Commonwealth Consolidated Acts

NEW BUSINESS TAX SYSTEM (CAPITAL ALLOWANCES--TRANSITIONAL AND CONSEQUENTIAL) ACT 2001 - SCHEDULE 2

Airports (Transitional) Act 1996

1   Section   48A

Insert:

"depreciating asset" has the meaning given by subsection 995 - 1(1) of the Income Tax Assessment Act 1997 .

2   Section   48A

Insert:

"hold" a depreciating asset has the meaning given by subsection 995 - 1(1) of the Income Tax Assessment Act 1997 .

3   Section   48A (definition of quasi - owner )

Before "section   42 - 310", insert "the former".

4   After section   49A

Insert:

49B   Special rules for fixtures that are depreciating assets-- Income Tax Assessment Act 1997

  (1)   This section applies if:

  (a)   a company obtains a lease relating to particular land under section   21, 22 or 23; and

  (b)   at the time the lease was obtained, a depreciating asset is attached to the land.

  (2)   If:

  (a)   just before the land vested in the Commonwealth under Part   2:

  (i)   the part of the land to which the depreciating asset was attached was held by another entity under a quasi - ownership right over land granted by an exempt Australian government agency; and

  (ii)   the other entity was the holder of the asset; and

  (b)   on the grant of the lease referred to in paragraph   (1)(a), the other entity became a sub - lessee of the company;

then, so long as the other entity continues to hold the sub - lease of that part of the land from the company or a successor, the other entity is taken to hold the asset.

  (3)   If:

  (a)   subsection   (2) does not apply to the depreciating asset; and

  (b)   the FAC was the holder of the asset just before the land vested in the Commonwealth under Part   2;

that Division applies to the asset as if:

  (c)   the company held the asset; and

  (d)   the amount paid by the company for the grant of the lease were an amount paid for the acquisition of the right.

  (4)   However, the Minister for Finance may make a written determination of the cost of the asset referred to in subsection   (3) for the purposes of Division   40 of the Income Tax Assessment Act 1997 .

Note:   If a determination is made, the cost of the asset will be determined under item   10 of the table in subsection 40 - 180(2) of the Income Tax Assessment Act 1997 .

  (5)   The FAC must give the Minister for Finance such information as the Minister for Finance requires about the application of Subdivision   40 - D of the Income Tax Assessment Act 1997 to the asset and to the FAC.

  (6)   This section does not affect the operation of section   19 of the Civil Aviation Legislation Amendment Act 1995 .

  (7)   In this section:

"entity" has the same meaning as in section   49A.

5   After section   50A

Insert:

50B   Acquisition of depreciating asset from the Commonwealth--Division   40 of the Income Tax Assessment Act 1997

  (1)   This section applies to a depreciating asset that:

  (a)   was transferred from the Commonwealth to a company under section   23; and

  (b)   at the time of transfer, was not attached to land.

  (2)   The Minister for Finance may make a written determination of the cost of the asset for the purposes of Division   40 of the Income Tax Assessment Act 1997 .

Note:   If a determination is made, the cost of the plant will be determined under item   10 of the table in subsection 40 - 180(2) of the Income Tax Assessment Act 1997 .

  (3)   The FAC must give the Minister for Finance such information as the Minister for Finance requires about the application of Subdivision   40 - D of the Income Tax Assessment Act 1997 to the asset and to the FAC.

6   After section   51A

Insert:

51B   Acquisition of depreciating asset from the FAC--Division   40 of the Income Tax Assessment Act 1997

  (1)   This section applies to a depreciating asset that was transferred from the FAC to a company under section   30.

  (2)   The Minister for Finance may make a written determination of the cost of the asset for the purposes of Division   40 of the Income Tax Assessment Act 1997 .

Note:   If a determination is made, the cost of the plant will be determined under item   10 of the table in subsection 40 - 180(2) of the Income Tax Assessment Act 1997 .

  (3)   The FAC must give the Minister for Finance such information as the Minister for Finance requires about the application of Subdivision   40 - D of the Income Tax Assessment Act 1997 to the asset and to the FAC.

7   Subsection 52A(2) (note)

Repeal the note, substitute:

Note:   If such a determination is relevant to working out a balancing adjustment, the termination value of the plant will be determined under item   13 or 14 of the table in former section   42 - 205 of the Income Tax Assessment Act 1997 , or item   11 of the table in subsection 40 - 300(2) of that Act.

8   Subsection 52A(3)

Repeal the subsection, substitute:

  (3)   The FAC must give the Minister for Finance such information as the Minister for Finance requires about the application of former Subdivision   42 - F of the Income Tax Assessment Act 1997 , or Subdivision   40 - D of that Act, to the asset and to the FAC.

9   Paragraph 55(2)(a)

After "depreciation", insert "or capital allowances".

Note:   The heading to section   55 is altered by omitting " depreciation " and substituting " capital allowances ".

A New Tax System (Goods and Services Tax) Act 1999

10   Subsection 38 - 505(2)

Omit " * car depreciation limit", substitute " * car limit".

11   Subsection 38 - 510(2)

Omit " * car depreciation limit", substitute " * car limit".

12   Paragraph 69 - 10(1)(c)

Omit " * car depreciation limit", substitute " * car limit".

13   Section   195 - 1 (definition of car depreciation limit )

Repeal the definition, substitute:

"car limit" has the meaning given by section   40 - 230 of the * ITAA 1997.

14   Section   195 - 1 (definition of minerals )

Omit "section   330 - 25", substitute "section   40 - 730".

A New Tax System (Luxury Car Tax) Act 1999

15   Subsection 25 - 1(3)

Repeal the subsection, substitute:

  (3)   The luxury car tax threshold is:

  (a)   the car depreciation limit that applied under the former Subdivision   42 - B of the * ITAA 1997; or

  (b)   the car limit that applies under section   40 - 230 of that Act;

for the year in which the supply of the car occurred or the car was * entered for home consumption.

Bounty and Capitalisation Grants (Textile Yarns) Act 1981

16   Paragraph 3(3)(p)

Repeal the paragraph, substitute:

  (p)   depreciation of machinery, plant or equipment, other than:

  (i)   depreciation of the machinery, plant or equipment that is an allowable deduction to the producer under the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 ; or

  (ii)   depreciation of the machinery, plant or equipment for which the producer can deduct amounts under Division   40 of the Income Tax Assessment Act 1997 ;

Bounty (Computers) Act 1984

17   Paragraph 6(5)(t)

Repeal the paragraph, substitute:

  (t)   depreciation of machinery, plant or equipment, other than depreciation of machinery, plant or equipment owned by the manufacturer that is:

  (i)   depreciation allowed by the Commissioner of Taxation for the purposes of a law of the Commonwealth relating to taxation; or

  (ii)   depreciation for which the producer can deduct amounts under Division   40 of the Income Tax Assessment Act 1997 ;

Bounty (Machine Tools and Robots) Act 1985

18   Paragraph 12(6)(p)

Repeal the paragraph, substitute:

  (p)   depreciation of machinery, plant or equipment other than depreciation of machinery, plant or equipment, owned by the producer that is:

  (i)   depreciation allowed by the Commissioner of Taxation for the purposes of a law of the Commonwealth relating to taxation; or

  (ii)   depreciation for which the producer can deduct amounts under Division   40 of the Income Tax Assessment Act 1997 ;

Defence Act 1903

19   After subsection 122AA(3)

Insert:

  (4)   In calculating the deductions (if any) allowable to the company under Subdivision   40 - B of the Income Tax Assessment Act 1997 in respect of the asset, the adjustable value of the asset to the company at the time of the acquisition of the asset is the amount that would have been its adjustable value to the Commonwealth just before that time if:

  (a)   the Commonwealth had been a taxpayer; and

  (b)   the asset had been used by the Commonwealth exclusively for the purpose of producing assessable income.

Income Tax Assessment Act 1936

20   Subsection 6(1)

Insert:

"depreciating asset" has the same meaning as in the Income Tax Assessment Act 1997 .

21   Subparagraph 23AH(6)(b)(i)

Before "Division   42", insert "the former".

22   After subparagraph 23AH(6)(b)(i)

Insert:

  (ia)   a depreciating asset for which the taxpayer can, or could, apart from this section, deduct amounts for its decline in value under Division   40 of the Income Tax Assessment Act 1997 for any year of income; or

23   Subparagraph 23AH(7)(b)(i)

Before "Division   42", insert "the former".

24   After subparagraph 23AH(7)(b)(i)

Insert:

  (ia)   a depreciating asset for which the partnership can, or could, apart from this section, deduct amounts for its decline in value under Division   40 of the Income Tax Assessment Act 1997 for any year of income;

25   Subsection 51AAA(2) (table)

Repeal the table, substitute:

26   At the end of subsection 51AD(1)

Add:

Note:   This section applies to deductions under Division   40 (Capital allowances) and Division   43 (Capital works) of the Income Tax Assessment Act 1997 as if you were the owner of an asset you hold (under that Division) instead of any other person: see section   40 - 135 of that Act.

27   Subsection 51AD(3A)

Repeal the subsection.

28   Subsection 73B(1) (definition of consideration receivable )

Omit "section   42 - 205", substitute "40 - 300".

29   Subsection 73B(1) (paragraph   (a) of the definition of plant )

Repeal the paragraph, substitute:

  (a)   things that are plant within the meaning of section   45 - 40 of the Income Tax Assessment Act 1997 ; or

30   Subsection 73B(1) (paragraph   (b) of the definition of plant )

Omit "section   42 - 18", substitute "section   45 - 40".

31   Subsection 73B(4J)

Omit "Subdivision   42 - C", substitute "Subdivision   40 - B".

32   Paragraphs 73B(4J)(a) and (b)

Repeal the paragraphs, substitute:

  (a)   the company could deduct amounts for the decline in value of the relevant unit under Division   40 of that Act; and

  (b)   any reference in Division   40 of that Act to using an asset for a taxable purpose included a reference to the use of the relevant unit by or on behalf of the company exclusively for carrying on research and development activities.

33   Paragraph 73B(23)(d)

Omit "Division   42 (Depreciation)", substitute "the former Division   42 (Depreciation) or Subdivision   40 - B (Capital allowances)".

34   Paragraph 73B(24)(d)

Omit "Division   42 (Depreciation)", substitute "the former Division   42 (Depreciation) or Subdivision   40 - B (Capital allowances)".

35   Subsection 73B(30)

Before "Subdivision   330 - A" (wherever occurring), insert "the former".

36   Subsection 73B(30)

After " Income Tax Assessment Act 1997 " (wherever occurring), insert ", or under section   40 - 730, or 40 - 830 (because of subsection 40 - 840(1)) of that Act, under the former Subdivision   387 - B or 387 - G of that Act, under section   40 - 515 of that Act (for a water facility) or under Subdivision   40 - B of that Act (for a timber mill building or forestry road)".

37   Paragraph 73E(1)(c)

Omit "Division   42 (Depreciation)", substitute "the former Division   42 (Depreciation) or Subdivision   40 - B (Capital allowances)".

38   Subsection 73E(3)

Repeal the subsection, substitute:

No deduction for decline in value for transferor in year of disposal

  (3)   A deduction under the former Division   42 (Depreciation) or Subdivision   40 - B (Capital allowances) of the Income Tax Assessment Act 1997 is not allowable to the transferor in respect of the unit in relation to the year of income in which the disposal took place.

39   Subsection 73E(6)

Repeal the subsection, substitute:

Modification of capital allowance provisions applicable to transferee

  (6)   If a deduction is or becomes allowable to the transferee for the decline in value of the unit, the provisions of Division   40 (Capital allowances) of the Income Tax Assessment Act 1997 apply as if:

  (a)   the transferee had acquired the unit for a cost equal to the modified written - down value of the unit; and

  (b)   subsections 73B(21) and (22) had effect as if a reference in those subsections to the written - down value of the unit were a reference to the modified written - down value of the unit; and

  (c)   in relation to the year of income of the transferee in which the disposal took place, the component "days held" in the formula in section   40 - 70 or 40 - 75 of the Income Tax Assessment Act 1997 included the number of days in that year when the transferor both:

  (i)   held the unit within the meaning of Division   40 of the Income Tax Assessment Act 1997 ; and

  (ii)   used it for a taxable purpose within the meaning of that Division or had it installed ready for use for that purpose.

40   Subsection 73F(10)

Before "Subdivision   330 - A" (wherever occurring), insert "the former".

41   Subsection 73F(10)

After " Income Tax Assessment Act 1997 " (wherever occurring), insert ", or under section   40 - 730, or 40 - 830 (because of subsection 40 - 840(1)) of that Act".

42   Subsection 73G(1)

Omit "section   373 - 15", substitute "subsection 995 - 1(1)".

43   Paragraphs 82AE(aa) and (a)

Repeal the paragraphs, substitute:

  (aa)   structural improvements that, apart from section   45 - 40 of the Income Tax Assessment Act 1997 , are plant within the meaning of that Act; or

  (a)   plumbing fixtures and fittings to which subsection   (2) of the definition of plant in section   45 - 40 of the Income Tax Assessment Act 1997 applies; or

44   Subsection 82AM(1)

Omit "or 330 - 590".

45   Subsection 82AM(2)

Before "section   330 - 15", insert "the former".

46   Subsection 82AM(2)

After "387 - E", insert "or paragraph 40 - 515(1)(a), section   40 - 630, section   40 - 645 or section   40 - 730".

47   Paragraphs 82AM(3)(a) and (b)

Repeal the paragraphs, substitute:

  (a)   the property is a depreciating asset; and

  (b)   a deduction is allowable for it under Division   40 of the Income Tax Assessment Act 1997 ; and

  (c)   the taxpayer could have deducted the property's cost under that Act for the income year in which the taxpayer first used it for a taxable purpose (within the meaning of that Act).

48   Subsection 82AQ(1) (definition of eligible property )

Omit "42 - 18", substitute "45 - 40".

49   Paragraph 82AQ(3A)(b)

Repeal the paragraph, substitute:

  (b)   the taxpayer is the holder of the property for the purposes of Division   40 of the Income Tax Assessment Act 1997 ;

50   Subsection 82AQ(3AA)

Repeal the subsection.

51   Subsection 82AQ(3B)

Omit ", quasi - owner ".

52   Subsection 82BC(3)

Omit "an amount of depreciation", substitute "the decline in value of a depreciating asset".

53   Subsection 82CB(1) (paragraph   (e) of the definition of RHQ setup costs )

Omit "plant", substitute "depreciating assets".

54   Subsection 82KH(1) (paragraphs   (ka), (oa) and (wa) of the definition of relevant expenditure )

Omit "by section   373 - 15", substitute "in".

55   Subsection 82KH(1) (paragraph   (x) of the definition of relevant expenditure )

Omit "it is taken into account in working out under Division   373 of the Income Tax Assessment Act 1997 the taxpayer's unrecouped expenditure on the item", substitute "it is taken into account in working out under Division   40 of the Income Tax Assessment Act 1997 the adjustable value of the item to the taxpayer".

56   Subsection 82KH(1) (paragraph   (y) of the definition of relevant expenditure )

Repeal the paragraph, substitute:

  (y)   it would be so taken into account apart from item   8 in the table in subsection 40 - 180(2), or item   1 in the table in subsection 40 - 190(3) (both about non - arm's length transactions).

57   Paragraph 82KH(1AD)(b)

Repeal the paragraph, substitute:

  (b)   if paragraph   (ka), (oa) or (wa) of the definition of relevant expenditure in subsection   (1) covers the expenditure--the taxpayer deducting or being able to deduct, or not deducting or not being able to deduct, as appropriate, an amount under Division   40 of the Income Tax Assessment Act 1997 for an item of intellectual property for a year of income because the taxpayer's adjustable value of the item would be calculated under that Division by reference to the relevant expenditure; and

58   Subsection 83(2)

Omit "42 - 205", substitute "40 - 300".

59   Section   102AAB (definition of depreciation provision )

Repeal the definition, substitute:

"depreciation provision" means:

  (a)   any of sections   54 to 62 of Division   3 of Part   III of this Act, any provision of Divisions   10, 10AAA, 10AA, 10A, 10C and 10D of that Part; or

  (b)   any provision of:

  (i)   Division   40 of the Income Tax Assessment Act 1997 (other than Subdivision   40 - E); or

  (ii)   the former Division   42 of that Act (other than Subdivisions   42 - L and 42 - M); or

  (iii)   the former Subdivision   330 - A, 330 - C, 330 - H or 387 - G of that Act; or

  (c)   any provision of Division   43 of the Income Tax Assessment Act 1997 .

60   Subsection 102AAZ(3)

Before "Division   42", insert "the former".

61   At the end of section   102AAZ

Add:

  (4)   For the purpose of exercising the Commissioner's power under subsection   (2) in relation to deductions allowable under Division   40 of the Income Tax Assessment Act 1997 , the Commissioner must assume that the property was used by the trustee of the trust estate during any non - attributable year of income wholly and exclusively for a taxable purpose (within the meaning of that Division).

62   Subsection 124L(1A) (note)

Omit "Division   373", substitute "Division   40".

63   Subsection 159GE(1) (definition of capital expenditure deduction )

Repeal the definition, substitute:

"capital expenditure deduction" means a deduction:

  (a)   under Division   10, 10AAA, 10AA, 10A, 10C or 10D of this Part; or

  (b)   under Subdivision   40 - B of the Income Tax Assessment Act 1997 for a depreciating asset that is a forestry road or timber mill building; or

  (c)   under Division   43 of that Act; or

  (d)   under section   40 - 830 of that Act for an amount that is a project amount under subsection 40 - 840(1) (about mining capital expenditure and transport capital expenditure); or

  (e)   under the former Subdivision   330 - C, 330 - H or 387 - G of that Act.

64   Subsection 159GE(1) (definition of depreciation deduction )

Repeal the definition, substitute:

"depreciation deduction" means a deduction:

  (a)   in respect of depreciation under Division   3 of this Act or the former Division   42 of the Income Tax Assessment Act 1997 ; or

  (b)   for the decline in value of a depreciating asset under Division   40 of the Income Tax Assessment Act 1997 .

65   Subsection 159GE(1) (definition of Division   10, 10AA or 10A property )

Repeal the definition, substitute:

"Division 10, 10AA or 10A property" means property in relation to which there has been incurred:

  (a)   allowable capital expenditure within the meaning of Division   10 or 10AA of this Part or the former Subdivision   330 - C of the Income Tax Assessment Act 1997 or mining capital expenditure within the meaning of section   40 - 860 of that Act;

  (b)   expenditure taken into account in ascertaining an amount of residual capital expenditure specified in paragraph 122C(1)(a); or

  (c)   capital expenditure specified in subsection 124F(1) or 124JA(1) of this Act or the former section   387 - 460 of the Income Tax Assessment Act 1997 ; or

  (d)   capital expenditure on a forestry road in connection with a timber operation, or capital expenditure for the construction or acquisition of a timber mill building.

66   Subsection 159GE(1) (definition of Division   10AAA property )

Before "Subdivision   330 - H", insert "the former".

67   Subsection 159GE(1) (definition of Division   10AAA property )

After "Subdivision   330 - H", insert ", or section   40 - 865".

68   Subsection 159GE(1) (paragraph   (a) of the definition of eligible amount )

Repeal the paragraph, substitute:

  (a)   where the item is an item of eligible depreciation property:

  (i)   the amount that was the cost of the item of property to the taxpayer who owns the item for the purposes of subsection 62(1) of this Act; or

  (ii)   the amount that was the cost of the item of property within the meaning of Division   40, or the former Division   42, of the Income Tax Assessment Act 1997 to the taxpayer who holds it;

    or that would have been the cost of the item of property to the taxpayer for the purposes of that subsection or that Division if that subsection or that Division had applied in relation to the item of property, as the case requires; and

69   Subsection 159GE(1) (definition of eligible depreciation property )

Repeal the definition, substitute:

"eligible depreciation property" means:

  (a)   plant or articles within the meaning of section   54 of this Act; or

  (b)   plant within the meaning of the former section   42 - 18 of the Income Tax Assessment Act 1997 or plant within the meaning of section   45 - 40 of that Act; or

  (c)   a depreciating asset within the meaning of Division   40 of that Act.

70   Subsection 159GE(1) (definition of eligible spectrum licence )

Repeal the definition, substitute:

"eligible spectrum licence" means a spectrum licence within the meaning of the Income Tax Assessment Act 1997 .

71   At the end of subsection 159GE(1)

Add:

Note:   This Division applies to deductions under Division   40 (Capital allowances) and Division   43 (Capital works) of the Income Tax Assessment Act 1997 as if you were the owner of an asset you hold (under that Division) instead of any other person: see section   40 - 135 of that Act.

72   Subsection 159GE(9)

Repeal the subsection.

73   Subsection 159GF(1)

Repeal the subsection, substitute:

  (1)   Subject to subsection 159GJ(1), in this Division a reference to the residual amount at a particular time (in this subsection referred to as the relevant time ) in relation to the eligible amount by reason of which an item of property is eligible depreciation property at the relevant time is a reference to the eligible amount reduced by:

  (a)   where the item of property was not dealt with by the taxpayer who holds the item in the prescribed manner at any time during the period (in this subsection referred to as the relevant period ) before the relevant time when it was held by the taxpayer (within the meaning of Division   40 of the Income Tax Assessment Act 1997 )--the total amount of deductions for depreciation or decline in value that would, but for any deduction denying provision, have been allowable to the taxpayer under this Act or the Income Tax Assessment Act 1997 in respect of that item of property for the relevant period if:

  (i)   at all times during the relevant period the taxpayer had wholly and exclusively dealt with the item of property in the prescribed manner; and

  (ii)   those deductions were calculated using the diminishing value method; and

  (iii)   section   57AG, as in force immediately before the commencement of section   1 of the Taxation Laws Amendment Act 1992 , did not apply in relation to the item of property;

  (b)   where the item of property was wholly and exclusively dealt with by the taxpayer who held the item in the prescribed manner at all times during the relevant period--the total amount of deductions for depreciation or decline in value that were or, but for any deduction denying provision, would have been, allowed or allowable to the taxpayer in respect of the item of property for that period under this Act or the Income Tax Assessment Act 1997 ; and

  (c)   in any other case--the total amount of deductions for depreciation or decline in value that, but for any deduction denying provision, would have been allowable to the taxpayer who holds the item of property in respect of the item under this Act or the Income Tax Assessment Act 1997 for the relevant period if:

  (i)   the taxpayer had wholly and exclusively dealt with the item of property in the prescribed manner at all times during the relevant period; and

  (ii)   in respect of any part of the relevant period for which deductions for depreciation or decline in value were or, but for any deduction denying provision, would have been allowed or allowable under this Act or the Income Tax Assessment Act 1997 --the deductions were allowable on the same basis and at the same percentage as was or would have been allowed or allowable for that part of the relevant period; and

  (iii)   in respect of any other part (in this subparagraph referred to as the relevant part ) of the relevant period--the deductions were allowable:

  (A)   where the relevant part was immediately succeeded by another part of the relevant period in respect of which deductions for depreciation or decline in value were or, but for any deduction denying provision, would have been allowed or allowable under this Act or the Income Tax Assessment Act 1997 --on the same basis and at the same percentage as was or would have been allowed or allowable in respect of that other part; and

  (B)   in any other case--on the same basis and at the same percentage as was or, but for any deduction denying provision, would have been allowed or allowable under this Act or the Income Tax Assessment Act 1997 in respect of the part of the relevant period for which deductions for depreciation or decline in value was or would have been allowed or allowable, being the part that immediately preceded the relevant part.

74   Paragraph 159GF(3)(f)

Before "Subdivision   330 - C", insert "the former".

75   After paragraph 159GF(3)(f)

Insert:

  (fa)   so much of an amount of mining capital expenditure or transport capital expenditure (within the meaning of the Income Tax Assessment Act 1997 ) as has not been deducted under Division   40 of that Act;

76   Paragraph 159GF(3)(g)

Before "subsection 387 - 470(1)", insert "the former".

77   After paragraph 159GF(3)(g)

Insert:

  (h)   the difference between the cost of a forestry road or timber mill building for the purposes of Division   40 of the Income Tax Assessment Act 1997 and its adjustable value for the purposes of that Division;

78   Subsection 159GF(4)

Before "Subdivision   330 - H", insert "the former".

79   Subsection 159GF(4)

After "1997", insert ", or under Subdivision   40 - I of that Act for transport capital expenditure,".

80   Subsection 159GF(6)

Repeal the subsection, substitute:

  (6)   In this Division, a reference to the residual amount at a particular time in relation to an amount of expenditure because of which an item of property is an eligible spectrum licence is a reference to:

  (a)   the amount of unrecouped expenditure (within the meaning of the former section   380 - 20 of the Income Tax Assessment Act 1997 ) on that licence at that time; or

  (b)   the adjustable value of that licence (within the meaning of Division   40 of that Act) at that time.

81   Subparagraph 159GJ(1)(c)(iii)

Repeal the subparagraph, substitute:

  (iii)   in relation to any part (in this subsection referred to as the post - application part ) of the year of income that occurs after the application period (not being a part that occurs after the commencement of a subsequent application period):

  (A)   the residual amount in relation to the item of eligible depreciation property at any time (in this sub - subparagraph referred to as the relevant time ) during the post - application part is an amount ascertained in accordance with the formula:

    where:

    A is the amount that, but for this application of this section, would be the residual amount at the relevant time in relation to the eligible amount (in this subparagraph referred to as the relevant eligible amount ) by reason of which the item is an item of eligible depreciation property.

    B is:

  (a)   where paragraph   (b) of this component does not apply--the amount that, in determining the residual amount in component A, would be taken into account as depreciation under subsection 159GF(1) in respect of the application period; and

  (b)   where, in determining the residual amount in component A, depreciation deductions taken into account in respect of the post - application part would be calculated under this Act or the Income Tax Assessment Act 1997 using the diminishing value method--the amount that, in determining the residual amount in component A, would be taken into account under subsection 159GF(1) as depreciation deductions in respect of the application period and the part of the post - application part before the relevant time; and

    C is:

  (a)   where paragraph   (a) of component B applies--an amount equal to the total notional principal in relation to the relevant eligible amount in relation to the application period; and

  (b)   where paragraph   (b) of component B applies--the sum of:

  (i)   the total notional principal in relation to the relevant eligible amount in relation to the application period; and

  (ii)   the amount that, in determining the residual amount in component A, would be taken into account as depreciation deductions under subsection 159GF(1) in respect of the part of the post - application part before the relevant time if the depreciated value under this Act, the undeducted cost under the former Division   42 of the Income Tax Assessment Act 1997 or the adjustable value under Division   40 of that Act, of the item of eligible depreciation property at the beginning of the year of income in which this Division ceases to apply were equal to the residual amount at the beginning of the application period as reduced by the total notional principal in relation to the relevant eligible amount in relation to the application period;

  (B)   for the purposes of any application of this Act or the Income Tax Assessment Act 1997 , in relation to the item of property in relation to the post - application part--the depreciated value, within the meaning of Division   3 of this Part, the undeducted cost under the former Division   42 of the Income Tax Assessment Act 1997 or the adjustable value under Division   40 of that Act, of the item of property at any time during the post - application part shall be taken to be an amount equal to the residual amount in relation to the relevant eligible amount at that time as ascertained in accordance with sub-subparagraph   (A); and

  (C)   the depreciation deduction (if any) allowable to a taxpayer in relation to the item of property in relation to the post - application part is the depreciation deduction that would be allowable in respect of that period if this Division did not apply and, in the case of an item of property in relation to which paragraph 56(1)(a) of this Act or the diminishing value method under the former Division   42, or Division   40, of the Income Tax Assessment Act 1997 would, apart from this Division, apply, if the depreciated value, within the meaning of Division   3 of this Part, the undeducted cost, under the former Division   42 of the Income Tax Assessment Act 1997 or the adjustable value under Division   40 of that Act, of the item of property at the beginning of the year of income were equal to the residual amount, as ascertained under sub-subparagraph   (A), in relation to the relevant eligible amount at the commencement of the post - application part;

82   Paragraph 159GJ(1)(e)

Omit "Division   3 of this Part and Division   42 of", substitute "this Act and".

83   Paragraph 159GJ(2)(a)

Repeal the paragraph, substitute:

  (a)   no deduction is allowable to any taxpayer under:

  (i)   Division   10, 10AA or 10A of this Part; or

  (ii)   section   40 - 830 of the Income Tax Assessment Act 1997 for a project amount that is mining capital expenditure within the meaning of that Act; or

  (iii)   Subdivision   40 - B of that Act for a depreciating asset that is a forestry road or timber mill building; or

  (iv)   the former Subdivision   330 - C or 387 - G of that Act;

    in relation to any amount of expenditure (not being expenditure incurred after the application period) by reason of which the item is Division   10, 10AA or 10A property for any year of income in which the whole or a part of the application period occurs;

84   Paragraph 159GJ(2)(c)

Repeal the paragraph, substitute:

  (c)   for the purposes of the application of:

  (i)   Division   10, 10AA or 10A of this Part; or

  (ii)   section   40 - 830 of the Income Tax Assessment Act 1997 for a project amount that is mining capital expenditure within the meaning of that Act; or

  (iii)   Subdivision   40 - B of that Act for a depreciating asset that is a forestry road or timber mill building; or

  (iv)   the former Subdivision   330 - C or 387 - G of that Act;

    in relation to an amount of expenditure (not being expenditure incurred after the application period) by reason of which the item is Division   10, 10AA or 10A property at any time after the application period, there shall be taken to have been allowed in respect of the amount of expenditure a deduction under whichever of those provisions applies in respect of the amount of expenditure of an amount equal to the total notional principal in relation to the amount of expenditure in relation to the application period.

85   Paragraph 159GJ(3)(a)

Repeal the paragraph, substitute:

  (a)   no deduction is allowable to any taxpayer under:

  (i)   Division   10AAA of this Part; or

  (ii)   section   40 - 830 of the Income Tax Assessment Act 1997 for a project amount that is transport capital expenditure within the meaning of that Act; or

  (iii)   the former Subdivision   330 - H of that Act;

    in relation to any amount of expenditure (not being expenditure incurred after the application period) by reason of which the item is Division   10AAA property for any year of income in which the whole or a part of the application period occurs;

86   Paragraph 159GJ(3)(c)

Repeal the paragraph, substitute:

  (c)   for the purposes of the application of:

  (i)   Division   10AAA of this Part; or

  (ii)   section   40 - 830 of the Income Tax Assessment Act 1997 for a project amount that is transport capital expenditure within the meaning of that Act; or

  (iii)   the former Subdivision   330 - H of that Act;

    in relation to an amount of expenditure (not being expenditure incurred after the application period) by reason of which the item is Division   10AAA property for any year of income after the year of income in which this Division ceases to apply--it shall be taken to be a requirement of those provisions that the deduction allowable under any of those provisions in respect of the amount of expenditure does not exceed the residual amount in relation to the amount of expenditure as ascertained in accordance with paragraph   (b).

87   Paragraph 159GJ(5)(a)

Omit "Division   380", substitute "the former Division   380, or Division   40,".

88   Paragraph 159GJ(5)(c)

Omit "Division   380", substitute "the former Division   380, or Division   40,".

89   Paragraph 159GM(b)

Repeal the paragraph, substitute:

  (b)   the expenditure by reason of which the item of property is eligible capital expenditure property is the amount that was the cost of the item of property to the taxpayer who incurred the expenditure for the purpose of:

  (i)   subsection 62(1) of this Act; or

  (ii)   the former Subdivision   42 - B, or Subdivision   40 - C, of the Income Tax Assessment Act 1997 ;

    or that would have been the cost to the taxpayer for the purpose of that subsection or that Subdivision if that subsection or that Subdivision applied in relation to the item of property;

90   Section   159UC

Omit "section   42 - 18", substitute "section   45 - 40".

91   Paragraph 160APHJ(7)(c)

Before "subsection", insert "the former".

92   Subsection 170(10AA) (table item   20)

Omit "Section   42 - 290", substitute "The former section   42 - 290".

93   Subsection 170(10AA) (table item   180)

Omit "Section   330 - 175", substitute "The former section   330 - 175".

94   Subsection 170(10AA) (table item   180)

Omit "Section   330 - 245", substitute "The former section   330 - 245".

95   Subsection 262A(4AB)

Before "section   42 - 355", insert "the former".

96   Subsection 262A(4ACA) (note)

Repeal the note.

97   Section   317 (definition of depreciation provision )

Repeal the definition, substitute:

"depreciation provision" means:

  (a)   any of sections   54 to 62 of Division   3 of Part   III of this Act, any provision of Divisions   10, 10AAA, 10AA, 10A, 10C and 10D of that Part; or

  (b)   any provision of Division   40 of the Income Tax Assessment Act 1997 (other than Subdivision   40 - E) or of Division   43 of that Act; or

  (c)   any provision of the former Division   42 of that Act (other than Subdivisions   42 - L and 42 - M), or the former Subdivisions   330 - A, 330 - C, 330 - H and 387 - G of that Act.

98   Subsection 398(3)

Repeal the subsection, substitute:

  (3)   For the purpose of exercising his or her power under subsection   (2) to determine a notional allowable deduction in relation to:

  (a)   sections   54 to 62 of this Act; or

  (b)   the former Division   42 (Depreciation) of the Income Tax Assessment Act 1997 (other than Subdivisions   42 - L and 42 - M); or

  (c)   Division   40 of that Act (other than Subdivision   40 - E);

the Commissioner must assume that the property was used by the eligible CFC during any non - attributable income period wholly and exclusively for the purpose of producing notional assessable income.

99   Subsubparagraph 439(1)(a)(iii)(A)

Repeal the subsubparagraph, substitute:

  (A)   if the company were a resident within the meaning of section   6, depreciation would be allowable to the company under section   54 of this Act or the former Division   42 of the Income Tax Assessment Act 1997 , or the company could deduct an amount for the decline in value of a depreciating asset under Division   40 of that Act, in respect of any year of income; and

100   Subparagraph 570(1)(a)(i)

Repeal the subparagraph, substitute:

  (i)   plant or articles within the meaning of section   54 of this Act, plant within the meaning of section   45 - 40 of the Income Tax Assessment Act 1997 or a depreciating asset within the meaning of Division   40 of that Act; or

101   Subparagraph 570(1)(a)(ii)

Omit "section   373 - 15 of".

102   Paragraph 570(1)(b)

After "articles", insert ", depreciating asset".

103   Subparagraph 574(1)(a)(i)

After "articles", insert ", depreciating asset".

104   Subsection 245 - 140(1) of Schedule   2C (table of deductible expenditure)

Repeal the table, substitute:

105   Subparagraph 245 - 155(1)(b)(iv) of Schedule   2C

Omit "Division   42", substitute "the former Division   42, or Division   40,".

106   Section   57 - 10 of Schedule   2D

Omit "Division   330", substitute "Division   40".

107   After paragraph 57 - 25(4)(g) of Schedule   2D

Insert:

  (ga)   Division   40 of the Income Tax Assessment Act 1997 (about capital allowances); and

108   Paragraph 57 - 25(4)(h) of Schedule   2D

Before "Division   42", insert "the former".

109   Paragraph 57 - 25(4)(k) of Schedule   2D

Before "Division   330", insert "the former".

110   Paragraph 57 - 25(4)(l) of Schedule   2D

Before "Subdivision   387 - G", insert "the former".

111   Subsection 57 - 85(3) of Schedule   2D (table item   2)

Omit "Subdivision   387 - E", substitute "the former Subdivision   387 - E or Subdivision   40 - G".

112   Subsection 57 - 85(3) of Schedule   2D (table item   3)

Omit "Subdivision   400 - A", substitute "the former Subdivision   400 - A or Subdivision   40 - I".

113   Subsection 57 - 85(3) of Schedule   2D (table item   4)

Omit "Subdivision   400 - B", substitute "the former Subdivision   400 - B or Subdivision   40 - H".

114   Subsection 57 - 85(3) of Schedule   2D (table item   6)

Omit "Subdivision   387 - D", substitute "the former Subdivision   387 - D or Subdivision   40 - F".

115   Subsection 57 - 85(3) of Schedule   2D (table item   7A)

Omit "Subdivision   373 - B", substitute "the former Subdivision   373 - B or Subdivision   40 - B".

116   Subsection 57 - 85(3) of Schedule   2D (table item   8)

Omit "Subdivision   387 - A", substitute "the former Subdivision   387 - A or Subdivision   40 - G".

117   Subsection 57 - 85(3) of Schedule   2D (table item   10)

Omit "Subdivision   330 - C", substitute "the former Subdivision   330 - C or Subdivision   40 - I".

118   Subsection 57 - 85(3) of Schedule   2D (table item   11)

Omit "Subdivision   330 - H", substitute "the former Subdivision   330 - H or Subdivision   40 - I".

119   Subsection 57 - 85(3) of Schedule   2D (table item   12)

Omit "Subdivision   330 - I", substitute "the former Subdivision   330 - I or Subdivision   40 - H".

120   Subsection 57 - 85(3) of Schedule   2D (table item   14A)

Omit "Subdivisions   46 - B and 46 - D", substitute "the former Subdivisions   46 - B and 46 - D or Subdivisions   40 - B and 40 - E and section   40 - 335.

121   Subsection 57 - 85(3) of Schedule   2D (table item   14B)

Omit "Subdivision   380 - A", substitute "the former Subdivision   380 - A or Subdivision   40 - B".

122   Subsection 57 - 85(3) of Schedule   2D (table item   15)

Omit "Subdivision   387 - F", substitute "the former Subdivision   387 - F or Subdivision   40 - G".

123   Subsection 57 - 85(3) of Schedule   2D (table item   16)

Omit "Subdivision   387 - G", substitute "the former Subdivision   387 - G or Subdivision   40 - B".

124   Subsection 57 - 85(3) of Schedule   2D (table item   17)

Omit "Subdivision   387 - G", substitute "the former Subdivision   387 - G or Subdivision   40 - B".

125   Subsection 57 - 85(3) of Schedule   2D (table item   19)

Omit "Subdivision   387 - B", substitute "the former Subdivision   387 - B or Subdivision   40 - F".

126   Subsection 57 - 105(1) of Schedule   2D

Before "Subdivision   330 - A", insert "the former".

127   Subsection 57 - 105(1) of Schedule   2D

After "330 - C", insert "or Division   40".

128   Subsection 57 - 105(2) of Schedule   2D

Before "Subdivision   330 - A", insert "the former".

129   Subsection 57 - 110(2) of Schedule   2D (table item   2)

Before "Division   42", insert "The former".

130   Subsection 57 - 110(2) of Schedule   2D (after table item   2)

Insert:

131   Subsection 57 - 110(2) of Schedule   2D (table item   4)

Omit "Section   387 - 315", substitute "The former section   387 - 315".

132   Subsection 57 - 110(2) of Schedule   2D (table item   4)

Before "Subdivision   387 - D", insert "The former".

133   Subsection 57 - 110(2) of Schedule   2D (table item   5A)

Before "Subdivisions   373 - C", insert "The former".

134   Subsection 57 - 110(2) of Schedule   2D (table item   5A)

Before "Subdivision   373 - B", insert "The former".

135   Subsection 57 - 110(2) of Schedule   2D (table item   6)

Before "Subdivision   330 - J", insert "The former".

136   Subsection 57 - 110(2) of Schedule   2D (table item   6)

After "Whichever of the following", insert "former Subdivisions".

137   Subsection 57 - 110(2) of Schedule   2D (table item   8A)

Before "Subdivisions   380 - B", insert "The former".

138   Subsection 57 - 110(2) of Schedule   2D (table item   8A)

Before "Subdivision   380 - A", insert "The former".

139   Subsection 57 - 110(2) of Schedule   2D (table item   9)

Omit "Section   387 - 485", substitute "The former section   387 - 485".

140   Subsection 57 - 110(2) of Schedule   2D (table item   9)

Before "Subdivision   387 - G", insert "The former".

141   Subdivision   57 - N of Schedule   2D

Repeal the Subdivision, substitute:

Subdivision   57 - N -- Division not applicable in respect of certain plant

57 - 130   Plant or depreciating assets covered by Subdivision   58 - B of the Income Tax Assessment Act 1997

    Subdivision   57 - I, and Subdivision   57 - K in so far as it applies to balancing adjustments for plant or depreciating assets, do not apply in respect of an asset to which Subdivision   58 - B of the Income Tax Assessment Act 1997 applies.

142   Subparagraph 42A - 90(4)(a)(ii) of Schedule   2E

Repeal the subparagraph, substitute:

  (ii)   any amount that is included in the lessee's assessable income under subsection 59(2) or under Subdivision   40 - D, or the former Subdivision   42F or 42G, of the Income Tax Assessment Act 1997 because the lessee is taken to have disposed of the car; or

143   Subsection 42A - 105(4) of Schedule   2E

Repeal the subsection, substitute:

  (4)   If the car is afterwards acquired by an associate of the lessee, the cost of the car for the purpose of calculating its adjustable value, within the meaning of Division   40 of the Income Tax Assessment Act 1997 , at the time of the acquisition for the purposes of the application of this Act to the associate is taken to be whichever is the lesser of:

  (a)   the sum of:

  (i)   the amount that would have been the adjustable value of the car (within the meaning of the Income Tax Assessment Act 1997 ) at that time for the purposes of the application of this Act to the lessee if the lessee were not taken under this Division to have disposed of the car; and

  (ii)   any amount that is included in the lessee's assessable income under subsection 59(2), under the former Subdivision   42F or 42G of the Income Tax Assessment Act 1997 or under Subdivision   40 - D of that Act because the lessee is taken under this Division to have disposed of the car; or

  (b)   the cost of the acquisition of the car by the associate.

144   Section   42A - 120 of Schedule   2E

Omit "depreciation allowable to that person for the car, would have been reduced because of the operation of section   57AF or section   42 - 80 of the Income Tax Assessment Act 1997 ", substitute "deductions allowable to that person for the decline in value of the car, would have been reduced because of the operation of section   57AF, the former section   42 - 80 of the Income Tax Assessment Act 1997 or section   40 - 230 of that Act".

145   After paragraph 268 - 35(2)(a) of Schedule   2F

Insert:

  (aa)   deductions for the decline in value of a depreciating asset;

See Division   40 of the Income Tax Assessment Act 1997 .

146   Paragraph 268 - 35(2)(b) of Schedule   2F (note)

Before "Division   330", insert "the former".

147   Paragraph 268 - 35(2)(c) of Schedule   2F (note)

Before "Division   330", insert "the former".

148   Paragraph 268 - 40(3)(c) of Schedule   2F (note)

Omit "item   1.16", substitute "item   1.25".

Income Tax Assessment Act 1997

149   Section   10 - 5 (table item headed "balancing adjustment")

Repeal the item, substitute:

150   Section   10 - 5 (after the table item headed "bounties")

Insert:

151   Section   10 - 5 (table item headed "depreciation")

Repeal the item, substitute:

152   Section   10 - 5 (table item headed "intellectual property")

Repeal the item.

153   Section   10 - 5 (after table item headed "landcare operations)

Insert:

154   Section   10 - 5 (table item headed "leases")

Omit "see also depreciation ".

155   Section   10 - 5 (table item headed "mining")

Repeal the item, substitute:

156   Section   10 - 5 (table item headed "petroleum")

Repeal the item, substitute:

157   Section   10 - 5 (table item headed "pooled depreciated property")

Repeal the item.

158   Section   10 - 5 (table item headed "pooled software")

Repeal the item.

159   Section   10 - 5

Insert:

160   Section   10 - 5 (table item headed "software")

Repeal the item.

161   Section   10 - 5 (table item headed "spectrum licences")

Repeal the item.

162   Section   10 - 5 (table item headed "timber")

Repeal the item.

163   Section   11 - 15 (table item headed "mining")

Omit:

164   Section   12 - 5 (table item headed "balancing adjustment")

Repeal the item, substitute:

165   Section   12 - 5 (table item headed "boats")

Omit " depreciation ", substitute " capital allowances ".

166   Section   12 - 5 (table item headed "buildings")

Repeal the item, substitute:

167   Section   12 - 5 (table item headed "capital allowances")

Repeal the item, substitute:

168   Section   12 - 5 (table item headed "car disposal")

Omit " depreciation ", substitute " capital allowances ".

169   Section   12 - 5 (table item headed "controlled foreign companies")

Repeal the item, substitute:

170   Section   12 - 5 (table item headed "depreciation")

Repeal the item, substitute:

171   Section   12 - 5 (table item headed "disposal of depreciated property")

Repeal the item, substitute:

172   Section   12 - 5 (table item headed "electricity connections")

Repeal the item, substitute:

173   Section   12 - 5 (table item headed "environment")

Repeal the item, substitute:

174   Section   12 - 5 (table item headed "exploration and prospecting")

Repeal the item, substitute:

175   Section   12 - 5 (table item headed "grape vines")

Repeal the item, substitute:

176   Section   12 - 5 (table item headed "GST--acquiring or upgrading plant to meet GST obligations etc.")

Repeal the item.

177   Section   12 - 5 (table item headed "horticultural plants")

Repeal the item, substitute:

178   Section   12 - 5 (table item headed "intellectual property")

Repeal the item, substitute:

179   Section   12 - 5 (table item headed "IRUs")

Omit " depreciation ", substitute " capital allowances ".

180   Section   12 - 5 (table item headed "leases")

Omit "see also depreciation ".

181   Section   12 - 5 (table item headed "mining")

Repeal the item, substitute:

182   Section   12 - 5 (table item headed "petroleum prospecting and mining")

Repeal the item.

183   Section   12 - 5 (table item headed "plant and articles")

Repeal the item.

184   Section   12 - 5 (table item headed "pooled software")

Repeal the item.

185   Section   12 - 5 (table item headed "primary production")

Repeal the item, substitute:

186   Section   12 - 5 (table item headed "property")

Omit ", depreciation ".

187   Section   12 - 5 (table item headed "quarrying")

Repeal the item.

188   Section   12 - 5 (table item headed "software")

Repeal the item, substitute:

189   Section   12 - 5 (table item headed "spectrum licences")

Repeal the item, substitute:

190   Section   12 - 5 (table item headed "timber")

Repeal the item, substitute:

191   Section   12 - 5 (table item headed "trading ships")

Omit " depreciation ", substitute " capital allowances ".

192   Section   12 - 5 (table item headed "water")

Repeal the item, substitute:

193   Section   13 - 1 (table item headed "primary production")

Repeal the item, substitute:

194   At the end of Division   15

Add:

15 - 40   Providing mining, quarrying or prospecting information

    Your assessable income includes an amount you receive for providing * mining, quarrying or prospecting information to another entity if:

  (a)   you continue to * hold the information; and

  (b)   the amount you receive is not assessable as * ordinary income under section   6 - 5.

195   At the end of Division   17

Add:

17 - 35   Certain sections not to apply to certain assets or expenditure

    Sections   17 - 5, 17 - 10 and 17 - 15 do not apply to assets, or to expenditure, for which you can deduct amounts under Division   40 or Division   328.

Note:   See instead Subdivision   27 - B.

196   Section   20 - 5 (table item   1)

Repeal the item, substitute:

197   Section   20 - 5 (table item   3)

Omit "330 - 350(3)", substitute "40 - 750(3)".

198   Section   20 - 5 (table item   3A)

Repeal the item.

199   Subsection 20 - 30(1) (table)

Repeal the table, substitute:

200   Subsection 20 - 30(2) (after table item   2.7)

Insert:

201   Subsection 20 - 40(2) (example)

Repeal the example, substitute:

Example:   At the start of the 2002 - 03 income year, a company incurs $100,000 to start to hold a depreciating asset. The company uses the prime cost method, and the effective life is 10 years. $10,000 is deductible for the 2002 - 03 income year and for each of the following 9 income years under section   40 - 25.

  In the 2002 - 03 income year, the company receives $20,000 as recoupment. How much is assessable for the 2002 - 03 income year?

  Applying the method statement:

  After step 1: the total assessable recoupment is $20,000.

  After step 2: the recoupment already assessed is nil.

  After step 3: the unassessed recoupment is:
total assessable recoupment minus recoupment already assesse d,
i.e. $20,000 minus 0 = $20,000.

  After step 4: the total deductions for the loss or outgoing are $10,000.

  After step 5: the outstanding deductions are:
total deductions for the loss or outgoing minus recoupment already assessed, i.e. $10,000 minus 0 = $10,000.

  After step 6: the unassessed recoupment (step 3) is greater than outstanding deductions (step 5), so the amount of the outstanding deductions is included in assessable income, i.e. $10,000.

  Applying the method statement to the 2003 - 04 income year: a further $10,000 is included in the company's assessable income.

202   Subsection 20 - 45(1) (note)

Omit "section   40 - 25", substitute "Subdivision   40 - D".

203   Subsection 20 - 45(3) (example)

Repeal the example, substitute:

Example:   Continuing the example in subsection 20 - 40(2): at the start of the 2005 - 06 income year, the company:

• receives a further $10,000 as recoupment; and
• sells the depreciating asset for $75,000.

  As a result of the sale, a balancing adjustment of $5,000 is included under section   40 - 285 in the company's assessable income for that income year.

  How much of the recoupment amount received in the 2005 - 06 income year is assessable for that income year?

  Applying the method statement in subsection 20 - 40(2):

  After step 1: the total assessable recoupment is $30,000 (received during 2002 - 03 and 2005 - 06).

  After step 2: the recoupment already assessed is $20,000 (for 2002 - 03 and 2003 - 04).

  After step 3: the unassessed recoupment is:
total assessable recoupment minus recoupment already assessed,
i.e. $30,000 minus $20,000 = $10,000.

  After step 4: the total deductions for the loss or outgoing are $30,000 ($10,000 for each of 2002 - 03, 2004 - 04 and 2004 - 05), reduced by $5,000 (the amount included in assessable income for the balancing adjustment), i.e. $25,000.

  After step 5: the outstanding deductions are:
total deductions for the loss or outgoing minus recoupment already assessed, i.e. $25,000 minus $20,000 = $5,000.

  After step 6: the unassessed recoupment (step 3) is greater than outstanding deductions (step 5), so the amount of the outstanding deductions is included in assessable income, i.e. $5,000.

204   Section   20 - 55 (after table item   6)

Insert:

205   At the end of section   20 - 55

Add:

  (2)   Section   330 - 350 of this Act is also a previous recoupment law .

206   Section   20 - 100

Omit "depreciation of the car", substitute "the car's decline in value".

207   Section   20 - 120

Omit "Subdivision   42 - B (which is about working out the cost of * plant for the purposes of depreciation)", substitute "Subdivision   40 - C (which is about working out the cost of * depreciating assets)".

208   Section   20 - 120

Omit "42 - 205", substitute "40 - 300".

209   Section   20 - 120 (note 1)

Omit "depreciation of the car", substitute "the car's decline in value".

210   Section   20 - 150

Omit "sections   42 - 190 and 42 - 240", substitute "sections   40 - 285 and 40 - 370".

211   Section   20 - 150 (note)

Omit "sections   42 - 190 and 42 - 240", substitute "sections   40 - 285 and 40 - 370".

212   Subsection 25 - 5(5) (example)

Omit "depreciate your computer and deduct an amount under Division   42", substitute "deduct the decline in value of your computer under Division   40".

213   Subsection 25 - 10(1)

Omit " * plant", substitute "a * depreciating asset".

214   Division   27 (after the heading)

Insert:

Table of Subdivisions

  Guide to Division   27

27 - A   General

27 - B   Division   40

215   After section   27 - 1

Insert:

Subdivision   27 - A -- General

216   At the end of Division   27

Add:

27 - 35   Certain sections not to apply to certain assets or expenditure

    Sections   27 - 5, 27 - 10, 27 - 15 and 27 - 20 do not apply to assets, or to expenditure, for which you can deduct amounts under Division   40 or 328.

Note:   See instead Subdivision   27 - B.

Subdivision   27 - B -- Division   40

Table of sections

27 - 80   Cost or opening adjustable value of depreciating assets reduced for input tax credits

27 - 85   Cost or opening adjustable value of depreciating assets reduced: decreasing adjustments

27 - 90   Cost or opening adjustable value of depreciating assets increased: increasing adjustments

27 - 95   Balancing adjustment events

27 - 100   Pooling

27 - 105   Other Division   40 expenditure

27 - 110   Input tax credit etc. relating to 2 or more things

27 - 80   Cost or opening adjustable value of depreciating assets reduced for input tax credits

  (1)   A * depreciating asset's * cost is reduced if:

  (a)   an entity's acquisition or importation of the asset constitutes a * creditable acquisition or * creditable importation; and

  (b)   the entity is or becomes entitled to an * input tax credit for the acquisition or importation; and

  (c)   the entity can deduct amounts for the asset under Division   40 or 328.

The reduction is the amount of the input tax credit.

  (2)   A * depreciating asset's * cost is also reduced if:

  (a)   the entity that * holds the asset incurs expenditure that is included in the second element of the asset's cost for the income year in which the asset's * start time occurs; and

  (b)   the entity is or becomes entitled to an * input tax credit for the * creditable acquisition or * creditable importation to which the expenditure relates; and

  (c)   the entity can deduct amounts for the asset under Division   40 or 328.

The reduction is the amount of the input tax credit.

  (3)   However, subsections   (1) and (2) do not apply if the * cost of the * depreciating asset is modified under Division   40 to be its * market value.

  (3A)   A * depreciating asset's * opening adjustable value for an income year is reduced if:

  (a)   an entity's acquisition or importation of the asset constitutes a * creditable acquisition or * creditable importation; and

  (b)   the entity is or becomes entitled to an * input tax credit in an income year (the credit year ) for the acquisition or importation and the credit year occurs after the income year in which the acquisition or importation occurred; and

  (c)   the income year is after the one in which the asset's * start time occurs; and

  (d)   the entity can deduct amounts for the asset under Division   40 or 328.

  (4)   A * depreciating asset's * opening adjustable value for an income year is reduced if:

  (a)   the entity that * holds the asset incurs expenditure that is included in the second element of the asset's cost for that income year; and

  (b)   that income year is after the one in which the asset's * start time occurs; and

  (c)   the entity is or becomes entitled to an * input tax credit for the * creditable acquisition or * creditable importation to which the expenditure relates for the income year in which the expenditure was incurred; and

  (d)   the entity can deduct amounts for the asset under Division   40 or 328.

The reduction is the amount of the input tax credit.

  (5)   If the reduction under subsection   (2) or (4) is more than:

  (a)   for a subsection   (2) case--the * depreciating asset's * cost; or

  (b)   for a subsection   (4) case--the depreciating asset's * opening adjustable value;

the excess is included in the entity's assessable income unless the entity is an * exempt entity.

Exception: pooling

  (6)   This section does not apply to:

  (a)   a depreciating asset allocated to a low - value pool or a pool under Division   328 for or in the * current year; or

  (b)   * in - house software if expenditure on the software is allocated to a software development pool for the current year; or

  (c)   a project pool.

27 - 85   Cost or opening adjustable value of depreciating assets reduced: decreasing adjustments

  (1)   This section applies to an entity if:

  (a)   the entity can deduct amounts for a * depreciating asset under Division   40 or 328; and

  (b)   the entity has a * decreasing adjustment in an income year that relates directly or indirectly to the asset.

  (1A)   However, this section does not apply to a * decreasing adjustment that arises under Division   129 or 132 of the * GST Act.

Note:   See instead section   27 - 87.

  (2)   The asset's * cost is reduced by an amount equal to the * decreasing adjustment if the adjustment arises in the income year in which the asset's * start time occurs.

  (3)   The asset's * opening adjustable value for an income year is reduced by an amount equal to the * decreasing adjustment if the adjustment arises in that year and that year is after the one in which the asset's * start time occurs.

  (4)   If the reduction under subsection   (2) or (3) is more than:

  (a)   for a subsection   (2) case--the * depreciating asset's * cost; or

  (b)   for a subsection   (3) case--the depreciating asset's * opening adjustable value;

the excess is included in the entity's assessable income unless the entity is an * exempt entity.

Exception: pooling

  (5)   This section does not apply to:

  (a)   a depreciating asset allocated to a low - value pool or a pool under Division   328 for or in the * current year; or

  (b)   * in - house software if expenditure on the software is allocated to a software development pool for the current year; or

  (c)   a project pool.

27 - 87   Certain decreasing adjustments included in assessable income

  (1)   This section applies to an entity if:

  (a)   the entity can deduct amounts for a * depreciating asset under Division   40 or 328; and

  (b)   the entity has a * decreasing adjustment that arises under Division   129 or 132 of the * GST Act in an income year that relates directly or indirectly to the asset.

  (2)   The amount of the * decreasing adjustment is included in the entity's assessable income for the income year unless the entity is an * exempt entity.

27 - 90   Cost or opening adjustable value of depreciating assets increased: increasing adjustments

  (1)   This section applies to an entity if:

  (a)   the entity can deduct amounts for a * depreciating asset under Division   40 or 328; and

  (b)   the entity has an * increasing adjustment in an income year that relates directly or indirectly to the asset.

  (1A)   However, this section does not apply to an * increasing adjustment that arises under Division   129 or 132 of the * GST Act.

Note:   See instead section   27 - 92.

  (2)   The asset's * cost is increased by an amount equal to the * increasing adjustment if the adjustment arises in the income year in which the asset's * start time occurs.

  (3)   The asset's * opening adjustable value for an income year is increased by an amount equal to the * increasing adjustment if the adjustment arises in that year and that year is after the one in which the asset's * start time occurs.

Exception: pooling

  (4)   This section does not apply to:

  (a)   a depreciating asset allocated to a low - value pool or a pool under Division   328 for or in the * current year; or

  (b)   * in - house software if expenditure on the software is allocated to a software development pool for the current year; or

  (c)   a project pool.

27 - 92   Certain increasing adjustments can be deducted

  (1)   This section applies to an entity if:

  (a)   the entity can deduct amounts for a * depreciating asset under Division   40 or 328; and

  (b)   the entity has an * increasing adjustment that arises under Division   129 or 132 of the * GST Act in an income year that relates directly or indirectly to the asset.

  (2)   The entity can deduct the amount of the * increasing adjustment for the income year.

  (3)   However, the entity cannot deduct the amount to the extent (if any) that the adjustment arises from an increase in the extent to which the activity giving rise to the adjustment is of a private or domestic nature.

27 - 95   Balancing adjustment events

  (1)   The * termination value of a * depreciating asset is reduced if the relevant * balancing adjustment event is a * taxable supply. The reduction is an amount equal to the * GST payable on the supply.

  (2)   However, subsection   (1) does not apply if the * termination value of the * depreciating asset is modified under Division   40 to be its * market value.

  (3)   The * termination value of a * depreciating asset is increased if the entity that * held the asset has a * decreasing adjustment that relates directly or indirectly to that * taxable supply in the income year in which the * balancing adjustment event occurred. The increase is the amount of the decreasing adjustment.

  (4)   The * termination value of a * depreciating asset is decreased if the entity that * held the asset has an * increasing adjustment that relates directly or indirectly to that * taxable supply in the income year in which the * balancing adjustment event occurred. The decrease is the amount of the increasing adjustment.

  (5)   An amount is included in the assessable income of the entity that * held the asset if the entity has a * decreasing adjustment that relates directly or indirectly to that * taxable supply in a later income year. The amount included is the amount of the decreasing adjustment.

  (6)   The entity that * held the asset can deduct an amount if the entity has an * increasing adjustment that relates directly or indirectly to that * taxable supply in a later income year. The amount it can deduct is the amount of the increasing adjustment.

27 - 100   Pooling

  (1)   This section contains special rules for expenditure (the pooled expenditure ) incurred by an entity:

  (a)   on a * depreciating asset allocated to a low - value pool; or

  (b)   on a depreciating asset allocated to a pool under Division   328 for or in an income year; or

  (c)   on * in - house software if the expenditure on the software is allocated to a software development pool; and

  (d)   on * project amounts if the amounts are allocated to a project pool.

Reduction to pools etc.

  (2)   There is a reduction under subsection   (3) or (5) if:

  (a)   the pooled expenditure relates directly or indirectly to a * creditable acquisition or * creditable importation; and

  (b)   the entity is or becomes entitled to an * input tax credit in an income year (the credit year ) for the acquisition or importation and the credit year occurs after the income year in which the acquisition or importation occurred.

  (2A)   There is a reduction under subsection   (4) if:

  (a)   the pooled expenditure relates directly or indirectly to a * creditable acquisition or * creditable importation; and

  (b)   the entity is or becomes entitled to an * input tax credit in an income year (the credit year ) for the acquisition or importation.

Reduced cost of assets allocated to a pool

  (2B)   A * depreciating asset's * cost is reduced if:

  (a)   an entity's acquisition or importation of the asset constitutes a * creditable acquisition or * creditable importation; and

  (b)   the entity is or becomes entitled to an * input tax credit for the acquisition or importation and the income year in which the acquisition or importation occurred is the same as the one in which the input tax credit arose; and

  (c)   the asset is allocated to a low - value pool or a pool under Division   328 for or in that year.

The reduction is the amount of the input tax credit.

Low - value pools

  (3)   For a low - value pool, the * closing pool balance of the pool for:

  (a)   if the credit year is later than the first income year for which * depreciating assets were allocated to the pool--the income year before the credit year; or

  (b)   if the credit year is the first income year for which * depreciating assets were allocated to the pool--the credit year;

is reduced by an amount equal to the input tax credit.

Software development pools and project pools

  (4)   For a software development pool or a project pool, the expenditure in the pool for the credit year, or the * pool value for the credit year, is reduced by an amount equal to the * input tax credit.

STS pools

  (5)   For a pool under Division   328, the * opening pool balance of the pool for the credit year is reduced by an amount equal to the input tax credit.

No reduction if market value

  (5A)   However, there is no reduction to the * cost of a * depreciating asset if its cost is modified under Division   40 to be its * market value.

Second element of cost

  (6)   There is a reduction under subsection   (7) if:

  (a)   the entity incurs expenditure in an income year (also the credit year ) that is included in the second element of the * cost of a * depreciating asset allocated to a low - value pool or a pool under Division   328 for or in the credit year; and

  (b)   the entity is or becomes entitled, after the credit year, to an * input tax credit for the expenditure.

  (7)   An amount equal to the amount of the * input tax credit is applied in reduction of:

  (a)   for a low - value pool:

  (i)   if the credit year is later than the first income year for which * depreciating assets were allocated to the pool--the * closing pool balance of the pool for the income year before the credit year; or

  (ii)   if the credit year is the first income year for which * depreciating assets were allocated to the pool--the * closing pool balance of the pool for the credit year; or

  (b)   for a pool under Division   328--the * opening pool balance of the pool for the credit year.

  (7A)   There is a reduction to an amount of expenditure included in the second element of the * cost of a * depreciating asset if:

  (a)   the asset is allocated to a low - value pool or a pool under Division   328 for or in the income year in which the expenditure was incurred; and

  (b)   the entity that incurred the expenditure is or becomes entitled to an * input tax credit for the expenditure; and

  (c)   the entitlement arises in the income year in which the expenditure was incurred.

The reduction is the amount of the input tax credit.

Increasing adjustments

  (8)   There is an increase under subsection   (9) if the entity has an * increasing adjustment (except one that arises under Division   129 or 132 of the * GST Act) in an income year (the adjustment year ) that relates directly or indirectly to a * creditable acquisition or * creditable importation to which the pooled expenditure relates.

Note:   For an increasing adjustment that arises under Division   129 or 132 of the GST Act, see section   27 - 92.

  (9)   An amount equal to the amount of that * increasing adjustment is added to:

  (a)   for a low - value pool:

  (i)   if the adjustment year is later than the first income year for which * depreciating assets were allocated to the pool--the * closing pool balance of the pool for the income year before the adjustment year; or

  (ii)   if the adjustment year is the first income year for which * depreciating assets were allocated to the pool--the * closing pool balance of the pool for the adjustment year; or

  (b)   for a pool under Division   328--the * opening pool balance of the pool for the adjustment year; or

  (c)   for * in - house software--the amount of expenditure allocated to the software development pool for the adjustment year; or

  (d)   for a project pool--the * pool value for the adjustment year.

Decreasing adjustments

  (10)   There is a decrease under subsection   (11) if the entity has a * decreasing adjustment (except one that arises under Division   129 or 132 of the * GST Act) in an income year (also the adjustment year ) that relates directly or indirectly to a * creditable acquisition or * creditable importation to which the pooled expenditure relates.

Note:   For a decreasing adjustment that arises under Division   129 or 132 of the GST Act, see section   27 - 87.

  (11)   An amount equal to the amount of the * decreasing adjustment is applied in reduction of:

  (a)   for a low - value pool:

  (i)   if the adjustment year is later than the first income year for which * depreciating assets were allocated to the pool--the * closing pool balance of the pool for the income year before the adjustment year; or

  (ii)   if the adjustment year is the first income year for which * depreciating assets were allocated to the pool--the * closing pool balance of the pool for the adjustment year; or

  (b)   for a pool under Division   328--the * opening pool balance of the pool for the adjustment year; or

  (c)   for * in - house software--the amount of expenditure allocated to the software development pool for the adjustment year; or

  (d)   for a project pool--the * pool value for the adjustment year.

  (12)   If the amount available for reduction under subsection   (11) is more than the amount referred to in paragraph   (11)(a), (b), (c) or (d) (whichever is applicable), the excess is included in the entity's assessable income unless the entity is an * exempt entity.

27 - 105   Other Division   40 expenditure

  (1)   This section applies to expenditure for which an entity can deduct amounts under Division   40 (but not under Subdivision   40 - B or 40 - E, or Subdivision   40 - I to the extent that that Subdivision relates to project pools).

  (2)   The amount of the expenditure is reduced if the entity is or becomes entitled to an * input tax credit for a * creditable acquisition or * creditable importation to which the expenditure directly or indirectly relates. The reduction is the amount of the input tax credit that relates to that expenditure.

  (3)   If the entity has a * decreasing adjustment in an income year that relates directly or indirectly to the expenditure, an amount equal to the decreasing adjustment is included in the entity's assessable income for that income year.

  (4)   If the entity has an * increasing adjustment in an income year that relates directly or indirectly to the expenditure, the entity can deduct an amount equal to the increasing adjustment for that income year.

  (5)   If the entity is a partnership and section   40 - 570 or 40 - 665 applies, an amount equal to the * input tax credit, the * decreasing adjustment or the * increasing adjustment is apportioned to each of the partners as appropriate.

  (6)   However, this section does not apply to an * exempt entity.

27 - 110   Input tax credit etc. relating to 2 or more things

    This Subdivision applies to an * input tax credit, or an * increasing adjustment or * decreasing adjustment, that relates directly or indirectly to 2 or more things of which at least one is a * depreciating asset as if a reasonable proportion of the input tax credit or adjustment related directly or indirectly to each of those depreciating assets and each of those other things.

217   Paragraph 28 - 13(2)(b)

Repeal the paragraph, substitute:

  (b)   the decline in value of a car.

218   Section   28 - 30

Repeal the section, substitute:

28 - 30   Capital allowances

    If a * balancing adjustment event occurs for the * car, you will need to refer to the capital allowances rules in Division   40 to find out how using this method affects the operation of those rules. See section   40 - 370 (about balancing adjustments for some cars).

219   Subsection 28 - 45(2)

Omit " * car depreciation limit", substitute " * car limit".

220   Subsection 28 - 45(2) (note)

Repeal the note, substitute:

Note:   Section   40 - 230 deals with the car limit.

221   Section   28 - 55

Repeal the section, substitute:

28 - 55   Capital allowances

    If a * balancing adjustment event occurs for the * car, you will need to refer to the capital allowances rules in Division   40 to find out how using this method affects the operation of those rules. See section   40 - 370 (about balancing adjustments for some cars).

222   Subsection 35 - 45(2) (table item   1)

Repeal the item, substitute:

223   Paragraph 43 - 20(5)(a)

Repeal the paragraph, substitute:

  (a)   they are constructed as a result of carrying out of * environmental protection activities; and

224   Section   43 - 45

Repeal the section, substitute:

43 - 45   Certain anti - avoidance provisions

    These anti - avoidance provisions:

  (a)   section   51AD (Deductions not allowable in respect of property under certain leveraged arrangements) of the Income Tax Assessment Act 1936 ;

  (b)   Division   16D (Certain arrangements relating to the use of property) of Part   III of that Act;

apply to your deductions under this Division for an asset as if you were the owner of the asset instead of any other person.

225   Paragraph 43 - 70(2)(f)

Repeal the paragraph, substitute:

  (f)   expenditure on property for which a deduction is allowable, or would be allowable if the property were for use for the * purpose of producing assessable income, under:

  (i)   Subdivision   40 - F (about primary production depreciating assets), Subdivision   40 - G (about capital expenditure of primary producers and other landholders), Subdivision   40 - H (about capital expenditure that is immediately deductible) or Subdivision   40 - I (about capital expenditure that is deductible over time); or