51 AD will not apply to arrangements entered into before 01 July 2007 where the tax-preferred use started between 01 July 2003 and 01 July 2007. In these circumstances Div 16 D will normally apply (unless there is a material alteration on or after 01 July 2007).