DG 3 Meaning of asset for this subpart
Meaning of asset


For the purposes of this subpart, an asset, for an income year, means an item of property described in subsection (2) held by a person described in subsection (3) to the extent to which the item—


is used by the person in the income year partly to derive income and partly for private use; and


is not in use—


for at least 62 days in the income year; or


when the asset is typically used only on working days, for at least 62 working days in the income year.

What items of property?


Subsection (1) applies to an asset that, in the complete form in which the person uses it for income-earning purposes,—


is 1 of the following:


land, including improvements to land:


a ship, boat, or craft used in navigation on or under water, whether or not it has a means of propulsion:


an aircraft; and


for an item referred to in paragraph (a)(ii) and (iii), has—


a cost to the person of $50,000 or more; or


a market value on the date of acquisition of the asset of $50,000 or more, if the asset was not acquired at market value; and


includes any related items, things, or accessories pertaining to the asset.

Which persons?


A person excludes a company other than a close company.



Despite subsection (2), an asset is excluded from the operation of the rules in this subpart if—


the use of the asset meets the following criteria:


the private use of the asset is minor; and


the main use of the asset is use in a business that is not a rental or charter business; and


for a company or a trustee of a trust, the use of the asset places an obligation on the company or the trustee, as applicable, to pay fringe benefit tax or income tax:


the asset is a residential property and its only income-earning use is as a long-term rental property:


Meaning of market value


For the purposes of this subpart, other than subsection (2)(b)(ii), market value means the price at which the asset is provided for use at a particular time or for a particular season—


in the open market; and


freely offered; and


made on ordinary terms; and


to a member of the public at arm’s length.

Partnerships and look-through companies


For the purposes of this section, if the asset is held through a partnership or a look-through company, the value of the interests in the asset held by all the partners in the partnership or all the shareholders in the look-through company, as applicable, is aggregated.

What constitutes use


For the purposes of this subpart, the use of an asset is the active use of the asset for its intended purpose.


Graeme owns a yacht that he used with his family for a 4-week holiday. He also rented the yacht at market rates to other people who were not associates on 4 occasions, totalling 3 weeks. The cost of the yacht (including some capital improvements and items such as lifejackets and a dinghy) is $85,000. The rules in this subpart apply to Graeme.

Defined in this Act: amount, asset, business, close company, company, deduction, fringe benefit tax, income, income tax, income year, land, look-through company, market value, partnership, private use, shareholder, tax, trustee, working day

Section DG 3: inserted (with effect on 1 April 2013 and applying for the 2013–14 and later income years for an item of property referred to in section DG 3(2)(a)(i), and for the 2014–15 and later income years for an item of property referred to in section DG 3(2)(a)(ii) and (iii)), on 17 July 2013, by section 30(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).

Section DG 3(3): amended, on 29 March 2018, by section 258 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section DG 3(4)(c): repealed (with effect on 1 April 2013 and applying for the 2013–14 and later income years), on 27 February 2014, by section 35(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).