Commonwealth Consolidated Acts Commonwealth Consolidated Acts
Income Tax (Transitional Provisions) Act 1997
1 Before Division 41
Insert:
Division 40 -- Capital allowances
Table of Subdivisions
40 - B Core provisions
40 - C Cost
40 - D Balancing adjustments
40 - E Low - value and software development pools
40 - F Primary production depreciating assets
40 - G Capital expenditure of primary producers and other landholders
40 - I Capital expenditure that is deductible over time
Subdivision 40 - B -- Core provisions
Table of sections
40 - 10 Plant
40 - 15 Recalculating effective life
40 - 20 IRUs
40 - 25 Software
40 - 30 Spectrum licences
40 - 33 Datacasting transmitter licences
40 - 35 Mining unrecouped expenditure
40 - 40 Transport expenditure
40 - 45 Intellectual property
40 - 50 Forestry roads and timber mill buildings
40 - 55 Environmental impact assessment
40 - 60 Pooling under Subdivision 42 - L of the former Act
40 - 65 Substituted accounting periods
40 - 70 References to amounts deducted and reductions in deductions
40 - 75 Mining expenditure incurred after 1 July 2001 on an asset
40 - 80 Other expenditure incurred after 1 July 2001 on a depreciating asset
(1) This section applies to you if:
(a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act ) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 , or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and
(b) either:
(i) you hold the plant at 1 July 2001 ; or
(ii) subparagraph (i) does not apply and you were the owner or quasi - owner of the plant at the end of 30 June 2001 .
(2) Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 (the new Act ) applies to the plant on this basis:
(a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant's opening adjustable value; and
(b) you use the same cost, effective life and method that you were using under Division 42 of the former Act; and
(c) if you excluded an amount from your assessable income under section 42 - 290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999--the cost of the plant, and its opening adjustable value, are reduced by that amount; and
(d) if subparagraph (1)(b)(ii) applies to you--you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi - owner of the plant under the former Act continue.
Note: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
(3) If you were using a rate for the plant under subsection 42 - 160(1) or 42 - 165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis:
(a) for the diminishing value method--replace the component in the formula in subsection 40 - 70(1) of the new Act that includes the plant's effective life with the rate you were using; and
(b) for the prime cost method:
(i) replace the component in the formula in subsection 40 - 75(1) of the new Act that includes the plant's effective life with the rate you were using; and
(ii) increase the plant's cost under Division 42 of the former Act by any amounts included in the second element of the plant's cost after 30 June 2001 .
Note 1: Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced.
Note 2: STS taxpayers work out the decline in value of their depreciating assets under Division 328.
40 - 12 Plant acquired after 30 June 2001
(1) This section applies to you if:
(a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001 ; or
(b) you started to construct an item of plant before 1 July 2001 and you complete its construction after 30 June 2001 .
(2) Division 40 of the new Act applies to the plant.
(3) If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40 - 70(1) or 40 - 75(1) of the new Act that includes the plant's effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day.
40 - 15 Recalculating effective life
You cannot recalculate the effective life of a depreciating asset for which:
(a) you were using, just before 1 July 2001 , a rate under subsection 42 - 160(1) or 42 - 165(1) of the former Act; or
(b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day.
(1) This section applies to you if:
(a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act; and
(b) you hold the IRU at 1 July 2001 .
(2) Division 40 of the new Act applies to the IRU on this basis:
(a) you use the cost, effective life and method you were using under Division 44 of the former Act; and
(b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU's opening adjustable value.
Note: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
(1) Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001 .
(2) For a unit of software for which you were deducting amounts under Subdivision 46 - B of the former Act, Subdivision 40 - B of the new Act applies to the unit on this basis:
(a) its cost is the amount of expenditure you incurred on the unit; and
(b) you must use the prime cost method; and
(c) its opening adjustable value at 1 July 2001 is its undeducted cost at the end of 30 June 2001 ; and
(d) you must use the same effective life you were using under Subdivision 46 - B of the former Act.
Note: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
(1) This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 .
(2) Subdivision 40 - B of the new Act applies to the spectrum licence on this basis:
(a) its cost is your expenditure incurred in obtaining the licence; and
(b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001 ; and
(c) its effective life is the same as it had under the former Act; and
(d) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
40 - 33 Datacasting transmitter licences
(1) This section applies to you if you hold a datacasting transmitter licence at 1 July 2001 .
(2) Division 40 of the new Act applies to the licence on this basis:
(a) its cost is your expenditure incurred in obtaining the licence; and
(b) its opening adjustable value at 1 July 2001 is its cost; and
(c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and
(d) you must use the prime cost method.
40 - 35 Mining unrecouped expenditure
(1) This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001 .
(2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset ) you hold on this basis:
(a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330 - 80 of the former Act for your income year ending on 30 June 2001; and
(b) it has a cost equal to the total amount of allowable capital expenditure under the former Act; and
(c) in applying the formula in section 40 - 75 of the new Act for the income year in which 1 July 2001 occurs--you use the adjustments in subsection 40 - 75(3) of the new Act; and
(d) it is taken to have been used for a taxable purpose at the start of 1 July 2001 ; and
(e) it has a remaining effective life worked out under subsection (3); and
(f) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
(3) The remaining effective life of the notional asset at the start of an income year ( present income year ) for which you are working out its decline in value is:
(a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these:
(i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible;
(ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or
(b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these:
(i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible;
(ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or
(c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these:
(i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and
(ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year.
(4) Sections 40 - 95 and 40 - 110 of the new Act do not apply to the unrecouped expenditure.
(5) If either:
(a) both of these subparagraphs apply:
(i) any of the unrecouped expenditure referred to in subsection (1) relates to a depreciating asset (the real asset );
(ii) in an income year (the cessation year ) you stop holding the real asset, or stop using it for a taxable purpose; or
(b) both of these subparagraphs apply:
(i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property );
(ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;
there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset's adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.
(6) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:
(a) if the other property is sold for a price specific to that property--that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or
(b) if the other property is sold with additional property without a specific price being allocated to it--the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or
(c) if the other property is lost or destroyed--the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or
(d) if you own the other property and you stop using it for a taxable purpose--its market value at that time; or
(e) if you do not own the property and you stop using it for a taxable purpose--a reasonable amount.
However, the amount included is reduced to the extent (if any) that it is also included under subsection 40 - 830(6) of the new Act.
(1) This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330 - H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001.
(2) Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset ) you hold on this basis:
(a) it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and
(b) it has a cost equal to the total amount of transport capital expenditure under the former Act; and
(c) in applying the formula in section 40 - 75 of the new Act for your income year in which 1 July 2001 occurs--you use the adjustments in subsection 40 - 75(3) of the new Act; and
(ca) it is taken to have been used for a taxable purpose at the start of 1 July 2001 ; and
(d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330 - 395 of the former Act; and
(e) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
(3) Sections 40 - 95 and 40 - 110 of the new Act do not apply to the expenditure.
(4) If either:
(a) both of these subparagraphs apply:
(i) any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset );
(ii) in an income year (the cessation year ) you stop holding the real asset, or stop using it for a taxable purpose; or
(b) both of these subparagraphs apply:
(i) any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property );
(ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;
there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset's adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.
(5) If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:
(a) if the other property is sold for a price specific to that property--that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or
(b) if the other property is sold with additional property without a specific price being allocated to it--the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or
(c) if the other property is lost or destroyed--the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or
(d) if you own the other property and you stop using it for a taxable purpose--its market value at that time; or
(e) if you do not own the property and you stop using it for a taxable purpose--a reasonable amount.
However, the amount included is reduced to the extent (if any) that it is also included under subsection 40 - 830(6) of the new Act.
(1) This section applies to you if:
(a) at the end of 30 June 2001 , you hold an item of intellectual property referred to in the table in section 373 - 35 of the former Act; and
(b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act.
(2) Subdivision 40 - B of the new Act applies to the item on this basis:
(a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001 ; and
(b) its cost is its original unrecouped expenditure under the former Act; and
(c) its effective life is the same as it had under the former Act; and
(d) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
40 - 50 Forestry roads and timber mill buildings
(1) This section applies to you if:
(a) you have deducted or can deduct an amount under Subdivision 387 - G of the former Act for an amount (the qualifying amount ) of expenditure on a forestry road or timber mill building; and
(b) you hold the road or building at the end of 30 June 2001 .
(2) Subdivision 40 - B of the new Act applies to the asset on this basis:
(a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and
(b) in applying the formula in section 40 - 75 of the new Act for your income year in which 1 July 2001 occurs--you use the adjustments in subsection 40 - 75(3) of the new Act; and
(c) its cost is the qualifying amount; and
(d) it has an effective life equal to the remaining life you last estimated for it under the former Act; and
(e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and
(f) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
40 - 55 Environmental impact assessment
(1) This section applies to you if you have deducted or can deduct an amount under Subdivision 400 - A of the former Act for an amount (the qualifying amount ) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400 - A of the former Act.
(2) Division 40 of the new Act applies to the qualifying amount as if it were a depreciating asset on this basis:
(a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936 ; and
(b) it has a cost equal to the qualifying amount; and
(c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400 - 15(3) of the former Act; and
(d) you must use the prime cost method.
Note: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
40 - 60 Pooling under Subdivision 42 - L of the former Act
(1) Units of plant that you had allocated to a pool under Subdivision 42 - L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act.
(2) Division 40 of the new Act applies to the single depreciating asset on this basis:
(a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and
(b) you must use the diminishing value method; and
(c) in applying the formula in section 40 - 70 of the new Act for your income year in which 1 July 2001 occurs--it has a base value equal to that opening adjustable value; and
(d) you replace the component in the formula in subsection 40 - 70(1) of the new Act that includes an asset's effective life with the pool percentage you were using for the pool; and
(e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40 - 115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and
(f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset.
Note: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
(3) An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item).
Note 1: You work out the decline in value of an item removed under this subsection under Subdivision 40 - B of the new Act, using the cost for it worked out under section 40 - 205 of the new Act.
Note 2: There are special rules for entities that have substituted accounting periods: see section 40 - 65.
40 - 65 Substituted accounting periods
(1) This section sets out special rules for the application of Division 40 of the new Act to an entity that:
(a) has a substituted accounting period; and
(b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset.
(2) The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year ) in this way:
(a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and
(b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section.
(3) The asset's opening adjustable value for the purposes of Division 40 of the new Act is:
(a) for a unit of plant (including IRUs and expenditure on software that is not pooled)--its undeducted cost at the end of 30 June 2001 ; or
(b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence--the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or
(c) for transport capital expenditure--the entity's amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or
(d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine--the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or
(e) for expenditure on evaluating the impact on the environment of a project--the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or
(f) for assets that were pooled under Subdivision 42 - M or 42 - L of the former Act--the closing balance of the pool at the end of 30 June 2001 .
(4) The asset's base value for applying the formula in section 40 - 70 of the new Act for the diminishing value method is that opening adjustable value.
(5) The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40 - 75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way:
(a) for an item of plant for which you were using the prime cost method--using the rules in section 40 - 10 of this Act; and
(b) for an IRU for which you were using the prime cost method--using the rules in section 40 - 20 of this Act; and
(c) for a unit of software for which the entity was deducting amounts under Subdivision 46 - B of the former Act--using the rules in subsection 40 - 25(2) of this Act; and
(d) for a spectrum licence--using the rules in section 40 - 30 of this Act; and
(e) for an item of intellectual property--using the rules in section 40 - 45 of this Act; and
(f) for an amount of expenditure on evaluating the impact on the environment of a project--using the rules in section 40 - 55 of this Act.
(6) The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40 - 75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way:
(a) for an amount of unrecouped expenditure under Division 330 of the former Act--using the rules in section 40 - 35 of this Act; and
(b) for an amount of transport capital expenditure under Division 330 of the former Act--using the rules in section 40 - 40 of this Act; and
(c) for a forestry road or timber mill building--using the rules in section 40 - 50 of this Act.
(7) The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act.
(8) The entity must, in working out its deductions under this section for the calculation year for:
(a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330 - C of the former Act; or
(b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330 - H of the former Act; or
(c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387 - B of the former Act; or
(d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387 - E of the former Act; or
(e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387 - E of the former Act;
reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365.
(9) The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001 .
(10) You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount ) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount ).
(11) You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount.
40 - 70 References to amounts deducted and reductions in deductions
(1) A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936 .
(2) An amount you have deducted or can deduct for a water facility under Subdivision 387 - B of the former Act or section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40 - F of the new Act.
(3) A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 .
40 - 75 Mining expenditure incurred after 1 July 2001 on an asset
(1) This section applies to you if:
(b) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001 ) that you:
(i) started to hold under a contract entered into before 1 July 2001 ; or
(ii) constructed where the construction started before that day; or
(iii) started to hold in some other way before that day; and
(c) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001 .
(2) If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act.
(3) Otherwise, Subdivision 40 - B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section.
(4) The effective life of the depreciating asset is the shorter of its effective life worked out under Division 40 and:
(a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining--the shorter of:
(i) 10 years; and
(ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or
(b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining--the shorter of:
(i) 10 years; and
(ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or
(c) if the expenditure on the asset was incurred in relation to eligible quarrying operations--the shorter of:
(i) 20 years; or
(ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life.
40 - 77 Mining, quarrying or prospecting rights or information held before 1 July 2001
(1) Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001 .
Note: If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3 - 1 or 3 - 3 of the Income Tax Assessment Act 1997 .
(2) If, after 30 June 2001 :
(a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours; or
(b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership;
the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act.
(3) An amount that would be included in your assessable income under section 15 - 40 or subsection 40 - 285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that:
(a) you have not deducted and cannot deduct (either immediately or over time) under the former Act; and
(b) did not form part of allowable capital expenditure under the former Act; and
(c) did not entitle you to a deduction under section 330 - 235 of the former Act;
but only to the extent that you have not already applied the amount under this section.
40 - 80 Other expenditure incurred after 1 July 2001 on a depreciating asset
(1) This section applies to you if:
(a) you incur expenditure after 30 June 2001 that forms part of the cost of a depreciating asset; and
(b) the depreciating asset is one that you:
(i) started to hold under a contract entered into before 1 July 2001 ; or
(ii) constructed where the construction started before that day; or
(iii) started to hold in some other way before that day; and
(c) if you had incurred the expenditure before 1 July 2001 , and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46 - B or 387 - G, of the former Act.
(2) Subdivision 40 - B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001 .
You can deduct any amount of new EPE (see sections 330 - 30 and 330 - 35 of this Act) you have at the end of your 2000 - 01 income year, reduced by the total of the relevant amounts (see subsections 330 - 30(4) and 330 - 35(4) of this Act) for an earlier applicable year (see subsections 330 - 30(3) and 330 - 35(3) of this Act).
Table of sections
40 - 230 Car limit
(1) Division 40 of the new Act applies as if references in that Division to the car limit included references to:
(a) the car depreciation limit under Division 42 of the former Act; and
(b) the motor vehicle depreciation limit under section 57AF of the Income Tax Assessment Act 1936 .
(2) If you:
(a) have a substituted accounting period; and
(b) start to hold a car in your 2001 - 02 income year but before 1 July 2001 ;
you must use as the car limit the car depreciation limit under section 42 - 80 of the former Act for the 2000 - 01 financial year.
Subdivision 40 - D -- Balancing adjustments
Table of sections
40 - 285 Balancing adjustments
40 - 290 Reduction of deductions under former Act etc.
40 - 295 Later year relief
40 - 340 Roll - overs
40 - 345 Balancing adjustments for depreciating assets that retain CGT indexation
40 - 285 Balancing adjustments
(1) Paragraphs 40 - 285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset's decline in value under Division 40.
(2) You are entitled to a further deduction under subsection (3) if:
(a) you are entitled to a deduction under subsection 40 - 285(2) of the new Act for a balancing adjustment event happening to a depreciating asset:
(i) to which Division 58 of the former Act applied; or
(ii) to which section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 of Schedule 2D to that Act occurred before 1 July 2001; and
(b) you would have been entitled to a further deduction under section 42 - 197 of the former Act.
(3) The amount of the further deduction is the amount worked out under section 42 - 197 of the former Act.
(4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day.
(5) The amount included in your assessable income under subsection 40 - 285(1) or section 40 - 370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if:
(a) the asset is either:
(i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or
(ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and
(b) any capital gain or capital loss would be disregarded (if Part 3 - 1 of the new Act applied):
(i) because of section 118 - 5 (about cars, motor cycles and valour decorations); or
(ii) because of section 118 - 10 (about collectables); or
(iii) because of section 118 - 12 (about plant used to produce exempt income); or
(iv) because the asset was a pre - CGT asset at the time of the balancing adjustment event.
(6) The reduction is:
where:
"sum of reductions" is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose.
"total decline" is the decline in value of the depreciating asset since you started to hold it.
(7) Section 118 - 24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens:
(a) if the depreciating asset is plant--at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or
(b) if the depreciating asset is not plant--before 1 July 2001 ;
where:
(c) the time of the event is when you entered into the contract for the disposal of the asset; and
(d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b).
40 - 290 Reduction of deductions under former Act etc.
Subsection 40 - 290(2) of the new Act has effect in relation to a depreciating asset that you held at 1 July 2001 as if:
(a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40 - 25 of the new Act; and
(b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 .
(1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999 - 2000 or 2000 - 01 income year to the extent that you choose under section 42 - 290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant.
(2) You can only make this choice for the replacement plant if:
(a) you acquire it:
(i) within 2 income years after the end of the income year in which the balancing adjustment event occurred; and
(ii) in your 2001 - 02 or 2002 - 2003 income year; and
(b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and
(c) you can deduct an amount for its decline in value; and
(d) you had not made a choice under section 42 - 285 or 42 - 293 of the former Act for the balancing adjustment event.
(3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it.
(1) This section applies to an entity (the transferee ) if:
(a) there is roll - over relief under section 40 - 340 of the new Act as a result of a balancing adjustment event happening to plant; and
(b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40 - 10(3) of this Act.
Plant acquired before 21 September 1999
(2) The transferee works out the decline in value of the plant under subsection 40 - 10(3) or 40 - 12(3) of this Act using the same method as the transferor if:
(a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or
(b) the transferor constructed it and the construction started at or before that time; or
(c) the transferor acquired it in some other way at or before that time; or
(d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40 - 10(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor.
Small business taxpayers
(3) The transferee also works out the decline in value of the plant under subsection 40 - 10(3) of this Act using the same method as the transferor if:
(a) the plant was not acquired as mentioned in subsection (2); and
(b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42 - 160(1) or 42 - 165(1) of the former Act; and
(c) the conditions set out in this table are satisfied:
Conditions for small business taxpayers retaining accelerated rates | |
Item | Condition |
1 | The transferee must have been a small business taxpayer for the income year (the start year ) that includes the time when the entity first used the plant, or first had it installed ready for use. |
2 | At that time, at least 50% of the transferee's intended use of the plant must be in carrying on a business for the purpose of producing assessable income. |
3 | At that time, neither of these applies: (a) it could reasonably be expected that, because of the plant's use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years; (b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection (5). |
(4) For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership.
(5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short - term hire agreement.
(6) The transferee works out the decline in value of the plant by:
(a) for the diminishing value method--replacing the component in the formula in subsection 40 - 70(1) of the new Act that includes the plant's effective life with the rate the transferor, or the earliest successive transferor, was using; or
(b) for the prime cost method:
(i) replacing the component in the formula in subsection 40 - 75(1) of the new Act that includes the plant's effective life with the rate the transferor, or the earliest successive transferor, was using; and
(ii) increasing the plant's cost under Division 42 of the former Act by any amounts included in the second element of the plant's cost after 30 June 2001 .
40 - 345 Balancing adjustments for depreciating assets that retain CGT indexation
(1) The amount included in your assessable income under subsection 40 - 285(1) or 104 - 240(1) of the new Act as a result of a balancing adjustment event occurring for:
(a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or
(b) a depreciating asset that is not plant and that you acquired before 1 July 2001 ;
is reduced (but not below nil) if:
(c) for a paragraph (a) case--there would have been a reduction under subsection 42 - 192(2) of the former Act as a result of that event; or
(d) for a paragraph (b) case--there would have been a reduction under subsection 42 - 192(2) of the former Act as a result of that event if the asset were plant.
(2) The amount of the reduction is the amount worked out under subsection 42 - 192(2) of the former Act.
(3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104 - 240(1) if the balancing adjustment event results in a discount capital gain under Division 115.
(4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain.
(5) Subsection (6) applies to an entity (the transferee ) if there is roll - over relief under section 40 - 340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee.
(6) Subsections (1), (2), (3) and (4) apply also to the transferee if:
(a) for a depreciating asset that is plant:
(i) the transferor referred to in section 40 - 340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or
(ii) the transferor constructed it and the construction started at or before that time; or
(iii) the transferor acquired it in some other way at or before that time; or
(iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40 - 10(3) or 40 - 12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or
(b) for a depreciating asset that is not plant:
(i) the transferor started to hold the asset under a contract entered into before 1 July 2001 ; or
(ii) the transferor constructed it and the construction started at or before that day; or
(iii) the transferor acquired it in some other way before that day.
Subdivision 40 - E -- Low - value and software development pools
Table of sections
40 - 420 Low - value pools under Division 42 continue
40 - 425 Allocating depreciating assets to low - value pools
40 - 450 Software development pools
40 - 420 Low - value pools under Division 42 continue
(1) A low - value pool you created under Subdivision 42 - M of the former Act continues under the new Act as if it had been created under Subdivision 40 - E of the new Act.
(2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40 - 440(1) of the new Act applies to the pool closing balance, worked out under section 42 - 470 of the former Act, for the income year before that year.
40 - 425 Allocating depreciating assets to low - value pools
You can allocate a depreciating asset to a low - value pool under section 40 - 425 of the new Act if:
(a) you hold the asset at the start of 1 July 2001 ; and
(b) the conditions in subsection 42 - 455(3) of the former Act are satisfied for the asset at the end of the previous income year.
40 - 450 Software development pools
Subsection 40 - 450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act.
Subdivision 40 - F -- Primary production depreciating assets
Table of sections
40 - 515 Water facilities, grapevines and horticultural plants
40 - 520 Special rule for water facilities you no longer hold
40 - 525 Amounts deducted for water facilities
40 - 515 Water facilities, grapevines and horticultural plants
(1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount ) of expenditure on any of these (the primary production asset ):
(a) the construction, manufacture, installation or acquisition of a water facility; or
(b) the establishment of horticultural plants; or
(c) the establishment of grapevines;
and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply.
(2) Subdivision 40 - F of the new Act applies to the primary production asset on this basis:
(a) the qualifying amount is taken to be:
(i) for a water facility--the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or
(ii) for a horticultural plant or a grapevine--the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and
(b) for horticultural plants, you use the effective life determined under section 387 - 175 of the former Act; and
(c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40 - F of the new Act.
40 - 520 Special rule for water facilities you no longer hold
(1) This section applies to you if:
(a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount ) of expenditure on a water facility; and
(b) you do not hold the water facility at the start of 1 July 2001 .
(2) Subdivision 40 - F of the new Act applies to the water facility on the basis specified in subsection 40 - 515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act.
40 - 525 Amounts deducted for water facilities
The reference in subsection 40 - 555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40 - F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under:
(a) Subdivision 387 - B of the former Act; or
(b) section 75B of the Income Tax Assessment Act 1936 .
Subdivision 40 - G -- Capital expenditure of primary producers and other landholders
Table of sections
40 - 645 Electricity supply and telephone lines
40 - 650 Special rule for land that you no longer hold
40 - 670 Farm consultants
40 - 645 Electricity supply and telephone lines
(1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount ) of expenditure on:
(a) connecting or upgrading the supply of mains electricity to land; or
(b) a telephone line on land;
and you hold the land to which the electricity or telephone line relates at the start of 1 July 2001 .
(2) You deduct amounts for the qualifying amount under Subdivision 40 - G of the new Act in the same way you were writing it off under Division 387 of the former Act.
(3) A reference in subsection 40 - 650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40 - G of that Act includes a reference to an amount being deducted under:
(a) Subdivision 387 - F of the former Act; or
(b) section 70 of the Income Tax Assessment Act 1936 .
40 - 650 Special rule for land that you no longer hold
(1) This section applies to you if:
(a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount ) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and
(b) you do not hold the land to which the electricity or telephone line relates at the start of 1 July 2001 .
(2) Subdivision 40 - G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act.
A person approved as a farm consultant under Subdivision 387 - A of the former Act is taken to be approved as a farm consultant under section 40 - 670 of the new Act.
Subdivision 40 - I -- Capital expenditure that is deductible over time
Table of sections
40 - 825 Genuine prospectors
The exemption provided by section 330 - 60 of the former Act continues to apply to ordinary income derived before 20 August 2001 .