Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) You may choose to recalculate the * effective life of a * depreciating asset from a later income year if the effective life you have been using is no longer accurate because of changed circumstances relating to the nature of the use of the asset.
Example: Some examples of changes in circumstances that may result in your recalculating the effective life of a depreciating asset are:
• your use of the asset turns out to be more or less rigorous than you expected (or was anticipated by the Commissioner's determination);
• there is a downturn in demand for the goods or services the asset is used to produce that will result in the asset being scrapped;
• legislation prevents the asset's continued use;
• changes in technology make the asset redundant;
• there is an unexpected demand, or lack of success, for a film.
(2) You must recalculate a * depreciating asset's * effective life from a later income year if:
(a) you:
(i) self - assessed its effective life; or
(ii) are using an effective life worked out under section 40 - 100 (about the Commissioner's determination), or 40 - 102 (about the capped life of certain depreciating assets), and the * prime cost method; or
(iii) are using an effective life because of subsection 40 - 95(4), (4B), (4C), (5), (5B) or (5C); and
(b) its * cost is increased in that year by at least 10%.
Note 1: You may conclude that the effective life is the same.
Note 2: For the elements of the cost of a depreciating asset, see Subdivision 40 - C.
Example 1: Paul purchases a photocopier and self - assesses its effective life at 6 years. In a later year he incurs expenditure to increase the quality of the reproductions it makes. He recalculates its effective life, but concludes that it remains the same.
Example 2: Fiona also purchases a photocopier and self - assesses its effective life at 6 years. In a later year she incurs expenditure to incorporate a more robust paper handling system. She recalculates its effective life, and concludes that it is increased to 7 years.
(3) You must recalculate a * depreciating asset's * effective life for the income year in which you started to * hold it if:
(a) you are using an effective life because of subsection 40 - 95(4), (4B), (4C), (5), (5B) or (5C); and
(b) the asset's * cost is increased after you started to hold it in that year by at least 10%.
(3A) Subsections (1), (2) and (3) do not apply to a * depreciating asset that is a * mining, quarrying or prospecting right or * mining, quarrying or prospecting information.
(3B) You may choose to recalculate the * effective life of a * mining, quarrying or prospecting right, or * mining, quarrying or prospecting information, from a later income year if the effective life you have been using is no longer accurate:
(a) because of changed circumstances relating to an existing or proposed mine, petroleum field or quarry to which that right or information relates; or
(b) because that right or information now relates to an existing or proposed mine, petroleum field or quarry; or
(c) because that right or information no longer relates to an existing or proposed mine, petroleum field or quarry.
(4) A recalculation under this section must be done using:
(a) if paragraph (b) does not apply--section 40 - 105 (about self - assessing effective life); or
(b) if the * depreciating asset is a * mining, quarrying or prospecting right or * mining, quarrying or prospecting information:
(i) subsections 40 - 95(10) and (11) (if the right or information relates to an existing or proposed mine, petroleum field or quarry); or
(ii) subsection 40 - 95(12) (if the right or information no longer relates to an existing or proposed mine, petroleum field or quarry).
Exception: intangibles
(5) This section does not apply to an intangible * depreciating asset to which an item in the table in subsection 40 - 95(7) applies.