Commonwealth Consolidated Acts Commonwealth Consolidated Acts
1 Chapter 2 (link note after heading)
Repeal the link note.
2 Before Part 2 - 5
Insert:
[The next Division is Division 15.]
Division 15 -- Some items of assessable income
15-1 What this Division is about
This Division sets out some items that are included in your assessable income. Remember that the general rules about assessable income in Division 6 apply to these items.
Table of sections
Operative provisions
15-3 Return to work payments
15-5 Accrued leave transfer payments
15-10 Bounties and subsidies
15-15 Profit-making undertaking or plan
15-20 Royalties
15-25 Amount received for lease obligation to repair
15-30 Insurance or indemnity for loss of assessable income
15-35 Interest on overpayments and early payments of tax
Your assessable income includes an amount you receive under an * arrangement that an entity enters into for a purpose of inducing you to resume working for, or providing services to, any entity.
15-5 Accrued leave transfer payments
Your assessable income includes an * accrued leave transfer payment that you receive.
To find out if the payment is deductible to the payer, see section 26-10.
Your assessable income includes a bounty or subsidy that:
(a) you receive in relation to carrying on a * business; and
(b) is not assessable as * ordinary income under section 6 - 5.
15-15 Profit-making undertaking or plan
(1) Your assessable income includes profit arising from the carrying on or carrying out of a profit-making undertaking or plan.
(2) This section does not apply to a profit that:
(a) is assessable as * ordinary income under section 6 - 5; or
(b) arises in respect of the sale of property acquired on or after 20 September 1985 .
Note: If you sell property you acquired before 20 September 1985 for profit-making by sale, your assessable income includes the profit: see section 25A of the Income Tax Assessment Act 1936 .
Your assessable income includes an amount that you receive as or by way of royalty within the ordinary meaning of "royalty" (disregarding the definition of royalty in subsection 995- 1(1)) if the amount is not assessable as * ordinary income under section 6 - 5.
15-25 Amount received for lease obligation to repair
Your assessable income includes an amount you receive from an entity if:
(a) you receive it as a lessor or former lessor of premises; and
(b) the entity pays you the amount for failing to comply with a lease obligation to make repairs to the premises; and
(c) the entity uses or has used the premises for the * purpose of producing assessable income; and
(d) the amount is not assessable as * ordinary income under section 6 - 5.
Note: The entity can deduct the amount: see section 25-15.
15-30 Insurance or indemnity for loss of assessable income
Your assessable income includes an amount you receive by way of insurance or indemnity for the loss of an amount (the lost amount ) if:
(a) the lost amount would have been included in your assessable income; and
(b) the amount you receive is not assessable as * ordinary income under section 6 - 5.
15-35 Interest on overpayments and early payments of tax
Your assessable income includes interest payable to you under the Taxation (Interest on Overpayments and Early Payments) Act 1983 . The interest becomes assessable when it is paid to you or applied to discharge a liability you have to the Commonwealth.
[The next Division is Division 20.]
Division 20 -- Amounts included to reverse the effect of past deductions
Table of Subdivisions
Guide to Division 20
20-A Insurance, indemnity or other recoupment for deductible expenses
20-B Disposal of a car for which lease payments have been deducted
20-1 What this Division is about
This Division includes amounts in your assessable income to reverse the effect of certain kinds of deductions.
Table of sections
20-5 Other provisions that reverse the effect of deductions
20-5 Other provisions that reverse the effect of deductions
The table lists other provisions that reverse the effect of certain kinds of deductions.
Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 .
Provisions that adjust your tax position in respect of deductions | ||
Item | In this situation: | See: |
1 | A balancing charge for property on which you incurred expenditure deductible under a capital allowance is included in your assessable income. | 40-25 and 40 - 30 |
2 | An amount you receive by way of insurance or indemnity for a loss of trading stock is included in your assessable income. | 70-115 |
3 | Because of: • petroleum resource rent tax; or • an instalment of petroleum resource rent tax; that you have deducted or can deduct, an amount is refunded, credited, paid or applied: the amount is included in your assessable income. | 330-350(3) |
4 | You receive a fringe benefit by way of reimbursement or payment of a loss or outgoing you incurred: your deduction for the loss or outgoing is reduced. | 51AH |
5 | A company receives (or becomes entitled to) an amount: • in respect of the results of research and development activities on which it incurred deductible expenditure; or • attributable to it having incurred deductible expenditure on research and development activities. The amount is included in its assessable income. | 73B(27A) |
6 | You receive an amount as recoupment of expenditure on research and development activities that you have deducted at the rate of 150%: the rate of deduction is reduced to 100%. | 73C |
7 | You receive an amount as recoupment for your local governing body election expenses: an amount is included in your assessable income. | 74A(4) |
8 | You receive superannuation benefits as a result of someone's deductible contributions: the benefits are included in your assessable income. | 82AAQ |
Subdivision 20-A -- Insurance, indemnity or other recoupment for deductible expenses
20-10 What this Subdivision is about
Your assessable income may include an amount that you receive by way of insurance, indemnity or other recoupment if:
ï‚· it is for a deductible expense; and
ï‚· it is not otherwise assessable income.
Table of sections
20-15 How to use this Subdivision
What is an assessable recoupment ?
20-20 Assessable recoupments
20-25 What is recoupment ?
20-30 Tables of deductions for which recoupments are assessable
How much is included in your assessable income?
20-35 If the expense is deductible in a single income year
20-40 If the expense is deductible over 2 or more income years
20-45 Effect of balancing charge
20-50 If the expense is only partially deductible
20-55 Meaning of previous recoupment law
20-15 How to use this Subdivision
(1) First, read sections 20-20 to 20-30 to work out whether you have received an assessable recoupment. If not, you do not need to read the rest of the Subdivision.
(2) If you have received one or more assessable recoupments, sections 20-35 to 20-55 tell you how much is included in your assessable income for an income year.
What is an assessable recoupment ?
Exclusion
(1) An amount is not an assessable recoupment to the extent that it is * ordinary income, or it is * statutory income because of a provision outside this Subdivision.
Insurance or indemnity
(2) An amount you receive as * recoupment of a loss or outgoing is an assessable recoupment if:
(a) you receive the amount by way of insurance or indemnity; and
(b) you can deduct an amount for the loss or outgoing for the * current year, or you have deducted or can deduct an amount for it for an earlier income year, under any provision of this Act.
Other recoupment
(3) An amount you receive as * recoupment of a loss or outgoing ( except by way of insurance or indemnity) is an assessable recoupment if:
(a) you can deduct an amount for the loss or outgoing for the * current year; or
(b) you have deducted or can deduct an amount for the loss or outgoing for an earlier income year;
under a provision listed in section 20-30.
General
(1) Recoupment of a loss or outgoing includes:
(a) any kind of recoupment, reimbursement, refund, insurance, indemnity or recovery, however described; and
(b) a grant in respect of the loss or outgoing.
Amount paid for you
(2) If some other entity pays an amount for you in respect of a loss or outgoing that you incur, you are taken to receive the amount as recoupment of the loss or outgoing.
Amount for disposing of right to recoupment
(3) If you dispose of your right to receive an amount as * recoupment of a loss or outgoing you are taken to receive as recoupment of the loss or outgoing any amount you receive for disposing of that right. (The disposal need not be to another entity.)
Amount received that is recoupment to an unspecified extent
(4) If you receive an amount that is, to an unspecified extent, * recoupment of a loss or outgoing, the amount is taken to be recoupment of the loss or outgoing to whatever extent is reasonable.
Balancing adjustments not covered
(5) If a balancing adjustment is required for property on which you incurred a loss or outgoing, no part of the * termination value of the property is an amount you receive as recoupment of the loss or outgoing.
Note: The termination value is usually the amount you receive because of disposal, loss or destruction of the property.
20-30 Tables of deductions for which recoupments are assessable
(1) This table shows the deductions under the Income Tax Assessment Act 1997 for which recoupments are assessable.
Note: References are to section numbers except where otherwise indicated.
Provisions of the Income Tax Assessment Act 1997 | ||
Item | Provision | Description of expense |
1.1 | 8-1 (so far as it allows you to deduct a bad debt, or part of a debt that is bad) | bad debts |
1.2 | 8-1 (so far as it allows you to deduct rates or taxes) | rates or taxes |
1.3 | 25-5 | tax-related expenses |
1.4 | 25-35 | bad debts |
1.5 | 25-45 | embezzlement or larceny by an employee |
1.6 | 25-60 | election expenses, Commonwealth and State elections |
1.7 | 25-75 | rates and land taxes on premises used to produce mutual receipts |
1.8 | 330-15 | exploration or prospecting expenditure |
1.9 | 330-80 | allowable capital expenditure relating to mining or quarrying |
1.10 | 330-370 | transport capital expenditure relating to mining or quarrying |
1.11 | 330-435 | rehabilitation expenditure relating to mining or quarrying |
1.12 | 330-485 | balancing adjustment deduction for expenditure relating to mining or quarrying |
1.13 | Subdivision 387 - A | landcare operations expenditure |
1.14 | Subdivision 387 - B | expenditure on facilities to conserve or convey water |
1.15 | Subdivision 387 - D | grapevine establishment expenditure |
1.16 | Subdivision 387 - E | mains electricity connection expenditure |
(2) This table shows the deductions under the Income Tax Assessment Act 1936 for which recoupments are assessable.
Note: References are to section numbers except where otherwise indicated.
Provisions of the Income Tax Assessment Act 1936 | ||
Item | Provision | Description of expense |
2.1 | 51(1) (so far as it allows you to deduct a bad debt, or part of a debt that is bad) | bad debts |
2.2 | 51(1) (so far as it allows you to deduct rates or taxes) | rates or taxes |
2.3 | 63 | bad debts |
2.4 | 69 | tax-related expenses |
2.5 | 70A(3) | mains electricity connection expenditure |
2.6 | 71 | embezzlement or larceny by an employee |
2.7 | 72 | rates and land tax |
2.8 | 73B | research and development activity expenditure |
2.9 | 74 | election expenses, Commonwealth and State elections |
2.10 | 75AA(1) or (6) | grape vine establishment expenditure |
2.11 | 75B(2) or (3A) | water conservation or conveyance expenditure |
2.12 | 75D(2) | land degradation prevention expenditure |
2.13 | 82AB | development allowance expenditure |
2.14 | 82BB | environmental impact study expenditure |
2.15 | 82BK | environmental protection expenditure |
2.16 | 82Z(1) | currency exchange loss |
2.17 | Division 10 of | mining and quarrying expenditure |
2.18 | Division 10AAA of Part III | expenditure on transport of minerals and quarry materials |
2.19 | Division 10AA of Part III | expenditure on prospecting and mining for petroleum |
2.20 | 124BA | expenditure on rehabilitating mining, quarrying and petroleum sites |
2.21 | 124ZZF | horticultural plant establishment expenditure (effective life of the plant less than 3 years) |
2.22 | 124ZZG | horticultural plant establishment expenditure (effective life of the plant more than 3 years) |
2.23 | 628 | drought mitigation property expenditure by a primary producer |
2.24 | 636 | drought mitigation property expenditure by a leasing company |
How much is included in your assessable income?
20-35 If the expense is deductible in a single income year
(1) Your assessable income includes an * assessable recoupment of a loss or outgoing if:
(a) you can deduct the whole of the loss or outgoing for the * current year; or
(b) you have deducted or can deduct the whole of the loss or outgoing for an earlier income year.
Note 1: The operation of this section may be affected if a balancing charge has been included in your assessable income because of a deduction for the loss or outgoing: see section 20-45.
Note 2: Recoupment of a loss or outgoing for which you can deduct amounts over more than one income year is covered by section 20-40.
Note 3: Recoupment of a loss or outgoing that is only partially deductible is covered by section 20-50.
Total assessed not to exceed the loss or outgoing
(2) The total of all amounts that subsection (1) includes in your assessable income for one or more income years in respect of a loss or outgoing cannot exceed the amount of the loss or outgoing.
Recoupment received before income year of the deduction
(3) If:
(a) you can deduct the whole of a loss or outgoing for the * current year; and
(b) before the current year you received an * assessable recoupment of the loss or outgoing;
your assessable income for the current year includes so much of the recoupment as subsection (1) would have included if you had instead received the recoupment at the start of the current year.
20-40 If the expense is deductible over 2 or more income years
(1) This section includes an amount in your assessable income if:
(a) you receive in the * current year an * assessable recoupment of a loss or outgoing for which you can deduct amounts over 2 or more income years; or
(b) you received in an earlier income year an * assessable recoupment of a loss or outgoing of that kind (unless all of the recoupment has already been included in your assessable income for one or more earlier income years by this section or a * previous recoupment law).
(This section applies even if the recoupment was received before the first of those income years.)
Note: Recoupment of a loss or outgoing that is only partially deductible is covered by section 20-50.
(2) Work out as follows how much is included in your assessable income for t he * current year because of one or more * assessable recoupments of the loss or outgoing.
Note: The method statement ensures that assessable recoupments are included:
Method statement
Step 1. Add up all the * assessable recoupments of the loss or outgoing that you have received (in the * current year or earlier). The result is the total assessable recoupment .
Step 2 . Add up the amounts (if any) included in your assessable income for earlier income years, in respect of the loss or outgoing, by this section or a * previous recoupment law. The result is the recoupment already assessed . (If no amount was included, the recoupment already assessed is nil.)
Step 3 . Subtract the recoupment already assessed from the total assessable recoupment. The result is the unassessed recoupment .
Step 4. Add up each amount that you can deduct for the loss or outgoing for the * current year, or you have deducted or can deduct for the loss or outgoing for an earlier income year. The result is the total deductions for the loss or outgoing .
Note: The total deductions may be reduced if an amount has been included in your assessable income because of a balancing adjustment: see section 20-45.
Step 5 . Subtract the recoupment already assessed from the total deductions for the loss or outgoing. The result is the outstanding deductions .
Step 6. The unassessed recoupment is included in your assessable income, unless it is greater than the outstanding deductions. In that case, the amount of the outstanding deductions is included instead.
Example: At the start of the 1997-98 income year, a mining company incurs $100,000 of expenditure on mining operations. $10,000 is deductible for the 1997-98 income year and for each of the following 9 income years under section 330-80.
In the 1997-98 income year, the company receives $20,000 as recoupment. How much is assessable for the 1997-1998 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 - recoupment
already assessed,
ie $20,000 - 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 -
recoupment already assessed, ie $10,000 - 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, ie $10,000.
Applying the method statement to the 1998-99 income year: a further $10,000 is included in the company's assessable income.
20-45 Effect of balancing charge
(1) This section may affect the operation of section 20-35 or 20-40 (as appropriate) if:
(a) a balancing adjustment is required for the * current year (or for an earlier income year) because you have deducted or can deduct an amount for an income year for the loss or outgoing; and
(b) an amount (the balancing charge ) is included in your assessable income for the * current year (or for the earlier income year) because of the balancing adjustment.
To find out about balancing adjustments, see section 40-25.
Effect on section 20-35
(2) In applying section 20-35, treat each of the following as reduced by the balancing charge:
(a) the amount of the loss or outgoing;
(b) the total of what you can deduct for the loss or outgoing for the * current year, or have deducted or can deduct for an earlier income year.
Effect on section 20-40
(3) In applying the method statement in subsection 20-40(3), reduce the total deductions for the loss or outgoing by the balancing charge.
Example: Continuing the example in subsection 20-40(3): during the 2000-2001 income year, the mining company:
As a result of the sale, a balancing charge of $5,000 is included under section 330-485 in the company's assessable income for that income year.
How much of the recoupment amount received in the 2000-2001 income year is assessable for that income year?
Applying the method statement in subsection 20-40(3):
After Step 1: the total assessable recoupment is $30,000 (received during 1997 - 98 and 2000-2001).
After Step 2: the recoupment already assessed is $20,000 (for 1997 - 98 and 1998-99).
After Step 3: the unassessed recoupment is:
total assessable recoupment -
recoupment already assessed,
ie $30,000 - $20,000 = $10,000.
After Step 4: the total deductions for the loss or outgoing are $30,000 ($10,000 for each of 1997-98, 1998-99 and 1999-2000), reduced by $5,000 (the amount included in assessable income for the balancing adjustment), ie $25,000.
After Step 5: the outstanding deductions are:
total deductions for the
loss or outgoing - recoupment already assessed, ie $25,000 - $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, ie $5,000.
20-50 If the expense is only partially deductible
(1) This section extends the operation of section 20-35 or 20-40 (as appropriate) to a case where the total of what you can deduct under a provision (the deduction provision ) for a loss or outgoing is limited to a proportion of the loss or outgoing.
(2) If you receive an * assessable recoupment of the loss or outgoing, section 20-35 or 20-40 applies as if:
(a) you had incurred only that proportion of the loss or outgoing, but could deduct the whole of that proportion under the deduction provision; and
(b) you had received only that proportion of the recoupment.
Example: You incur expenditure of $500. A provision listed in section 20-30 entitles you to deduct 10% of the expenditure ($50) over 5 years. This means you can deduct $10 in each of the 5 years.
You recoup $300 of the expenditure. This section treats you as receiving only 10% of the recoupment. Therefore, $30 is dealt with by section 20-40.
20-55 Meaning of previous recoupment law
"Previous recoupment law" means a provision of the Income Tax Assessment Act 1936 listed in this table.
Previous recoupment law | ||
|
| What kind of expense the provision relates to: |
1 | 26(j) (so far as it relates to an amount received for or in respect of a loss or outgoing that is an allowable deduction) | a loss or outgoing that is an allowable deduction |
2 | 26(k) | embezzlement or larceny by an employee |
3 | 63(3) | bad debts |
4 | 69(8) | tax-related expenses |
5 | 70A(5) | mains electricity connection expenditure |
6 | 72(2) (so far as it relates to a refund of an amount allowed or allowable as a deduction) | rates or taxes |
7 | 74(2) | election expenses, Commonwealth and State elections |
Subdivision 20-B -- Disposal of a car for which lease payments have been deducted
20-100 What this Subdivision is about
This Subdivision reverses the effect of deductions for lease payments for a car leased to you (or to your associate), but only if you make a profit by disposing of the car after acquiring it from the lessor. The smallest of these amounts is included in your assessable income:
ï‚· your profit on the disposal;
ï‚· the total deductible lease payments for the period of the lease;
ï‚· the total amounts you could have deducted for depreciation of the car if, instead of leasing it, you had owned it and used it solely for the purpose of producing assessable income.
Table of sections
20-105 Map of this Subdivision
The usual case
20-110 Disposal of a leased car for profit
20-115 Working out the profit on the disposal
20-120 Meaning of notional depreciation
The associate case
20-125 Disposal of a leased car for profit
Successive leases
20-130 Successive leases
Previous disposals of the car
20-135 No amount included if earlier disposal for market value
20-140 Reducing the amount to be included if there has been an earlier disposal
Miscellaneous rules
20-145 No amount included if you inherited the car
20-150 Reducing the amount to be included if another provision requires you to include an amount for the disposal
20-155 Exception for particular cars taken on hire
Disposals of interests in a car: special rules apply
20-160 Disposal of an interest in a car
20-105 Map of this Subdivision
20-110 Disposal of a leased car for profit
(1) Your assessable income includes the * profit you make on disposing of a * car if:
(a) the car was designed mainly for carrying passengers; and
(b) the car was leased to you and has been leased to no-one else; and
(c) you or another entity can deduct for the income year any of the lease payments paid or payable by you, or have deducted or can deduct any of them for an earlier income year, under this Act; and
(d) you acquired the car from the lessor.
Note 1: Even if subsection (1) does not apply, an amount may still be included in your assessable income:
Note 2: In some cases you do not include an amount in your assessable income:
(2) However, the amount included cannot exceed the smaller of these limits:
(a) the total lease payments for the lease that you or another entity have deducted or can deduct under this Act for an income year;
(b) the amount of * notional depreciation for the lease period.
Note 1: If, because of more than one lease of the car, there is more than one way to work out the amount to be included, you only include the largest amount: see sec tion 20-130.
Note 2: In some cases you reduce the amount to be included:
(3) You increase those limits if you have previously leased the * car from the same lessor, or from an * associate of that lessor.
You increase the first limit by the total lease payments for each previous lease of that kind that you or another entity have deducted or can deduct under this Act for an income year.
You increase the second limit by the amount of * notional depreciation for the period of each previous lease of that kind.
20-115 Working out the profit on the disposal
(1) The profit on the disposal is the amount by which the * consideration receivable for the disposal exceeds:
ï‚· the amount it cost you to acquire the * car;
plus:
ï‚· any capital expenditure you incurred on the car after acquiring it.
(2) The consideration receivable is worked out using this table:
Consideration receivable for the disposal of the car | ||
Item | In this situation: | the consideration receivable is: |
1 | you sell the * car for a price specific to it | that price, less the expenses of the sale |
2 | you sell the * car with other property without a specific price being allocated to it | the part of the total sale price that is reasonably attributable to the car less the part of the reasonably attributable expenses of the sale |
3 | you trade the * car in and buy another car | the value of the trade-in, plus any other consideration you receive |
4 | you sell the * car and another entity buys another car | the amount by which the cost of the other car is reduced by the sale, plus any other consideration you receive |
5 | you dispose of the * car to an insurer because it is lost or destroyed | the amount or value received or receivable under the insurance policy |
20-120 Meaning of notional depreciation
This is how to work out the notional depreciation for a lease period:
Method statement
Step 1. Compare:
• the * car's * cost to the lessor for the purposes of Subdivision 42-B (which is about working out the cost of * plant for the purposes of depreciation);
with:
• the car's * termination value for the purposes of section 42-205 when the lessor disposed of it.
Step 2. If the car's cost exceeds the car's termination value, multiply the excess by:
• the number of days in the lease period;
divided by:
• the number of days the lessor owned the car.
Step 3. The result is the notional depreciation for the lease period.
Step 4 . If the car's cost does not exceed the car's termination value, the notional depreciation for the lease period is zero.
Note 1: The notional depreciation f or the lease period represents:
adjusted by:
Note 2: The car's cost to the lessor is worked out differently if the lessor acquired it in the 1996-97 income year or an earlier income year: see section 20-105 of the Income Tax (Transitional Provisions) Act 1997 .
Note 3: The car's termination value is worked out differently if the lessor disposed of it in the 1996-97 income year or an earlier income year: see section 20- 110 of the Income Tax (Transitional Provisions) Act 1997 .
20-125 Disposal of a leased car for profit
(1) Your assessable income includes the * profit you make on disposing of a * car if:
(a) section 20-110 does not include an amount in your assessable income because of the disposal; and
(b) the car was designed mainly for carrying passengers; and
(c) the car was leased to you or your * associate; and
(d) you, your associate or another entity can deduct for the income year any of the lease payments paid or payable by the lessee, or have deducted or can deduct any of them for an earlier income year, under this Act; and
(e) either:
(i) you, your associate, or entities including you or your associate, acquired the car from the lessor; or
(ii) another entity acquired the car from the lessor under an * arrangement that enabled you or your associate to acquire the car.
Note 1: Even if subsection (1) does not apply, an amount may be included in your assessable income if you disposed of an interest in a car (rather than the car itself): see section 20-160.
Note 2: In some cases you do not include an amount in your assessable income:
(2) However, the amount included cannot exceed the smallest of these limits:
(a) the total lease payments for the lease that you, your * associate or another entity have deducted or can deduct under this Act for an income year;
(b) the amount of * notional depreciation for the lease period;
(c) if an entity other than you, or if entities including you, acquired the * car from the lessor--the amount by which the * consideration receivable for the disposal of the car by you exceeds the total of:
(i) the car's cost to that entity, or those entities; and
(ii) any capital expenditure that entity, or any of those entities, incurred on the car after that acquisition and before you acquired it.
Note 1: If, because of more than one lease of the car, there is more than one way to work out the amount to be included, you only include the largest amount: see section 20-130.
Note 2: In some cases you reduce the amount to be included:
Example: Your associate leases a car for 5 years and t hen acquires it from the lessor for $4,000. Your associate sells it to you for $3,000. You sell it for $10,000.
Your profit is $10,000 (the consideration receivable) less $3,000 (the car's cost to you) = $7,000.
The first 2 limits on the amount to be included in your assessable income are $9,000 (total deductible lease payments for the lease) and $8,000 (notional depreciation for the lease period).
Since your associate acquired the car from the lessor, the third limit is $10,000 (the consideration receivable by you) less $4,000 (the car's cost to the associate) = $6,000.
The amount you include in your assessable income cannot exceed the smallest of the limits. So, you do not include your profit of $7,000. Instead, you include $6,000 (the smallest of the limits).
(3) You increase the first 2 limits if you, or your associate, have previously leased the * car from the same lessor, or from an associate of that lessor.
You increase the first limit by the total lease payments for each previous lease of that kind that you, your * associate or another entity have deducted or can deduct under this Act for an income year.
You increase the second limit by the amount of * notional depreciation for the period of each previous lease of that kind.
If, because of 2 or more leases of the * car, there are different amounts that could be included in your assessable income because of the disposal, only the largest of those amounts is included.
20-135 No amount included if earlier disposal for market value
You do not include an amount in your assessable income because of the disposal if, after the lessor disposed of the * car and before you disposed of it, an entity other than you disposed of the car and:
(a) the * consideration receivable for that disposal was at least the market value of the car at the time of that disposal; or
(b) because of that disposal, that market value was included, or an amount worked out using that market value was included, in the entity's assessable income under this Act.
20-140 Reducing the amount to be included if there has been an earlier disposal
Each limit on the amount to be included in your assessable income because of your disposal of the * car is reduced if, after the lease period began and before your disposal, the car, or an interest in it, was disposed of in one of these situations:
Reducing each limit on the amount to be included | ||
Item | In this situation: | reduce each limit by: |
1 | Section 20-110 or 20-125 included an amount in your assessable income in respect of such an earlier disposal by you | that amount |
2 | Section 20-110 or 20-125 included an amount in another entity's assessable income in respect of such an earlier disposal by the other entity | that amount |
3 | Section 20-110 or 20-125 would have included an amount in your assessable income in respect of such an earlier disposal by you but for the operation of section 20-145 | that amount |
4 | Section 20-110 or 20-125 would have included an amount in another entity's assessable income in respect of such an earlier disposal by the other entity but for the operation of section 20 - 145 | that amount |
5 | Section 20-150 reduced the amount to be included in your assessable income in respect of such an earlier disposal by you | the amount of the reduction |
6 | Section 20-150 reduced the amount to be included in another entity's assessable income in respect of such an earlier disposal by the other entity | the amount of the reduction |
Examples: Your associate leases a car for 5 years and then acquires it. Your associate disposes of it to you and section 20-110 includes $500 in your associate's assessable income.
You later dispose of the car.
In working out the amount to include in your assessable income for your disposal, you can reduce each limit in subsection 20-125(2) by $500 because the disposal by your associate occurred after the lease period began.
Contrast this case:
You lease a car for 5 years and then acquire it. You dispose of it to another entity and section 20-110 includes $1,000 in your assessable income.
You lease the car from that entity for 2 years and then acquire it. You later dispose of it.
In working out the amount to include in your assessable income in respect of the second lease, you cannot reduce each limit in subsection 20 - 110(2) by $1,000 because the first disposal did not occur after the start of that lease.
Note: If the earlier disposal occurred in the 1996-97 income year or an earlier income year, each limit may be able to be reduced by a further amount: see section 20-115 of the Income Tax (Transitional Provisions) Act 1997 .
20-145 No amount included if you inherited the car
You do not include an amount in your assessable income because of the disposal if you inherited the * car.
The amount to be included in your assessable income because of the disposal is reduced by any amount that another provision of this Act (except sections 42-190 and 42-240) requires you to include in your assessable income because of the disposal.
Note: Sections 42-190 and 42-240 are about including an amount after making a balancing adjustment on the disposal of a car.
20-155 Exception for particular cars taken on hire
This Subdivision does not apply to these kinds of leases:
(a) letting a * car on hire under a hire purchase agreement; or
(b) letting a * car on hire under an agreement of a kind ordinarily entered into by people who take cars on hire intermittently on an hourly, daily, weekly or monthly basis.
Disposals of interests in a car: special rules apply
20-160 Disposal of an interest in a car
(1) This Subdivision applies to the disposal of an interest in a * car in almost the same way as it does to the disposal of the car itself. The differences are set out below.
(2) Your assessable income includes so much of your * profit on the disposal as is reasonable. The limits in subsections 20-110(2) and 20-125(2) do not apply.
(3) The cost of the interest to you is taken to be a reasonable amount.
(4) Sections 20-135 and 20-140 do not apply to the disposal.
Note 1: Section 20-135 says that you do not include an amount if there has been an earlier disposal of the car for market value.
Note 2: Section 20-140 allows you to reduce the amount to be included if there has been an earlier disposal of the car.
(5) Section 20-145 applies to the disposal if you inherited either the interest or the * car itself.
Note: Section 20-145 says that you do not include an amount if you inherited the car.
[The next Part is Part 2-5.]
3 Part 2-5 (link note after heading)
Omit " Division 26 ", substitute " Division 25 ".
4 Before Division 26
Insert:
Division 25 -- Some amounts you can deduct
25-1 What this Division is about
This Division sets out some amounts you can deduct. Remember that the general rules about deductions in Division 8 (which is about general deductions) apply to this Division.
Table of sections
Operative provisions
25-5 Tax-related expenses
25-10 Repairs
25-15 Amount paid for lease obligation to repair
25-20 Lease document expenses
25-25 Borrowing expenses
25-30 Expenses of discharging a mortgage
25-35 Bad debts
25-40 Loss from profit-making undertaking or plan
25-45 Loss by theft etc.
25-50 Payments of pensions, gratuities or retiring allowances
25-55 Payments to associations
25-60 Parliament election expenses
25-70 Deduction for election expenses does not extend to entertainment
25-75 Rates and land taxes on premises used to produce mutual receipts
(1) You can deduct expenditure you incur to the extent that it is for:
(a) managing your * tax affairs; or
(b) complying with an obligation imposed on you by a * Commonwealth law, insofar as that obligation relates to the * tax affairs of an entity; or
(c) interest under section 170AA (Underpayment of tax) or 207A (Late payment of tax) of the Income Tax Assessment Act 1936 .
Note: To find out whether a trustee of a deceased estate can deduct expenditure under this section, see subsection 69(7) of the Income Tax Assessment Act 1936 .
No deduction for certain expenditure
(2) You cannot deduct under subsection (1):
(a) * tax; or
(b) an amount payable under Part VI (Collection and recovery of tax) of the Income Tax Assessment Act 1936 ; or
(c) expenditure for borrowing money (including payments of interest) to pay an amount covered by paragraph (a) or (b); or
(d) expenditure for a matter relating to the commission (or possible commission) of an offence against an * Australian law or a * foreign law; or
(e) a fee or commission for advice about the operation of a * Commonwealth law relating to taxation, unless that advice is provided by a * recognised tax adviser.
No deduction for expenditure excluded from general deductions
(3) You cannot deduct expenditure under subsection (1) to the extent that a provision of this Act (except section 8-1) expressly prevents or limits your deducting it under section 8- 1 (about general deductions). It does not matter whether the provision specifically refers to section 8- 1.
No deduction for capital expenditure
(4) You cannot deduct capital expenditure under subsection (1). However, for this purpose, expenditure is not capital expenditure merely because the * tax affairs concerned relate to matters of a capital nature.
Example: Under this section, you can deduct expenditure you incur in applying for a private ruling on whether you can depreciate an item of property.
Use of property taken to be for income producing purpose
(5) Under some provisions of this Act it is important to decide whether you used property for the * purpose of producing assessable income. For provisions of that kind, your use of property is taken to be for that purpose insofar as you use the property for:
(a) managing your * tax affairs; or
(b) complying with an obligation imposed on you by a * Commonwealth law, insofar as that obligation relates to the * tax affairs of another entity.
Example: You buy a computer to prepare your tax returns. The expenditure you incur in buying the computer is capital expenditure and cannot be deducted under this section.
However, to the extent that you use the computer in preparing your income tax return, you will be able to depreciate your computer and deduct an amount under section 54 (Depreciation) of the Income Tax Assessment Act 1936 . That is because, under this subsection, the computer is property that you are taken to use for the purpose of producing assessable income.
(6) If another provision of this Act expressly provides that a particular use of property is not taken to be for the * purpose of producing assessable income, that provision overrides subsection (5).
(1) You can deduct expenditure you incur for repairs to premises (or part of premises), * plant, machinery, tools or articles that you held or used solely for the * purpose of producing assessable income.
Property held or used partly for that purpose
(2) If you held or used the property only partly for that purpose, you can deduct so much of the expenditure as is reasonable in the circumstances.
No deduction for capital expenditure
(3) You cannot deduct capital expenditure under this section.
25-15 Amount paid for lease obligation to repair
You can deduct an amount that you pay for failing to comply with a lease obligation to make repairs to premises if you use or have used the premises for the * purpose of producing assessable income.
Note: The amount is assessable income of the entity to which you pay it: either as ordinary income under section 6-5 or because it is included by section 15-25.
(1) You can deduct expenditure you incur for preparing, registering or stamping:
(a) a lease of property; or
(b) an assignment or surrender of a lease of property;
if you have used or will use the property solely for the * purpose of producing assessable income.
Property used partly for that purpose
(2) If you have used, or will use, the leased property only partly for that purpose, you can deduct the expenditure to the extent that you have used, or will use, the leased property for that purpose.
(1) You can deduct expenditure you incur for borrowing money, to the extent that you use the money for the * purpose of producing assessable income. In most cases the deduction is spread over the *period of the loan.
For the cases where the deduction is not spread, see subsection (6).
Note: Your deductions under this section may be reduced if any of your commercial debts have been forgiven in the income year: see Subdivision 245-E of Schedule 2C to the Income Tax Assessment Act 1936 .
Income year when money used solely for the purpose of producing assessable income
(2) You can deduct for an income year the maximum amount worked out under subsection (4) if you use the borrowed money during that income year solely for the * purpose of producing assessable income.
Example: In 1997-98 you borrow $100,000 and incur expenditure of $1,500 for the borrowing. You use the money to buy a house. Throughout 1998 - 99 you rent the house to a tenant. You can deduct for the expenditure for 1998 - 99 the maximum amount worked out under subsection (4).
Income year when borrowed money used partly for that purpose
(3) If you use the money only partly for that purpose during that income year, you can deduct the proportion of that maximum amount that is appropriate having regard to the extent that you used the borrowed money for that purpose.
Note: You cannot deduct anything for that income year if you do not use the money for that purpose at all during that income year.
Maximum deduction for an income year
(4) You work out as follows the maximum amount that you can deduct for the expenditure for an income year:
Method statement
Step 1. Work out the remaining expenditure as follows:
• For the income year in which the * period of the loan begins, it is the amount of the expenditure.
• For a later income year, it is the amount of the expenditure reduced by the the maximum amount that you can deduct for the expenditure for each earlier income year.
Step 2. Work out the remaining loan period as follows:
• For the income year in which the * period of the loan begins, it is the period of the loan (as determined at the end of the income year).
• For a later income year, it is the period from the start of the income year until the end of the period of the loan (as determined at the end of the income year).
Step 3. Divide the remaining expenditure by the number of days in the remaining loan period.
Step 4. Multiply the result from Step 3 by the number of days in the remaining loan period that are in the income year.
Example: To continue the example in subsection (2): suppose the original period of the loan is 4 years starting on 1 September 1997 . What is the maximum amount you can deduct for the expenditure for 1997 - 98?
Applying the method statement:
After Step 1: the remaining expenditure is $1,500 (the amount of the expenditure).
After Step 2: the remaining loan period is 4 years from 1 September 1997 (1,461 days).
After Step 3: the result is $1,500 divided by 1,461 = $1.03.
After Step 4: the result is $1.03 multiplied by 302 days = $310.06.
Suppose you repay the loan early, on 31 December 1998 . What is the maximum amount you can deduct for the expenditure for 1998-99?
Applying the method statement:
After Step 1: the remaining expenditure is $1,500 (the amount of the expenditure) reduced by $310.06 (the maximum amount you can deduct for 1997-98) = $1,189.94.
After Step 2: the remaining loan period is the period from 1 July 1998 to 31 December 1998 (183 days).
After Step 3: the result is $1,189.94 divided by 183 days = $6.50.
After Step 4: the result is $6.50 multiplied by 183 days = $1,189.94.
Meaning of period of the loan
(5) The period of the loan is the shortest of these periods:
(a) the period of the loan as specified in the original loan contract;
(b) the period starting on the first day on which the money was borrowed and ending on the day the loan is repaid;
(c) 5 years starting on the first day on which the money was borrowed.
When deduction not spread
(6) If the total of the following is $100 or less:
(a) each amount of expenditure you incur in an income year for borrowing money you use during that income year solely for the * purpose of producing assessable income;
(b) for each amount of expenditure you incur in that income year for borrowing money you use during that income year only partly for that purpose--the proportion of that amount that is appropriate having regard to the extent that you use the money during that income year for that purpose;
you can deduct for the income year:
(c) each amount covered by paragraph (a); and
(d) each proportion covered by paragraph (b).
25-30 Expenses of discharging a mortgage
Mortgage for borrowed money
(1) You can deduct expenditure you incur to discharge a mortgage that you gave as security for the repayment of money that you borrowed if you used the money solely for the * purpose of producing assessable income.
Mortgage for property bought
(2) You can deduct expenditure you incur to discharge a mortgage that you gave as security for the payment of the whole or part of the purchase price of property that you bought if you used the property solely for the * purpose of producing assessable income.
Money or property used partly for that purpose
(3) If you used the money you borrowed, or the property you bought, only partly for the * purpose of producing assessable income, you can deduct the expenditure to the extent that you used the money or property for that purpose.
No deduction for payments of principal or interest
(4) You cannot deduct payments of principal or interest under this section.
(1) You can deduct a debt (or part of a debt) that you write off as bad in the income year if:
(a) it was included in your assessable income for the income year or for an earlier income year; or
(b) it is in respect of money that you lent in the ordinary course of your * business of lending money.
Note: If a bad debt is in respect of a payment that is required to be made under a qualifying security (within the meaning of Division 16E of Part III of the Income Tax Assessment Act 1936 ): see subsection 63(1A) of that Act.
Writing off a debt you have bought
(2) You can deduct a debt that you write off as bad in the income year if you bought the debt in the ordinary course of your * business of lending money. However, you cannot deduct more than the expenditure you incurred in buying the debt.
Writing off part of a debt you have bought
(3) You can deduct a part of a debt if:
(a) you write off that part as bad in the income year; and
(b) you bought the debt in the ordinary course of your * business of lending money.
(4) However, the maximum that you can deduct under subsection (3) for one or more income years is the amount (if any) by which:
• the expenditure you incurred in buying the debt;
exceeds:
• so much of the debt as has not yet been written off as bad.
Special rules affecting deductions under this section
(5) Your entitlement to deductions under this section may be affected by the rules described in the table.
Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 .
Rules affecting deductions for bad debts | ||
Item | For the rules about this situation: | See: |
1 | A company cannot deduct a bad debt if there has been a change in ownership or control of the company and the company has not carried on the same business. | sections 63A and 63C |
2 | A company cannot deduct a bad debt in various other cases that may involve trafficking in bad debts. | sections 63B and 63D |
3 | A deduction under this section is reduced if the debt is forgiven and the debtor and creditor are companies under common ownership and agree for the creditor to forgo the deduction to a specified extent. | section 245 - 90 of Schedule 2C |
25-40 Loss from profit-making undertaking or plan
(1) You can deduct a loss arising from the
carrying on or carrying out of a profit-making undertaking or plan if any
profit from that plan would have been included in your assessable income by
section 15-15 (which is about profit-making undertakings and plans).
When section does not apply
(2) You cannot deduct a loss under subsection (1) if the loss arises in respect of the sale of property acquired on or after 20 September 1985 .
Note: If you sell property you acquired before 20 September 1985 for profit-making by sale, you may be able to deduct a loss on the sale: see section 52 of the Income Tax Assessment Act 1936 .
Notice to Commissioner
(3) You can deduct a loss under subsection (1), insofar as it arises in respect of property, only if:
(a) you notified the Commissioner that you acquired the property for the purpose of profit-making by sale or for the carrying on or carrying out of any profit-making undertaking or plan (however described); or
(b) the Commissioner is satisfied that you acquired the property for either of those purposes.
When notice must have been given
(4) The notice must have been given at or before the time you lodged your * income tax return:
(a) for the income year in which you acquired the property; or
(b) if you were not required to lodge an income tax return for that income year--for the first income year after that income year for which you were required to lodge one.
You can deduct a loss in respect of money if:
(a) you discover the loss in the income year; and
(b) the loss was caused by theft, stealing, embezzlement, larceny, defalcation or misappropriation by your employee or * agent (other than an individual you employ solely for private purposes); and
(c) the money was included in your assessable income for the income year, or for an earlier income year.
25-50 Payments of pensions, gratuities or retiring allowances
(1) You can deduct a payment of a pension, gratuity or retiring allowance that you make to:
(a) an employee; or
(b) a former employee; or
(c) a dependant of an employee or a former employee.
(2) However, you can deduct it only to the extent that it is made in good faith in consideration of the past services of the employee, or former employee, in any * business that you carried on for the purpose of gaining or producing assessable income.
(3) You cannot deduct a payment under this section if you can deduct it under any other provision of this Act.
25-55 Payments to associations
(1) You can deduct a payment you make for membership of a trade, business or professional association.
Note: Alternatively, you can deduct the expense under section 8- 1 (which is about general deductions) if you satisfy the requirements of that section.
Maximum amount--$42
(2) However, $42 is the maximum amount you can deduct under this section for the payments that you make in the income year to any one association.
If you deduct under section 8- 1
(3) If you deduct a payment under section 8- 1 (which is about general deductions) instead of this section:
(a) the payment does not count towards the $42 limit; and
(b) the amount that you can deduct for the payment is not limited to $42.
25-60 Parliament election expenses
You can deduct expenditure you incur in contesting an election for membership of:
(a) the Parliament of the Commonwealth; or
(b) the Parliament of a State; or
(c) the Legislative Assembly for the Australian Capital Territory ; or
(d) the Legislative Assembly of the Northern Territory of Australia .
Note: Entertainment expenses are excluded: see section 25-70.
[The next section is section 25-70.]
25-70 Deduction for election expenses does not extend to entertainment
(1) To the extent that you incur expenditure in respect of providing * entertainment, you cannot deduct it under section 25-60.
(2) However, subsection (1) does not stop you deducting expenditure to the extent that you incur it in respect of:
(a) providing * entertainment that is available to the public generally; or
(b) providing food or drink to yourself, unless it would be concluded that you have a purpose of enabling or facilitating * entertainment to be provided to someone else.
25-75 Rates and land taxes on premises used to produce mutual receipts
(1) An entity can deduct these amounts it pays for premises:
(a) rates which are annually assessed;
(b) land tax imposed under a * State law or * Territory law.
But only if it uses the premises:
(c) for the purpose of producing mutual receipts; or
(d) in carrying on a * business for the purpose of producing mutual receipts.
When premises used only for deductible purposes
(2) The entity can deduct the whole of the rates or land tax if it uses the premises only in one or more of these ways:
(a) for the purpose of producing mutual receipts;
(b) in carrying on a * business for the purpose of producing mutual receipts;
(c) for the * purpose of producing assessable income.
When premises used partly for deductible purposes
(3) If the entity uses the premises partly in one or more of the ways referred to in subsection (2) and partly in some other way, it can deduct the rates or land tax to the extent that it uses the premises in one or more of the ways referred to in that subsection.
No deduction under section 8- 1
(4) The entity cannot deduct the rates or land tax under section 8- 1 (which is about general deductions).
5 Division 26 (heading and link note)
Repeal the heading and the link note, substitute:
Division 26 -- Some amounts you cannot deduct, or cannot deduct in full
26-1 What this Division is about
This Division sets out some amounts that you cannot deduct, or that you cannot deduct in full.
Table of sections
Operative provisions
26-5 Penalties
26-10 Leave payments
26-20 HECS and student assistance
26-30 Relative's travel expenses
26-35 Reducing deductions for amounts paid to related entities
26-40 Maintaining your family
26-45 Recreational club expenses
26-50 Expenses for a leisure facility or boat
You cannot deduct under this Act:
(a) an amount (however described) payable, by way of penalty, under an * Australian law or a * foreign law; or
(b) an amount ordered by a court to be paid on the conviction of an entity for an offence against an * Australian law or a * foreign law.
(1) You cannot deduct under this Act a loss or outgoing for long service leave, annual leave, sick leave or other leave except:
(a) an amount paid in the income year to the individual to whom the leave relates (or, if that individual has died, to that individual's dependant or * legal personal representative); or
(b) an * accrued leave transfer payment that is made in the income year.
(2) An accrued leave transfer payment is a payment that an entity makes:
(a) in respect of an individual's leave (some or all of which accrued while the entity was required to make payments in respect of the individual's leave, or leave the individual might take); and
(b) when the entity is no longer required (or is about to stop being required) to make payments in respect of such leave; and
(c) to another entity when the other entity has begun (or is about to begin) to be required to make payments in respect of such leave; and
(d) under (or for the purposes of facilitating the provisions of) an * Australian law, or an award, order, determination or industrial agreement under an * Australian law.
It does not matter whether the leave accrues to the individual as an employee or for some other reason.
Example: Your employee goes to a new employer. You pay the new employer $2,000 for the employee's unused long service leave because an industrial agreement requires you to make that payment.
Note: An accrued leave transfer payment is included in the assessable income of the entity to which it is made: see section 15-5.
[The next section is section 26-20.]
26-20 HECS and student assistance
(1) You cannot deduct under this Act:
(a) a contribution made under Chapter 4 of the Higher Education Funding Act 1988 ; or
(b) a basic charge within the meaning of Chapter 5 of that Act; or
(c) a payment made to reduce a debt to the Commonwealth under Chapter 5A of that Act; or
(d) a payment made to reduce a debt to the Commonwealth, or to a participating corporation, under Part 4A of the Student Assistance Act 1973 .
Exception when you provide a fringe benefit
(2) Subsection (1) does not stop you deducting expenditure you incur in * providing a * fringe benefit.
[The next section is section 26-30.]
26-30 Relative's travel expenses
(1) You cannot deduct under this Act a loss or outgoing you incur, insofar as it is attributable to your * relative's travel, if:
(a) you travelled in the course of performing your duties as an employee, or in the course of carrying on a * business for the purpose of gaining or producing your assessable income; and
(b) your relative accompanied you while you travelled.
Exception to subsection (1)
(2) Subsection (1) does not stop you deducting a loss or outgoing if:
(a) your * relative, while accompanying you, performed substantial duties as your employer's employee, or as your employee; and
(b) it is reasonable to conclude that your relative would still have accompanied you even if he or she had not had a personal relationship with you.
Exception when you provide a fringe benefit
(3) Subsection (1) does not stop you deducting expenditure you incur in * providing a * fringe benefit.
This section applies to PAYE earners
(4) If an individual is not an employee, but is a * PAYE earner, this section applies to him or her as if:
(a) he or she were an employee; and
(b) the entity (the notional employer ) who pays (or is liable to pay) * PAYE earnings because of which he or she is (or would be) a * PAYE earner were his or her employer; and
(c) any other individual who receives (or is entitled to receive) * PAYE earnings:
(i) because of which the other individual is (or would be) a * PAYE earner; and
(ii) that the notional employer pays (or is liable to pay) to the other individual;
were also an employee of the notional employer.
This section applies to entities liable to PAYE earnings
(5) If an entity is not an employer, but pays (or is liable to pay) * PAYE earnings, this section applies to the entity as if:
(a) it were an employer; and
(b) an individual to whom the entity pays (or is liable to pay) * PAYE earnings were the entity's employee.
26-35 Reducing deductions for amounts paid to related entities
You can only deduct reasonable amounts paid to related entities
(1) If, under another provision of this Act, you can deduct an amount for a payment you make, or for a liability you incur, to a * related entity, then you can only deduct so much of the amount as the Commissioner considers reasonable.
Note: This section has a special operation if the payment is made, or the liability is incurred, by a partnership in which a private company is a partner: see section 65 (Payments to associated persons and relatives) of the Income Tax Assessment Act 1936 .
Meaning of related entity
(2) A related entity is any of the following:
(a) your * relative; or
(b) a partnership in which your relative is a partner.
(3) In the case of a partnership, a related entity is any of the following:
(a) a * relative of a partner in the partnership;
(b) an individual who is or has been a director of a company that is a partner in the partnership and is a * private company for the income year;
(c) an entity that is or has been a shareholder in a company of that kind;
(d) a * relative of an individual who is or has been a director or shareholder of a company of that kind;
(e) a beneficiary of a trust if the trustee is a partner in the partnership;
(f) a * relative of a beneficiary of a trust if the trustee is a partner in the partnership;
(g) another partnership, if a partner in the other partnership is a * relative of a partner in the first partnership.
However, a partner in a partnership is not a related entity of the partnership.
If you can't deduct, then related entity doesn't include amount as income
(4) To the extent that subsection (1) stops you deducting an amount, the amount is neither assessable income, nor exempt income, of the * related entity.
Amendments of assessments
(5) The Commissioner can amend an assessment at any time for the purpose of giving effect to subsection (4).
Example: An amount was not included in the related entity's assessable income because at the time you could not deduct the amount. At a later time you discover that you could deduct the amount and your assessment is amended. The Commissioner can amend the entity's assessment so that the amount is included in the entity's assessable income.
You cannot deduct under this Act expenditure you incur for maintaining:
(a) your * spouse (except a spouse permanently living separately and apart from you); or
(b) your * child who is under 16 years.
Example: A farmer cannot deduct an amount for food or lodgings that the farmer provides to his or her child who is under 16 years for the work the child performs on the farm.
26-45 Recreational club expenses
(1) You cannot deduct under this Act a loss or outgoing to the extent you incur it to obtain or maintain:
(a) membership of a * recreational club; or
(b) rights to enjoy (otherwise than as a * member) facilities provided by a * recreational club for the use or benefit of its * members;
whether for yourself or someone else.
Meaning of recreational club
(2) A recreational club is a company that was established or is carried on mainly to provide facilities, for the use or benefit of its * members, for drinking, dining, * recreation or entertainment.
Exception when you provide a fringe benefit
(3) Subsection (1) does not stop you deducting expenditure you incur in * providing a * fringe benefit.
26-50 Expenses for a leisure facility or boat
(1) You cannot deduct under this Act a loss or outgoing to the extent you incur it:
(a) to acquire ownership of a * leisure facility or boat; or
(b) to retain ownership of a * leisure facility or boat; or
(c) to acquire rights to use a * leisure facility or boat; or
(d) to retain rights to use a * leisure facility or boat; or
(e) to use, operate, maintain or repair a * leisure facility or boat; or
(f) in relation to any obligation associated with your ownership of a * leisure facility or boat; or
(g) in relation to any obligation associated with your rights to use a * leisure facility or boat.
However, there are exceptions (see subsections (3), (4), (5), (6) and (8)).
What is a leisure facility ?
(2) A leisure facility is land, a building, or part of a building or other structure, that is used (or held for use) for holidays or * recreation.
Exception--leisure facilities
(3) Subsection (1) does not stop you deducting a loss or outgoing for a * leisure facility if at all times in the income year:
(a) you hold the leisure facility for sale in the ordinary course of your business of selling leisure facilities; or
(b) you use the leisure facility (or hold it for use) mainly to provide it:
(i) in the ordinary course of your * business of providing leisure facilities for payment; or
(ii) to produce your assessable income in the nature of rents, lease premiums, licence fees or similar charges; or
(iii) for your employees to use; or
(iv) for the care of your employees' children.
In the case of a company, subparagraphs (b)(iii) and (iv) do not apply to employees who are * members or directors of the company.
Exception--part year use of leisure facilities
(4) If you use a * leisure facility (or hold it) as described in subsection (3) at all times during part of the income year, then subsection (1) does not stop you deducting so much of the loss or outgoing as is reasonable in the circumstances.
Exception--boats
(5) Subsection (1) does not stop you deducting a loss or outgoing for a boat if at all times in the income year you:
(a) hold the boat as * trading stock for sale in the ordinary course of a * business that you carry on; or
(b) use the boat (or hold it) mainly for letting it on hire in the ordinary course of a * business that you carry on; or
(c) use the boat (or hold it) mainly for transporting for payment in the ordinary course of a * business that you carry on, the public or goods; or
(d) use the boat for a purpose that is essential to the efficient conduct of a * business that you carry on.
Exception--part year use of boats
(6) If you use a boat (or hold it) as described in subsection (5) at all times during part of the income year, then subsection (1) does not stop you deducting so much of the loss or outgoing as is reasonable in the circumstances.
Anti-avoidance--when exceptions do not apply
(7) A * leisure facility or boat is taken not to be used (or held) as described in subsection (3) or (5) if:
(a) apart from this subsection, the leisure facility or boat would be used (or held) in that way because of a * scheme; and
(b) in the Commissioner's opinion, the scheme would not have been entered into or carried out if this section had not been enacted.
Exception when you provide a fringe benefit
(8) Subsection (1) does not stop you deducting expenditure you incur in * providing a * fringe benefit.
6 Section 28-185 (link note)
Omit " Division 36 ", substitute " Division 30 ".
7 After Division 28
Insert:
Division 30 -- Gifts or contributions
Table of Subdivisions
Guide to Division 30
30-A Deductions for gifts or contributions
30-B Tables of recipients for deductible gifts
30-C Rules applying to particular gifts of property
30-D Testamentary gifts under the Cultural Bequests Program
30-E Register of environmental organisations
30-F Register of cultural organisations
30-G Index to this Division
30-1 What this Division is about
This Division sets out the rules for working out deductions for certain gifts or contributions that you make.
Table of sections
30-5 How to find your way around this Division
30-10 Index
30-5 How to find your way around this Division
(1) You should start at Subdivision 30-A unless you are making a testamentary gift under the Cultural Bequests Program.
Note: Subdivision 30-D deals with the deductibility of such a gift.
(2) Subdivision 30-A contains a table of all the gifts and contributions that you can deduct. You need to look at the table to see whether the type of gift or contribution you are making is covered by it.
(3) In some cases, the table sends you off to Subdivision 30-B. It has a number of tables that list particular funds, authorities or institutions that deductible gifts can be made to.
(4) In other cases, the table sends you off to Subdivision 30-C. It contains rules that apply to particular gifts of property.
(5) Subdivision 30-E requires the establishment of a register of * environmental organisations. Subdivision 30-F requires the establishment of a register of * cultural organisations. Their only relevance to you is that you can deduct a gift that you make to a fund listed on either register.
There is an index to this Division in Subdivision 30-G.
Subdivision 30-A -- Deductions for gifts or contributions
Table of sections
30-15 Table of gifts or contributions that you can deduct
30-15 Table of gifts or contributions that you can deduct
(1) You can deduct a gift or contribution that you make in the situations set out in the following table. It tells you:
ï‚· who the recipient of the gift or contribution can be; and
ï‚· the type of gift or contribution that you can make; and
ï‚· how much you can deduct for the gift or contribution; and
ï‚· any special conditions that apply.
(2) A testamentary gift or contribution is not deductible under this section.
Note: Subdivision 30-D deals with the deductibility of testamentary gifts under the Cultural Bequests Program.
Deductible gifts or contributions | ||||
Recipient | Type of gift or contribution | How much you can deduct | Special conditions | |
1 | A fund, authority or institution covered by an item in any of the tables in Subdivision 30-B. | A gift of: (a) money; or (b) property (including * trading stock) that you purchased during the 12 months before making the gift; or (c) an item of your * trading stock if: ï‚· the gift is a disposal of the item outside the ordinary course of your * business; and ï‚· no election has been made, or is made, in relation to the item under Subdivision 385-E (about electing to spread or defer profit from the forced disposal or death of *live stock). | (a) if the gift is money--the amount you are giving; or (b) if the gift is property (except * trading stock covered by paragraph (c))--the lesser of the market value of the property on the day you made the gift and the amount you paid for the property; or (c) if the gift is an item of your * trading stock: ï‚· that you disposed of outside the ordinary course of your * business; and ï‚· for which no election has been made, or is made, in relation to the item under Subdivision 385-E; the market value of the item on the day you made the gift. | (a) the fund, authorit y or institution must be in Australia ; and (b) the value of the gift must be $2 or more; and (c) any conditions set out in the relevant table item in Subdivision 30-B must be satisfied. |
2 | A public fund established and maintained under a will or instrument of trust solely for: (a) the purpose of providing money, property or benefits: ï‚· to a fund, authority or institution covered by an item in any of the tables in Subdivision 30-B; and ï‚· for any purposes set out in the item; or (b) the establishment of such a fund, authority or institution. | A gift of: (a) money; or (b) property (includi ng * trading stock) that you purchased during the 12 months before making the gift; or (c) an item of your * trading stock if: ï‚· the gift is a disposal of the item outside the ordinary course of your * business; and ï‚· no election has been made, or is made, in relation to the item under Subdivision 385-E (about electing to spread or defer profit from the forced disposal or death of * live stock). | (a) if the gift is money--the amount you are giving; or (b) if the gift is property (except * trading stock covered by paragraph (c))--the lesser of the market value of the property on the day you made the gift and the amount you paid for the property; or (c) if the gift is an item of your * trading stock: ï‚· that you disposed of outside the ordinary course of your * business; and ï‚· for which no election has been made, or is made, in relation to the item under Subdivision 385-E; the market value of the item on the day you made the gift. | (a) the value of the g ift must be $2 or more; and (b) the terms of the will or trust must allow the trustee to invest money that the fund receives because of the gift only in a way that an * Australian law allows trustees to invest trust money. |
3 | A political party that is registered under Part XI of the Commonwealth Electoral Act 1918 . | A contribution of: (a) money; or (b) property that you purchased during the 12 months before making the contribution. | (a) if the contribution is money--the amount of the contribution; or (b) if the contribution is property--the lesser of the market value of the property on the day you made the contribution and the amount you paid for the property. | (a) a company cannot deduct a contribution it makes; and (b) the value of the contribution must be $2 or more; and (c) you cannot deduct more than $100 of contributions for any one income year. |
4 | (a) the Australiana Fund; or (b) a public library in Australia ; or (c) a public museum in Australia ; or (d) a public art gallery in Australia ; or (e) an institution in Australia consisting of a public library, a public museum and a public art gallery or any 2 of them. | A gift of property (except an estate or interest in land or in a building or part of a building). | The general rule is that you can deduct the average of the market values specified in the written valuations you get from approved valuers.
Subdivision 30-C sets out: (a) how a person becomes an approved valuer; and (b) the exceptions to the general rule; and (c) the situations when the amount you can deduct is reduced.
If the property is jointly owned, see section 30-225 to work out how much of the gift you can deduct. | (a) the property must be accepted by the recipient for inclusion in a collection it is maintaining or establishing; and (b) the value of the gift must be $2 or more; and (c) you must satisfy the valuation requirements in section 30-200, unless section 30-205 (about the sale price being assessable) applies. |
5 | The Commonwealth (for the purposes of Artbank). | A gift of property (except an estate or interest in land or in a building or part of a building). | The general rule is that you can deduct the average of the market values specified in the written valuations you get from approved valuers.
Subdivision 30-C sets out: (a) how a person becomes an approved valuer; and (b) the exceptions to the general rule; and (c) the situations when the amount you can deduct is reduced.
If the property is jointly owned, see section 30-225 to work out how much of the gift you can deduct. | (a) the property must be accepted by the Commonwealth for inclusion in a collection maintained, or being established, for the purposes of Artbank; and (b) you must satisfy the valuation requirements in section 30-200, unless section 30-205 (about the sale price being assessable) applies. |
6 | (a) the National Trust of Australia ( New South Wales ); or (b) the National Trust of Australia ( Victoria ); or (c) The National Trust of Queensland ; or (d) The National Trust of South Australia ; or (e) The National Trust of Australia (W.A.); or (f) the National Trust of Australia ( Tasmania ); or (g) The National Trust of Australia ( Northern Territory ); or (h) the National Trust of Australia (A.C.T.); or (i) the Australian Council of National Trusts. | A gift of a place listed in the Register of the National Estate (kept under the Australian Heritage Commission Act 1975 ). | The general rule is that you can deduct the average of the market values specified in the written valuations you get from approved valuers.
Subdivision 30-C sets out: (a) how a person becomes an approved valuer; and (b) the exceptions to the general rule; and (c) the situations when the amount you can deduct is reduced.
If the place is jointly owned, see | (a) the place must be accepted by the recipient for the purpose of preserving it for the benefit of the public; and (b) the value of the gift must be $2 or more; and (c) you must satisfy the valuation requirements in section 30-200, unless section 30-205 (about the sale price being assessable) applies. |
Subdivision 30-B -- Tables of recipients for deductible gifts
Table of sections
Health
30-20 Health
Education
30-25 Education
30-30 Gifts that must be for certain purposes
30-35 Gifts to a public fund established to benefit a rural school hostel building must satisfy certain requirements
Research
30-40 Research
Welfare and rights
30-45 Welfare and rights
Defence
30-50 Defence
Environment
30-55 The environment
30-60 Gifts to a National Parks body or conservation body must satisfy certain requirements
Industry, trade and design
30-65 Industry, trade and design
The family
30-70 The family
30-75 Marriage guidance organisations must be approved
International affairs
30-80 International affairs
30-85 Declaration must be in force at the time you make the gift
Sports and recreation
30-90 Sports and recreation
Philanthropic trusts
30-95 Philanthropic trusts
Cultural organisations
30-100 Cultural organisations
(1) This table sets out general categories of health recipients.
Health--General | ||
Item | Fund, authority or institution | Special conditions |
1.1.1 | a public hospital | none |
1.1.2 | a hospital carried on by a society or association otherwise than for the purposes of profit or gain to the individual members of the society or association | none |
1.1.3 | a public fund established before 23 October 1963 and maintained for the purpose of providing money for hospitals covered by item 1.1.1 or 1.1.2 or for the establishment of such hospitals | none |
1.1.4 | a public authority engaged in research into the causes, prevention or cure of disease in human beings, animals or plants | the gift must be made for such research |
1.1.5 | a public institution engaged solely in research into the causes, prevention or cure of disease in human beings, animals or plants | none |
(2) This table sets out specific health recipients.
Health--Specific | ||
Item | Fund, authority or institution | Special conditions |
1.2.1 | The Australian College of Obstetricians and Gynaecologists | none |
1.2.2 | the Australian College of Occupational Medicine | none |
1.2.3 | the Australian Postgraduate Federation in Medicine | the gift must be made for education or research in medical knowledge or science |
1.2.4 | the College of Radiologists in Australasia | the gift must be made for education or research in medical knowledge or science |
1.2.5 | the New South Wales College of Nursing | none |
1.2.6 | the Royal Australian and New Zealand College of Psychiatrists | none |
1.2.7 | the Royal Australian College of General Practitioners | the gift must be made for education or research in medical knowledge or science |
1.2.8 | the Royal Australasian College of Physicians | none |
1.2.9 | the Royal Australasian College of Surgeons | none |
1.2.10 | the Royal College of Pathologists of Australasia | the gift must be made for education or research in medical knowledge or science |
1.2.11 | the Australian Regional Council of the Royal College of Obstetricians and Gynaecologists | none |
1.2.12 | the Royal College of Nursing , Australia | none |
1.2.13 | the Australian and New Zealand College of Anaesthetists | none |
(1) This table sets out general categories of education recipients.
Education--General | ||
Item | Fund, authority or institution | Special conditions |
2.1.1 | a public university | none |
2.1.2 | a public fund for the establishment of a public university | none |
2.1.3 | a higher education institution within the meaning of the Employment, Education and Training Act 1988 | none |
2.1.4 | a residential educational institution affiliated under statutory provisions with a public university | none |
2.1.5 | a residential educational institution established by the Commonwealth | none |
2.1.6 | a residential educational institution that is affiliated with a higher education institution within the meaning of the Employment, Education and Training Act 1988 | none |
2.1.7 | an institution that the Minister for Employment, Education, Training and Youth Affairs has declared by a signed instrument to be a technical and further education institution within the meaning of the Employment, Education and Training Act 1988 | see section 30-30 |
2.1.8 | a public fund established and maintained solely for the purpose of providing religious instruction in government schools in Australia | none |
2.1.9 | a public fund established and maintained by a Roman Catholic archdiocesan or diocesan authority solely for the purpose of providing religious instruction in government schools in Australia | none |
2.1.10 | a public fund established and maintained solely for providing money for the acquisition, construction or maintenance of a building used, or to be used, as a school or college by: (a) a government; or (b) a public authority; or (c) a society or association which is carried on otherwise than for the purposes of profit or gain to the individual members of the society or association | none |
2.1.11 | a public fund established and maintained solely for providing money for the acquisition, construction or maintenance of a rural school hostel building | see section 30-35 |
(2) This table sets out specific education recipients.
Education--Specific | ||
Item | Fund, authority or institution | Special conditions |
2.2.1 | The Academy of the Social Sciences in Australia Incorporated | none |
2.2.2 | the Australian Academy of Science | none |
2.2.3 | the Australian Academy of the Humanities for the Advancement of Scholarship in Language, Literature, History, Philosophy and the Fine Arts | none |
2.2.4 | the Australian Academy of Technological Sciences and Engineering Limited | none |
2.2.5 | the Australian Administrative Staff College | none |
2.2.6 | the Australian and New Zealand Association for the Advancement of Science | none |
2.2.7 | the Australian Ireland Fund | none |
2.2.8 | the Life Education Centre | none |
2.2.9 | a company that conducts life education programs under the auspices of the Life Education Centre if the company: (a) is not carried on for the purposes of profit or gain to its individual members; and (b) is prohibited by its * constitution from making any distribution of money or property to its members | the gift must be for the conduct of such programs |
2.2.10 | the Council for Christian Education in Schools | none |
2.2.11 | the Council for Jewish Education in Schools | none |
2.2.12 | H.R.H. The Duke of Edinburgh's Commonwealth Study Conferences ( Australia ) Incorporated | none |
2.2.13 | the Lionel Murphy Foundation | none |
2.2.14 | the Marcus Oldham Farm Management College | see section 30-30 |
2.2.15 | the Constitutional Centenary Foundation Incorporated | none |
2.2.16 | the Polly Farmer Foundation (Inc) | none |
30-30 Gifts that must be for certain purposes
(1) You can deduct a gift that you make to:
(a) a technical and further education institution covered by item 2.1.7 of the table in subsection 30-25(1); or
(b) the Marcus Oldham Farm Management College ;
only if the gift is for:
(c) purposes of the institution, or of the College, that have been declared by the Minister for Employment, Education, Training and Youth Affairs to relate solely to tertiary education; or
(d) the provision of facilities for the institution, or the College, if the Minister has declared that he or she is satisfied the facilities are to be used principally for such purposes.
(2) A declaration under subsection (1) must be in writing, signed by the Minister.
(1) You can deduct a gift that you make to a public fund covered by item 2.1.11 of the table in subsection 30-25(1) only if each requirement in this section is satisfied.
(2) The rural school hostel building must be used, or going to be used, principally as residential accommodation for students:
(a) whose usual place of residence is in a rural area; and
(b) who are undertaking primary or secondary education, or special education programs for children with disabilities, at a school in the same area as the building.
(3) The costs of the school must be solely or partly funded by the Commonwealth, a State or a Territory.
(4) The residential accommodation must be provided by:
(a) the Commonwealth, a State or a Territory; or
(b) a public authority; or
(c) a company that:
(i) is not carried on for the purposes of profit or gain to its individual members; and
(ii) is prohibited by its * constitution from making any distribution of money or property to its members.
(1) This table sets out general categories of research recipients.
Research--General | ||
Item | Fund, authority or institution | Special conditions |
3.1.1 | a university, college, institute, association or organisation which is an approved research institute for the purposes of section 73A (Expenditure on scientific research) of the Income Tax Assessment Act 1936 | the gift must be made for purposes of scientific research in the field of natural or applied science |
(2) This table sets out specific research recipients.
Research--Specific | ||
Item | Fund, authority or institution | Special conditions |
3.2.1 | the Centre for Independent Studies | none |
3.2.2 | the Ian Clunies Ross Memorial Foundation | none |
3.2.3 | the Commonwealth | the gift must be made for purposes of research in the Australian Antarctic Territory |
(1) This table sets out general categories of welfare and rights recipients.
Welfare and rights--General | ||
Item | Fund, authority or institution | Special conditions |
4.1.1 | a public benevolent institution | none |
4.1.2 | a public fund established before | none |
4.1.3 | a public fund established and maintained for the relief of persons in Australia who are in necessitous circumstances | none |
(2) This table sets out specific welfare and rights recipients.
Welfare and rights--Specific | ||
Item | Fund, authority or institution | Special conditions |
4.2.1 | Amnesty International | none |
4.2.2 | the Child Accident Prevention Foundation of Australia | none |
4.2.3 | the National Foundation for Australian Women Limited | none |
4.2.4 | the National Safety Council of Australia | none |
4.2.5 | the Pearl Watson Foundation Limited | none |
4.2.6 | the Royal Society for the Prevention of Cruelty to Animals New South Wales | none |
4.2.7 | the Royal Society for the Prevention of Cruelty to Animals ( Victoria ) | none |
4.2.8 | the Royal Queensland Society for the Prevention of Cruelty | none |
4.2.9 | the Royal Society for the Prevention of Cruelty to Animals ( South Australia ) Incorporated | none |
4.2.10 | the Royal Society for the Prevention of Cruelty to Animals Western Australia (Incorporated) | none |
4.2.11 | the R.S.P.C.A. ( Tasmania ) Incorporated | none |
4.2.12 | the Society for the Prevention of Cruelty to Animals ( Northern Territory ) | none |
4.2.13 | the Royal Society for the Prevention of Cruelty to Animals (A.C.T.) Incorporated | none |
4.2.14 | the R.S.P.C.A. Australia Incorporated | none |
(1) This table sets out general categories of defence recipients.
Defence--General | ||
Item | Fund, authority or institution | Special conditions |
5.1.1 | the Commonwealth or a State | the gift must be made for purposes of defence |
5.1.2 | a public institution or public fund established and maintained for the comfort, recreation or welfare of members of the armed forces of any part of Her Majesty's dominions, or of any allied or other foreign force serving in association with Her Majesty's armed forces | none |
(2) This table sets out specific defence recipients.
Defence--Specific | ||
Item | Fund, authority or institution | Special conditions |
5.2.1 | the Shrine of Remembrance Restoration and Development Trust | the gift must be made before 1 July 1999 |
5.2.2 | The Sandakan Memorials Trust Fund | the gift must be made before 30 July 1997 |
5.2.3 | the Cobram and District War Memorial Incorporated Fund | the gift must be made before 19 October 1997 |
5.2.4 | The Central Synagogue Restoration Fund | the gift must be made before 23 December 1997 |
5.2.5 | The Borneo Memorials Trust Fund | the gift must be made before 23 December 1997 |
(1) This table sets out general categories of environment recipients.
The environment--General | ||
Item | Fund, authority or institution | Special conditions |
6.1.1 | a public fund that, when the gift is made, is on the register of * environmental organisations kept under Subdivision 30 - E | none |
(2) This table sets out specific environment recipients.
The environment--Specific | ||
Item | Fund, authority or institution | Special conditions |
6.2.1 | the Australian Conservation Foundation Incorporated | see section 30-60 |
6.2.2 | Greening Australia Limited | see section 30-60 |
6.2.3 | Landcare Australia Limited | see section 30-60 |
6.2.4 | the National Parks Association of New South Wales | see section 30-60 |
6.2.5 | the Victorian National Parks Association | see section 30-60 |
6.2.6 | the Victoria Conservation Trust | see section 30-60 |
6.2.7 | the National Parks Association of Queensland | see section 30-60 |
6.2.8 | The Nature Conservation Society of South Australia Incorporated | see section 30-60 |
6.2.9 | the National Parks Foundation of South Australia Incorporated | see section 30-60 |
6.2.10 | the Western Australian National Parks and Reserves Association Incorporated | see section 30-60 |
6.2.11 | the Tasmanian Conservation Trust Incorporated | see section 30-60 |
6.2.12 | the National Parks Association of the Australian Capital Territory Incorporated | see section 30-60 |
6.2.13 | the National Trust of Australia ( New South Wales ) | none |
6.2.14 | the National Trust of Australia ( Victoria ) | none |
6.2.15 | The National Trust of Queensland | none |
6.2.16 | The National Trust of South Australia | none |
6.2.17 | The National Trust of Australia (W.A.) | none |
6.2.18 | the National Trust of Australia ( Tasmania ) | none |
6.2.19 | The National Trust of Australia ( Northern Territory ) | none |
6.2.20 | the National Trust of Australia (A.C.T.) | none |
6.2.21 | the Australian Council of National Trusts | none |
6.2.22 | the World Wide Fund for Nature | see section 30-60 |
30-60 Gifts to a National Parks body or conservation body must satisfy certain requirements
You can deduct a gift that you make to:
(a) an environmental institution covered by any of the items 6.2.1 to 6.2.12 of the table in subsection 30-55(2); or
(b) the World Wide Fund for Nature;
only if, at the time of making the gift:
(c) the institution or Fund has agreed to give the Secretary to the Department of the Environment, Sport and Territories, within a reasonable period after the end of the income year in which you made the gift, statistical information about gifts made to the institution or Fund during that income year; and
(d) the institution or Fund has a policy of not acting as a mere conduit for the donation of money or property to other institutions, bodies or persons.
30-65 Industry, trade and design
This table sets out specific industry, trade and design recipients.
Industry, trade and design--Specific | ||
Item | Fund, authority or institution | Special conditions |
7.2.1 | the Industrial Design Council of Australia | none |
7.2.2 | the Productivity Promotion Council of Australia | none |
7.2.3 | the Work Skill Australia Foundation Incorporated | none |
(1) This table sets out general categories of family recipients.
The family--General | ||
Item | Fund, authority or institution | Special conditions |
8.1.1 | a public fund established and maintained solely for the purpose of providing money to be used in giving marriage guidance to persons in Australia through a voluntary organisation or a branch or section of a voluntary organisation | see section 30-75 |
(2) This table sets out specific family recipients.
The family--Specific | ||
Item | Fund, authority or institution | Special conditions |
8.2.1 | the Nursing Mothers' Association of Australia | none |
30-75 Marriage guidance organisations must be approved
(1) You can deduct a gift that you make to a public fund covered by item 8.1.1 of the table in subsection 30-70(1) only if the organisation, or branch or section of the organisation, has been declared by the Attorney - General to be a marriage guidance organisation.
(2) The Attorney-General may declare an organisation, or a branch or section of an organisation, to be a marriage guidance organisation if he or she is satisfied that:
(a) it is willing and able to engage in marriage guidance; and
(b) marriage guidance is, or will be, its only activity, or a major part of its activities.
(3) A declaration under subsection (1) must be in writing, signed by the Attorney-General.
(1) This table sets out general categories of international affairs recipients.
International affairs--General | ||
Item | Fund, authority or institution | Special conditions |
9.1.1 | a public fund declared by the Treasurer to be a relief fund | see section 30-85 |
(2) This table sets out specific international affairs recipients.
International affairs--Specific | ||
Item | Fund, authority or institution | Special conditions |
9.2.1 | the Australian Institute of International Affairs | none |
9.2.2 | the Australian National Travel Association | none |
9.2.3 | The Foundation for Development Cooperation Ltd | none |
30-85 Declaration must be in force at the time you make the gift
(1) You can deduct a gift that you make to a public fund covered by item 9.1.1 of the table in subsection 30-80(1) only if the declaration is in force at the time you make the gift.
(2) The Treasurer may, by notice in the Gazette , declare a public fund to be a relief fund if he or she is satisfied that the fund:
(a) has been established by an organisation declared by the Minister for Foreign Affairs to be an approved organisation; and
(b) is solely for the relief of people in a country declared by the Minister for Foreign Affairs to be a developing country.
(3) The notice must specify the day on which it has effect. It cannot have effect earlier than the day on which it is published in the Gazette .
(4) The Treasurer may, by notice in the Gazette , revoke a declaration that a public fund is a relief fund. The notice must specify the day on which it has effect. It cannot have effect earlier than the day on which it is published in the Gazette .
(5) A declaration by the Minister for Foreign Affairs under this section must be in writing, signed by the Minister.
This table sets out specific sports and recreation recipients.
Sports and recreation--Specific | ||
Item | Fund, authority or institution | Special conditions |
10.2.1 | the Australian Sports Foundation | none |
10.2.2 | the Girl Guides Association of Australia | none |
10.2.3 | an institution that is known as a State or Territory branch of the Girl Guides Association of Australia | none |
10.2.4 | the Scout Association of Australia | none |
10.2.5 | an institution that is known as a State or Territory branch of the Scout Association of Australia | none |
10.2.6 | the Australian Games Uniform Company Limited | none |
This table sets out specific philanthropic trusts.
Philanthropic trusts--Specific | ||
Item | Fund, authority or institution | Special conditions |
11.2.1 | the Connellan Airways Trust | none |
11.2.2 | The Friends of the Duke of Edinburgh's Award in Australia Incorporated | none |
11.2.3 | the Herbert Vere Evatt Memorial Foundation Incorporated | none |
11.2.4 | the Playford Memorial Trust | none |
11.2.5 | The Sir Robert Menzies Memorial Foundation Limited | none |
11.2.6 | the Queen Elizabeth II Silver Jubilee Trust for Young Australians | none |
11.2.7 | the Winston Churchill Memorial Trust | none |
(1) This table sets out general categories of cultural recipients.
Cultural organisations--General | ||
Item | Fund, authority or institution | Special conditions |
12.1.1 | a public fund that, when the gift is made, is on the register of * cultural organisations kept under Subdivision 30-F | none |
12.1.2 | a public library | none |
12.1.3 | a public museum | none |
12.1.4 | a public art gallery | none |
12.1.5 | an institution consisting of a public library, public museum and public art gallery or of any 2 of them | none |
(2) This table sets out specific cultural recipients.
Cultural organisations--Specific | ||
Item | Fund, authority or institution | Special conditions |
12.2.1 | The Australiana Fund | none |
Subdivision 30-C -- Rules applying to particular gifts of property
Table of sections
Valuation requirements
30-200 Getting written valuations
30-205 Sale price would have been assessable
30-210 Approved valuers
Working out the amount you can deduct for a gift of property
30-215 How much you can deduct
30-220 Reducing the amount you can deduct
Joint ownership of property
30-225 Gift of property by joint owners
30-200 Getting written valuations
(1) You satisfy the valuation requirements if you get 2 or more written valuations of the gift you made.
Note 1: In most cases, you
need to get these written valuations to be able to deduct a gift of property
that you make to a recipient covered by
item 4, 5 or 6 of the table in section
30-15.
Note 2: You do not need to get written valuations in the circumstances set out in section 30-205.
(2) The valuations must be by different individuals, each of whom is an approved valuer of the kind of property you are giving away.
Note: Section 30-210 deals with how an individual becomes an approved valuer.
(3) Each valuation must state the amount that, in the opinion of the valuer, was:
(a) the market value of the property on the day you made the gift; or
(b) the market value of the property on the day the valuation was made.
(4) If a valuation states the market value of the property on the day the valuation was made, it must have been made within 90 days before or after the gift was made. However, the Commissioner may allow a longer period than this.
30-205 Sale price would have been assessable
You do not need to get written valuations of the gift you made if:
(a) no amount is included in your assessable income in respect of the gift you made; but
(b) an amount would have been included in your assessable income if you had sold the property instead of making the gift.
(1) The Secretary to the Department of Communications and the Arts may approve an individual as a valuer of a particular kind of property. The approval must be in writing, signed by the Secretary.
(2) The Secretary must, in deciding whether to approve an individual, have regard to:
(a) the individual's qualifications, experience and knowledge in valuing that kind of property; and
(b) the individual's knowledge of the current market value of that kind of property; and
(c) the individual's standing in the professional community.
Working out the amount you can deduct for a gift of property
30-215 How much you can deduct
(1) This section contains the rules for working out how much you can deduct for a gift of property that you make to a recipient covered by item 4, 5 or 6 of the table in section 30-15.
(2) The general rule is that the amount you can deduct for a gift of this kind is the average of the market values specified in the written valuations you got from the approved valuers.
Note: In some situations you must reduce the amount you can deduct: see section 30-220.
(3) The exceptions to the general rule are set out in this table:
Amount you can deduct for a gift of property | ||
Item | In this case: | The amount you can deduct is: |
1 | Section 30-205 (which is about the sale price being assessable) applies, and you bought the property | the amount you paid for the property |
2 | Section 30-205 (which is about the sale price being assessable) applies, and you created or produced the property | so much of the cost of creation or production as you would have been able to deduct if you had sold the property |
3 | Neither of cases 1 and 2 applies, and you acquired the property: (a) less than one year before making the gift (otherwise than by inheriting it); or (b) for the purpose of giving it away; or (c) subject to an * arrangement that the property would be given away | the lesser of the amount you paid for the property and: (a) if the average of the written valuations you got fairly represents the market value of the property on the day you made the gift--that average; or (b) if it does not-- the market value of the property on the day you made the gift |
4 | None of cases 1 to 3 applies, and the average of the written valuations you got does not fairly represent the market value of the property on the day you made the gift | the market value of the property on the day you made the gift |
30-220 Reducing the amount you can deduct
(1) The amount you can deduct is reduced by a reasonable amount if:
(a) the terms and conditions on which the gift is made are such that the recipient:
(i) does not receive immediate custody and control of the property; or
(ii) does not have the unconditional right to retain custody and control of the property in perpetuity; or
(iii) does not obtain an immediate, indefeasible and unencumbered legal and equitable title to the property; or
(b) the custody, control or use of the property by the recipient is affected by an * arrangement entered into in respect of the making of the gift.
(2) In deciding what is a reasonable amount, have regard to the effect of those terms and conditions, or that * arrangement, on the market value of the gift.
30-225 Gift of property by joint owners
If:
(a) you own property jointly with one or more other entities; and
(b) you and the other entities make a gift of the property; and
(c) you would have been able to deduct the gift under section 30-15 because of item 4, 5 or 6 of the table in that section if you had made a gift of the property as sole owner of it;
you can deduct so much of the gift as is reasonable, having regard to your interest in the property.
Subdivision 30-D -- Testamentary gifts under the Cultural Bequests Program
Table of sections
30-230 Testamentary gifts of property
30-235 Getting a certificate
30-240 Limit on total value of gifts for an income year
30-230 Testamentary gifts of property
(1) A testamentary gift of property (except an estate or interest in land or in a building or part of a building) that you make under the Cultural Bequests Program is deductible for the income year in which you die.
Note: The trustee of your estate can claim the deduction in the tax return lodged for you that covers the period from the start of the income year to the day you die.
(2) The recipient of the gift must be:
(a) The Australiana Fund; or
(b) a public library in Australia ; or
(c) a public museum in Australia ; or
(d) a public art gallery in Australia ; or
(e) an institution in Australia consisting of a public library, a public museum and a public art gallery or any 2 of them.
(3) The property must be given to, and accepted by, the recipient for inclusion in a collection it is maintaining or establishing.
(4) The value of the gift must be $2 or more.
(5) When you die, there must be in force a certificate from the Minister for Communications and the Arts:
(a) approving the gift; and
(b) specifying the value of the gift.
(6) If:
(a) you die before the last day of an income year; and
(b) section 26-55 (which is about a limit on deductions) prevents the whole or a part of the gift from being deductible in the tax return lodged for you for that income year;
the trustee of your estate can claim the whole or part as a deduction in the trust return for that income year.
Note: The trust return covers the period from the day you die to the end of the income year.
(1) You get a certificate by making a written application for one to the Minister for Communications and the Arts.
(2) The Minister must decide your application in accordance with written guidelines made by the Minister under this section.
(3) The guidelines may require the Minister to decide an application having regard to:
(a) specified criteria; or
(b) recommendations of particular bodies.
(4) If the Minister approves your gift, he or she must give you a certificate:
(a) approving the gift; and
(b) specifying the value of the gift; and
(c) setting out any other information that the Commissioner requires.
30-240 Limit on total value of gifts for an income year
The total value of all gifts approved by the Minister for Communications and the Arts for an income year cannot exceed an amount that the Minister determines in writing. The Minister must determine this amount before approving any gifts for that income year.
Subdivision 30-E -- Register of environmental organisations
30-250 What this Subdivision is about
This Subdivision requires the establishment of a register of environmental organisations. Section 30-15 allows you to deduct a gift that you make to a fund that is on the register.
Table of sections
Operative provisions
30-255 Establishing the register
30-260 Meaning of environmental organisation
30-265 Its principal purpose must be protecting the environment
30-270 Other requirements it must satisfy
30-275 Further requirement for a body corporate or a co-operative society
30-280 What must be on the register
30-285 Removal from the register
30-255 Establishing the register
The Secretary to the Department of Environment, Sport and Territories must keep a register of * environmental organisations.
Note: Section 30-280 sets out what details must be entered on the register.
30-260 Meaning of environmental organisation
An environmental organisation is:
(a) a body corporate; or
(b) a co-operative society; or
(c) a trust; or
(d) an unincorporated body established for a public purpose by the Commonwealth, a State or a Territory;
that satisfies each requirement in sections 30-265 and 30-270.
Note: A body corporate or a co-operative society must satisfy a further requirement: see section 30-275.
30-265 Its principal purpose must be protecting the environment
(1) Its principal purpose must be:
(a) the protection and enhancement of the natural environment or of a significant aspect of the natural environment; or
(b) the provision of information or education, or the carrying on of research, about the natural environment or a significant aspect of the natural environment.
(2) It must maintain a public fund:
(a) to which gifts of money or property for its principal purpose can be made; and
(b) to which any money received because of such gifts is to be credited; and
(c) that does not receive any other money or property.
(3) It must use gifts made to the fund, and any money received because of such gifts, only for its principal purpose.
(4) It must have agreed to comply with any rules that the Treasurer and the Minister for Environment, Sport and Territories make to ensure that gifts made to the fund are used only for its principal purpose.
30-270 Other requirements it must satisfy
No payment of profits to its members
(1) It must not pay any of its profits or financial surplus, or give any of its property, to its members, beneficiaries, controllers or owners (as appropriate).
No acting as a conduit
(2) It must have a policy of not acting as a mere conduit for the donation of money or property to other organisations, bodies or persons.
Surplus assets to be transferred on winding up
(3) It must have rules providing that, if the public fund is wound up, any surplus assets of the fund are to be transferred to another fund that is on the register.
Statistical information to be provided
(4) It must have agreed to give the Secretary to the Department of Environment, Sport and Territories, within a reasonable period after the end of each income year, statistical information about gifts made to the public fund during that income year.
30-275 Further requirement for a body corporate or a co-operative society
A body corporate (except a statutory authority) or a co-operative society is an environmental organisation only if:
(a) its membership consists principally of bodies corporate; or
(b) it has at least 50 members who are individuals that are:
(i) regarded as financial members; and
(ii) entitled to vote at a general meeting of it; or
(c) the Minister for Environment, Sport and Territories has determined that, because of special circumstances, it does not have to meet either of the requirements in paragraph (a) or (b).
30-280 What must be on the register
(1) The Secretary to the Department of Environment, Sport and Territories must enter on the register each * environmental organisation, and the public fund it maintains, that he or she has been directed to enter by the Treasurer and the Minister for Environment, Sport and Territories.
(2) The Treasurer and the Minister may so direct the Secretary only if the Minister has notified the Treasurer that he or she is satisfied that an organisation is an * environmental organisation. The notification must be in writing.
(3) The direction must be in writing and must specify the day on which the organisation and public fund are to be entered on the register. The day must be the day on which the direction is given or a later day.
(4) The Treasurer and the Minister for Environment, Sport and Territories must have regard to the policies and budgetary priorities of the Commonwealth Government in deciding whether to give a direction.
30-285 Removal from the register
(1) The Treasurer and the Minister for Environment, Sport and Territories may direct the Secretary to the Department of Environment, Sport and Territories to remove an * environmental organisation, and the public fund it maintains, from the register.
(2) The direction must be in writing and must specify the day on which the organisation and public fund are to be removed from the register. The day must be the day on which the direction is given or a later day.
Subdivision 30-F -- Register of cultural organisations
30-290 What this Subdivision is about
This Subdivision requires the establishment of a register of cultural organisations. Section 30-15 allows you to deduct a gift that you make to a fund that is on the register.
Table of sections
Operative provisions
30-295 Establishing the register
30-300 Meaning of cultural organisation
30-305 What must be on the register
30-310 Removal from the register
30-295 Establishing the register
The Secretary to the Department of Communications and the Arts must keep a register of * cultural organisations.
Note: Section 30-305 sets out what details must be entered on the register.
30-300 Meaning of cultural organisation
(1) A cultural organisation is:
(a) a body corporate; or
(b) a trust; or
(c) an unincorporated body established for a public purpose by the Commonwealth, a State or a Territory;
that satisfies each requirement in this section.
(2) Its principal purpose must be the promotion of literature, music, a performing art, a visual art, a craft, design, film, video, television, radio, community arts, Aboriginal arts or movable cultural heritage.
(3) It must maintain a public fund:
(a) to which gifts of money or property for its principal purpose can be made; and
(b) to which any money received because of such gifts is to be credited; and
(c) that does not receive any other money or property.
(4) It must use gifts made to the fund, and any money received because of such gifts, only for its principal purpose.
(5) It must not pay any of its profits or financial surplus, or give any of its property, to its members, beneficiaries, controllers or owners (as appropriate).
(6) It must have agreed to comply with any rules that the Treasurer and the Minister for Communications and the Arts make to ensure that gifts made to the fund are used only for its principal purpose.
(7) It must have agreed to give the Secretary to the Department of Communications and Arts, at intervals of 6 months, statistical information about gifts made to the public fund during the last 6 months.
30-305 What must be on the register
(1) The Secretary to the Department of Communications and the Arts must enter on the register each * cultural organisation, and the public fund it maintains, that he or she has been directed to enter by the Treasurer and the Minister for Communications and the Arts.
(2) The Treasurer and the Minister may so direct the Secretary only if the Minister has notified the Treasurer that he or she is satisfied that an organisation is a * cultural organisation. The notification must be in writing.
(3) The direction must be in writing and must specify the day on which the organisation and public fund are to be entered on the register. The day must be the day on which the direction is given or a later day.
(4) The Treasurer and the Minister for Communications and the Arts must have regard to the policies and budgetary priorities of the Commonwealth Government in deciding whether to give a direction.
30-310 Removal from the register
(1) The Treasurer and the Minister for Communications and the Arts may direct the Secretary to the Department of Communications and the Arts to remove a * cultural organisation, and the public fund it maintains, from the register.
(2) The direction must be in writing and must specify the day on which the organisation and public fund are to be removed from the register. The day must be the day on which the direction is given or a later day.
Subdivision 30-G -- Index to this Division
Table of sections
30-315 Index
30-320 Effect of this Subdivision
(1) The table in this section gives you an index to this Division.
(2) It tells you:
ï‚· each topic covered by this Division; and
ï‚· where in this Division you can find the detail about each topic.
Note: In the last column there are many references in this form: item 2.2.1. These refer to items in the tables in Subdivision 30-B.
Index | ||
Topic | Provision | |
1 | Academies - professional | section 30-25 |
2 | Academy of the Social Sciences in Australia Incorporated | item 2.2.1 |
3 | Amnesty International | item 4.2.1 |
4 | Ancillary funds | item 2 of the table in section 30 - 15 |
5 | Antarctic research | item 3.2.3 |
6 | Approved research institutes | item 3.1.1 |
7 | Armed forces, auxiliaries | item 5.1.2 |
8 | Artbank | item 5 of the table in section 30 - 15 |
9 | Art galleries | items 12.1.4 and 12.1.5; item 4 of the table in section 30-15 |
10 | Australian Academy of Science | item 2.2.2 |
11 | Australian Academy of Technological Sciences and Engineering Limited | item 2.2.4 |
12 | Australian Academy of the Humanities for the Advancement of Scholarship in Language, Literature, History, Philosophy and the Fine Arts | item 2.2.3 |
13 | Australian Administrative Staff College | item 2.2.5 |
14 | Australiana Fund | item 12.2.1; item 4 of the table in section 30-15 |
15 | Australian and New Zealand Association for the Advancement of Science | item 2.2.6 |
16 | Australian and New Zealand College of Anaesthetists | item 1.2.13 |
17 | Australian Antarctic Territory , payment to Commonwealth for research | item 3.2.3 |
18 | Australian College of Obstetricians and Gynaecologists | item 1.2.1 |
19 | Australian College of Occupational Medicine | item 1.2.2 |
20 | Australian Conservation Foundation Incorporated | item 6.2.1 |
21 | Australian Games Uniform Company Limited | item 10.2.6 |
22 | Australian Institute of International Affairs | item 9.2.1 |
23 | Australian Ireland Fund | item 2.2.7 |
24 | Australian National Travel Association | item 9.2.2 |
25 | Australian Postgraduate Federation in Medicine | item 1.2.3 |
26 | Australian Regional Council of the Royal College of Obstetricians and Gynaecologists | item 1.2.11 |
27 | Australian Sports Foundation | item 10.2.1 |
28 | Borneo Memorials Trust Fund | item 5.2.5 |
29 | Central Synagogue Restoration Fund | item 5.2.4 |
30 | Centre for Independent Studies | item 3.2.1 |
31 | Child Accident Prevention Foundation of Australia | item 4.2.2 |
32 | Cobram and District War Memorial Incorporated Fund | item 5.2.3 |
33 | College buildings | item 2.1.10 |
34 | College of Radiologists in Australasia | item 1.2.4 |
35 | Conditional gifts | section 30-220 |
36 | Connellan Airways Trust | item 11.2.1 |
37 | Conservation bodies | section 30-55 |
38 | Constitutional Centenary Foundation Incorporated | item 2.2.15 |
39 | Council for Christian Education in Schools | item 2.2.10 |
40 | Council for Jewish Education in Schools | item 2.2.11 |
41 | Cultural Bequests Program, testamentary gifts | Subdivision 30-D |
42 | Cultural organisations | section 30-100 |
43 | Cultural organisations, register of | Subdivision 30-F |
44 | Defence organisations | section 30-50 |
45 | Diseases - institutions researching causes, prevention or cure | items 1.1.4 and 1.1.5 |
46 | Education bodies | section 30-25 |
47 | Environmental organisations | section 30-55 |
48 | Environmental organisations, register of | Subdivision 30-E |
49 | Family organisations | section 30-70 |
50 | Foundation for Development Cooperation Ltd | item 9.2.3 |
51 | Friends of the Duke of Edinburgh's Award in Australia Incorporated | item 11.2.2 |
52 | Girl Guides | items 10.2.2 and 10.2.3 |
53 | Greening Australia Limited | item 6.2.2 |
54 | Health organisations | section 30-20 |
55 | Herbert Vere Evatt Memorial Foundation Incorporated | item 11.2.3 |
56 | Heritage properties | item 6 of the table in section 30 - 15 |
57 | Higher education institutions | item 2.1.3 |
58 | Hospitals | items 1.1.1, 1.1.2 and 1.1.3 |
59 | H.R.H. The Duke of Edinburgh's Commonwealth Study Conferences ( Australia ) Incorporated | item 2.2.12 |
60 | Ian Clunies Ross Memorial Foundation | item 3.2.2 |
61 | Industrial Design Council of Australia | item 7.2.1 |
62 | Industry, trade and design | section 30-65 |
63 | International affairs | section 30-80 |
64 | Joint ownership of property | section 30-225 |
65 | Landcare Australia Limited | item 6.2.3 |
66 | Libraries | items 12.1.2 and 12.1.5; item 4 of the table in section 30-15 |
67 | Life Education Centre | items 2.2.8 and 2.2.9 |
68 | Lionel Murphy Foundation | item 2.2.13 |
69 | Marcus Oldham Farm Management College | item 2.2.14 |
70 | Marriage guidance organisations | item 8.1.1 |
71 | Medical colleges | section 30-20 |
72 | Medical research | section 30-20 |
73 | Museums | items 12.1.3 and 12.1.5; item 4 of the table in section 30-15 |
74 | National Foundation for Australian Women Limited | item 4.2.3 |
75 | National Parks associations | section 30-55 |
76 | National Safety Council of Australia | item 4.2.4 |
77 | National Trust bodies | section 30-55; item 6 of the table in section 30-15 |
78 | Nature organisations | section 30-55 |
79 | Necessitous circumstances - funds for relief of persons in | item 4.1.3 |
80 | New South Wales College of Nursing | item 1.2.5 |
81 | Nursing Mothers' Association of Australia | item 8.2.1 |
82 | Overseas relief funds | item 9.1.1 |
83 | Pearl Watson Foundation Limited | item 4.2.5 |
84 | People in need, fund for | item 4.1.3 |
85 | Philanthropic trusts | section 30-95 |
86 | Playford Memorial Trust | item 11.2.4 |
87 | Political contributions | item 3 of the table in section 30 - 15 |
88 | Polly Farmer Foundation (Inc) | item 2.2.16 |
89 | Prevention of cruelty to animals | section 30-45 |
90 | Productivity | section 30-65 |
91 | Productivity Promotion Council of Australia | item 7.2.2 |
92 | Property, rules for valuing gifts | section 30-15 and Subdivision 30-C |
93 | Public benevolent institutions | items 4.1.1 and 4.1.2 |
94 | Queen Elizabeth II Silver Jubilee Trust for Young Australians | item 11.2.6 |
95 | Religious instruction/education | section 30-25 |
96 | Research institutions | items 1.1.4 and 1.1.5 |
97 | Residential education institutions | section 30-25 |
98 | Royal Australian and New Zealand College of Psychiatrists | item 1.2.6 |
99 | Royal Australian College of General Practitioners | item 1.2.7 |
100 | Royal Australasian College of Physicians | item 1.2.8 |
101 | Royal Australasian College of Surgeons | item 1.2.9 |
102 | Royal College of Nursing , Australia | item 1.2.12 |
103 | Royal College of Pathologists of Australasia | item 1.2.10 |
104 | Royal Societies for the Prevention of Cruelty to Animals | section 30-45 |
105 | Rural school hostel buildings | item 2.1.11 |
106 | Sandakan Memorials Trust Fund | item 5.2.2 |
107 | School building funds | item 2.1.10 |
108 | Schools | section 30-25 |
109 | Scouts | items 10.2.4 and 10.2.5 |
110 | Shrine of Remembrance Restoration and Development Trust | item 5.2.1 |
111 | Sir Robert Menzies Memorial Trust Foundation Limited | item 11.2.5 |
112 | Sports and recreation | section 30-90 |
113 | Tasmanian Conservation Trust Incorporated | item 6.2.11 |
114 | Taxation incentives for the Arts scheme | items 4 and 5 of the table in section 30 - 15 |
115 | Technical and further education institution | item 2.1.7 |
116 | Tertiary education/TAFE | section 30-25 |
117 | Trusts - philanthropic | section 30-95 |
118 | Trusts - ancillary | item 2 of the table in section 30 - 15 |
119 | Universities - general | section 30-25 |
120 | Universities - research | section 30-40 |
121 | Valuers | section 30-210 |
122 | Victoria Conservation Trust | item 6.2.6 |
123 | War Memorials | section 30-50 |
124 | Welfare and rights | section 30-45 |
125 | Winston Churchill Memorial Trust | item 11.2.7 |
126 | Work Skill Australia Foundation Incorporated | item 7.2.3 |
127 | World Wide Fund for Nature Australia | item 6.2.22 |
30-320 Effect of this Subdivision
This Subdivision (except this section) has effect as if it were a * Guide.
Note: In interpreting an operative provision, a Guide may be considered only for limited purposes: see section 950-150.
[The next Division is Division 32.]
Division 32 -- Entertainment expenses
Table of Subdivisions
Guide to Division 32
32-A No deduction for entertainment expenses
32-B Exceptions
32-C Definitions relevant to the exceptions
32-D In-house dining facilities (employer expenses table item 1.2)
32-E Anti-avoidance
32-F Special rules for companies and partnerships
32-1 What this Division is about
You cannot deduct costs of providing entertainment. Nor can you deduct amounts for property that you use for providing entertainment. But there are exceptions.
Subdivision 32-A -- No deduction for entertainment expenses
Table of sections
32-5 No deduction for entertainment expenses
32-10 Meaning of entertainment
32-15 No deduction for property used for providing entertainment
32-5 No deduction for entertainment expenses
To the extent that you incur a loss or outgoing in respect of providing
* entertainment, you cannot deduct it under section 8- 1. However, there are
exceptions, which are set out in
Subdivision 32-B.
Note 1: Under section 8- 1 you can deduct a loss or outgoing that you incur for the purpose of producing assessable income.
Note 2: If you have used your property in providing entertainment, you may not be able to deduct an amount for the property: see section 32-15.
Note 3: Section 32-75 deals with arrangements to avoid the operation of this section.
32-10 Meaning of entertainment
(1) Entertainment means:
(a) entertainment by way of food, drink or * recreation; or
(b) accommodation or travel to do with providing entertainment by way of food, drink or * recreation.
(2) You are taken to provide entertainment even if business discussions or transactions occur.
Note: These are some examples of what is entertainment:
These are some examples of what is not entertainment:
32-15 No deduction for property used for providing en tertainment
To the extent that you use property in providing * entertainment, your use of the property is taken not to be for the * purpose of producing assessable income if section 32-5 would stop you deducting a loss or outgoing if you incurred it in the income year in providing the entertainment.
Note: Under some provisions of this Act, in order to deduct an amount for your property, you must have used the property for the purpose of producing assessable income.
Subdivision 32-B -- Exceptions
Table of sections
32-20 The main exception--fringe benefits
32-25 The tables set out the other exceptions
32-30 Employer expenses
32-35 Seminar expenses
32-40 Entertainment industry expenses
32-45 Promotion and advertising expenses
32-50 Other expenses
32-20 The main exception--fringe benefits
Section 32-5 does not stop you deducting a loss or outgoing to the extent that you incur it in respect of providing * entertainment by way of * providing a * fringe benefit.
But this exception does not apply to the extent that the taxable value of the * fringe benefit is reduced under section 63A of the Fringe Benefits Tax Assessment Act 1986.
Note 1: You may be able to deduct losses or outgoings that are fringe benefits under section 51AEA, 51AEB or 51AEC of the Income Tax Assessment Act 1936 . If you do, then you cannot deduct them under section 8- 1 (about general deductions) and so this section is not relevant.
Note 2: There are other exceptions for a loss or outgoing you incur in providing a benefit that would be a fringe benefit if it were not an exempt benefit: see items 1.6 and 1.7 of the table in section 32-30.
32-25 The tables set out the other exceptions
Section 32-5 does not stop you deducting a loss or outgoing to the extent that you incur it in respect of providing * entertainment as described in column 2 of an item of a table in this Subdivision.
However, if column 3 of that item applies, the exception in column 2 of that item does not.
Employer expenses | ||
Item | Section 32-5 does not stop you deducting a loss or outgoing for ... | But the exception does not apply if ... |
1.1 | providing food or drink to your employees in an * in-house dining facility. | the food or drink is provided at a party, reception or other social function. |
1.2 | providing food or drink to individuals (other than your employees) in an * in-house dining facility. | (a) you choose (under section 32-70) not to include in your assessable income $30 for each meal you provide in the * in-house dining facility in the income year to an individual (other than your employee); or (b) the food or drink is provided at a party, reception or other social function. |
1.3 | providing food or drink in a * dining facility to your employees who perform most of their duties in connection with: (a) the dining facility; or (b) a facility (of which the dining facility forms a part) for providing accommodation, * recreation or travel. | the food or drink is provided at a party, reception or other social function. |
1.4 | providing food or drink to your employee under an * industrial instrument relating to overtime. |
|
1.5 | providing a facility for * recreation on property you occupy, if the facility is mainly operated for your employees to use. | the facility is for: (a) accommodation; or (b) dining or drinking (unless it is a food or drink vending machine). |
1.6 | providing food or drink which would be a * fringe benefit apart from sections 54, 58, 58N, 58S and 58T of the Fringe Benefits Tax Assessment Act 1986 (disregarding section 58P of that Act). |
|
1.7 | providing a meal which would be a * fringe benefit apart from sections 58A, 58F, 58L, 58LA and 58M of the Fringe Benefits Tax Assessment Act 1986 (disregarding section 58P of that Act). |
|
1.8 | giving your employee an allowance that is included in his or her assessable income. | (a) the employee is a * relative of another employee of yours; and (b) you give the allowance to the relative, as your employee, because: (i) he or she provides, or facilitates providing, * entertainment to do with the other employee's employment; and (ii) you expect the relative to do so. |
Note 1: In the case of a company, items 1.1, 1.2, 1.3, 1.5 and 1.8 cover directors of the company as if they were employees: see section 32 - 80.
Note 2: In the case of a company, items 1.1, 1.2, 1.3 and 1.5 cover directors, employees and property of another company that is a member of the same wholly-owned group: see section 32-85.
Note 3: Item 1.8 has a special operation for partnerships: see section 32-90.
Seminar expenses | ||
Item | Section 32-5 does not stop you deducting a loss or outgoing for ... | But the exception does not apply if ... |
2.1 | providing food, drink, accommodation or travel to an individual (including yourself) that is reasonably incidental to the individual attending a * seminar that * goes for at least 4 hours. | (a) the seminar is a * business meeting; or (b) the * seminar's main purpose is to promote or advertise a * business (or prospective * business) or its goods or services; or (c) the * seminar's main purpose is to provide * entertainment at, or in connection with, the seminar. |
32-40 Entertainment industry expenses
Entertainment industry expenses | ||
Item | Section 32-5 does not stop you deducting a loss or outgoing for ... | But the exception does not apply if ... |
3.1 | providing * entertainment for payment in the ordinary course of a * business that you carry on. |
|
3.2 | providing * entertainment in performing your duties to your employer who carries on a * business that includes providing that entertainment for payment. |
|
32-45 Promotion and advertising expenses
Promotion and advertising expenses | ||
Item | Section 32-5 does not stop you deducting a loss or outgoing for ... | But the exception does not apply if ... |
4.1 | providing * entertainment if: (a) you provide it to an individual under a contract to supply him or her with goods or services in the ordinary course of your * business; and (b) you incur the loss or outgoing to promote or advertise to the public your business or its goods or services. |
|
4.2 | providing or exhibiting your * business's goods or services if you incur the loss or outgoing to promote or advertise those goods or services to the public. |
|
4.3 | providing * entertainment to promote or advertise to the public a * business or its goods or services. | some people have a greater opportunity to get the benefits of the entertainment than ordinary members of the public have. |
Other expenses | ||
Item | Section 32-5 does not stop you deducting a loss or outgoing for ... | But the exception does not apply if ... |
5.1 | buying food or drink to do with overtime that you work, if you receive an allowance under an * industrial instrument to buy the food or drink. |
|
5.2 | providing * entertainment free to members of the public who are sick, disabled, poor or otherwise disadvantaged. |
|
Subdivision 32-C -- Definitions relevant to the exceptions
Table of sections
32-55 In-house dining facility (employer expenses table items 1.1 and 1.2)
32-60 Dining facility (employer expenses table item 1.3)
32-65 Seminars (seminar expenses table item 2.1)
32-55 In-house dining
facility (employer expenses table items 1.1
and 1.2)
An in-house dining facility is a canteen, dining room or similar facility that:
(a) is on property you occupy; and
(b) is operated mainly for providing food and drink to your employees; and
(c) is not open to the public.
Note 1: In the case of a company, this definition also covers directors of the company as if they were employees: see section 32-80.
Note 2: In the case of a company, this definition also covers directors, employees and property of another company that is a member of the same wholly-owned group: see section 32-85.
32-60 Dining facility (employer expenses table item 1.3)
A dining facility is:
(a) a canteen, dining room or similar facility; or
(b) a cafe, restaurant or similar facility;
that is on property you occupy.
Note: In the case of a company, this definition also covers property of another company that is a member of the same wholly-owned group: see section 32-85.
32-65 Seminars (seminar expenses table item 2.1)
(1) Seminar includes a conference, convention, lecture, meeting (including a meeting for the presentation of awards), speech, "question and answer session", training session or educational course.
(2) In working out whether a * seminar goes for at least 4 hours the following are taken not to affect the seminar's continuity, nor to form part of it:
(a) any part of the seminar that occurs during a meal;
(b) any break during the seminar for the purpose of a meal, rest or * recreation.
(3) A * seminar is a business meeting if its main purpose is for individuals who are (or will be) associated with the carrying on of a particular * business to give or receive information, or discuss matters, relating to the business.
However, the * seminar is not a business meeting if it:
(a) is organised by (or on behalf of) an employer solely for either or both of these purposes:
(i) training the employer and the employer's employees (or just those employees) in matters relevant to the employer's * business (or prospective * business);
(ii) enabling the employer and the employer's employees (or just those employees) to discuss general policy issues relevant to the internal management of the employer's * business; and
(b) is conducted on property that is occupied by a person (other than the employer) whose * business includes organising seminars or making property available for conducting seminars.
Note 1: In the case of a company, subsection (3) covers directors of the company as if they were employees: see section 32-80.
Note 2: In the case of a company, paragraph (3)(b) also covers property of another company that is a member of the same wholly-owned group: see section 32-85.
Note 3: Subsection (3) has a special operation for partnerships: see section 32 - 90.
Subdivision 32-D -- In-house dining facilities (employer expenses table item 1.2)
Table of sections
32-70 $30 is assessable for each meal provided to non-employee in an in - house dining facility
32-70 $30 is assessable for each meal provided to non-employee in an in - house dining facility
(1) Your assessable income includes $30 for a meal you provide in an * in-house dining facility in the income year to an individual other than your employee, but only if:
(a) you incur a loss or outgoing in respect of providing the meal; and
(b) because of item 1.2 of the table in
section 32-30,
section 32 - 5 does not stop you deducting the loss or outgoing
under section 8- 1 (which deals with general deductions); and
(c)
the loss or outgoing is one that you can deduct under
section 8- 1 for
the income year or some other income year.
(2) However, you can choose not to include in your assessable income $30 for each meal you provide in the * in-house dining facility in the income year to an individual other than your employee.
Note: If you do choose, you cannot rely on item
1.2 of the table in
section 32-30 as a basis for deducting a loss or outgoing
you incur in respect of providing a meal.
(3) You must choose by the day you lodge your * income tax return for the income year, or within a further time allowed by the Commissioner.
Subdivision 32-E -- Anti-avoidance
Table of sections
32-75 Commissioner may treat you as having incurred entertainment expense
32-75 Commissioner may treat you as having incurred entertainment expense
If:
(a) you incur a loss or outgoing under an * arrangement; and
(b) someone provides * entertainment under the arrangement to you or someone else; and
(c) section 32-5 would have stopped you deducting the loss or outgoing under section 8- 1 (which deals with general deductions) if you had incurred it in respect of providing that entertainment;
this Division applies to you as if you had incurred the loss or outgoing in providing that entertainment, to the extent (if any) that the Commissioner thinks reasonable.
Note: This means that section 32-5 will prevent you from deducting the loss or outgoing under section 8- 1 unless an exception applies.
Example: A company pays $1,000 to sponsor a football game. Under the same arrangement, the company is given a viewing box at the game. To the extent the Commissioner thinks reasonable, he or she can treat the company as having incurred the $1,000 in providing entertainment.
Subdivision 32-F -- Special rules for companies and partnerships
Table of sections
32-80 Company directors
32-85 Directors, employees and property of wholly-owned group company
32-90 Partnerships
In the case of a company, these provisions cover directors of the company as if they were the company's employees:
ï‚· item 1.1 (exception for * in-house dining facilities) of the table in section 32-30;
ï‚· item 1.2 (exception for * in-house dining facilities) of the table in section 32-30;
ï‚· item 1.3 (exception for * dining facilities) of the table in section 32-30;
ï‚· item 1.5 (exception for recreational facilities) of the table in section 32-30;
ï‚· item 1.8 (exception for providing your employee with an allowance) of the table in section 32-30;
ï‚· section 32-55 (which defines in-house dining facility );
ï‚· subsection 32-65(3) (which defines business meeting ).
32-85 Directors, employees and property of wholly-owned group company
Employees and directors of group company
(1) In the case of a company, these provisions cover directors and employees of another company that is a member of the same * wholly-owned group as if they were the company's own directors and employees:
ï‚· item 1.1 (exception for * in-house dining facilities) of the table in section 32-30;
ï‚· item 1.2 (exception for * in-house dining facilities) of the table in section 32-30;
ï‚· item 1.3 (exception for * dining facilities) of the table in section 32-30;
ï‚· item 1.5 (exception for recreational facilities) of the table in section 32-30;
ï‚· section 32-55 (which defines in-house dining facility );
ï‚· subsection 32-60(1) (which defines dining facility );
ï‚· paragraph 32-65(3)(b).
Property occupied by group company
(2) Those provisions also cover property occupied by that other company as if the company occupied that property.
In the case of a partnership:
• item 1.8 (exception for providing employee with an allowance) of the table in section 32-30; and
• subsection 32-65(3) (which defines business meeting );
apply to a partner in the same way as they apply to an employee of the partnership, but only for the purposes of calculating, in accordance with section 90 of the Income Tax Assessment Act 1936 , the partnership's net income or partnership loss.
[The next Division is Division 34.]
Division 34 -- Non-compulsory uniforms
Table of Subdivisions
Guide to Division 34
34-A Application of Division 34
34-B Deduction for your non-compulsory uniform
34-C Registering the design of a non-compulsory uniform
34-D Appeals from Industry Secretary's decision
34-E The Register of Approved Occupational Clothing
34-F Approved occupational clothing guidelines
34-G The Industry Secretary
34-1 What this Division is about
This Division is about deductions for the costs of non - compulsory uniforms.
Table of sections
34-3 What you need to read
Employees
(1) If you incur expenditure for your non-compulsory uniform, you need to read Subdivision 34-B (which is about deductions for your non - compulsory uniform), starting at section 34-10.
Employers
(2) If you have people working for you who want to deduct expenditure of that kind, you need to read:
ï‚· Subdivision 34-C (which is about registering the design of a non-compulsory uniform), starting at section 34-25; and
ï‚· Subdivision 34-D (which is about appeals from Industry Secretary's decision), starting at section 34-40.
Subdivision 34-A -- Application of Division 34
Table of sections
34-5 This Division applies to employees, PAYE earners and others
34-7 This Division applies to employers and others
34-5 This Division applies to employees, PAYE earners and others
(1) This Division applies not only to an individual who is an employee. It also applies to an individual who is not an employee, but who:
(a) is a * PAYE earner; or
(b) is not a * PAYE earner, but would be a * PAYE earner apart from paragraph (q) of the definition of salary or wages in subsection 221A(1) of the Income Tax Assessment Act 1936 (which excludes recipients of prescribed payments within the meaning of Division 3A of Part VI of that Act).
(2) If an individual is not an employee, but is covered by paragraph (1)(a) or (b), this Division applies to him or her as if:
(a) he or she were an employee; and
(b) the entity (the notional employer ) who pays (or is liable to pay) * PAYE earnings because of which he or she is (or would be) a * PAYE earner were his or her employer; and
(c) any other individual who receives (or is entitled to receive) * PAYE earnings:
(i) because of which the other individual is (or would be) a * PAYE earner; and
(ii) that the notional employer pays (or is liable to pay) to the other individual;
were the employee of the notional employer.
34-7 This Division applies to employers and others
If an entity is not an employer, but pays (or is liable to pay) * PAYE earnings, this Division applies to the entity as if:
(a) it were an employer; and
(b) an individual to whom the entity pays (or is liable to pay) * PAYE earnings were the entity's employee.
Subdivision 34-B -- Deduction for your non-compulsory uniform
Table of sections
34-10 What you can deduct
34-15 What is a non-compulsory uniform ?
34-20 What are occupation specific clothing and protective clothing ?
(1) If you are an employee, you can deduct expenditure you incur in respect of your * non-compulsory uniform if:
(a) you can deduct the expenditure under another provision of this Act; and
(b) the * design of the uniform is registered under this Division when you incur the expenditure.
Note 1: This Division also applies to PAYE earners and other individuals who are not employees: see Subdivision 34-A.
Note 2: Employers apply to register designs of
uniforms: see
Subdivision 34 - C.
(2) You cannot deduct the expenditure under this Act if the * design is not registered at the time you incur the expenditure.
(3) However, this Division does not stop you deducting expenditure you incur in respect of your * occupation specific clothing or * protective clothing.
34-15 What is a non-compulsory uniform ?
What is a uniform ?
(1) A uniform is one or more items of clothing (including accessories) which, when considered as a set, distinctively identify you as a person associated (directly or indirectly) with:
(a) your employer; or
(b) a group consisting of your employer and one or more of your employer's * associates.
When is a uniform non-compulsory ?
(2) Your uniform is non-compulsory unless your employer consistently enforces a policy that requires you and the other employees (except temporary or relief employees) who do the same type of work as you:
(a) to wear the uniform when working for your employer; and
(b) not to substitute an item of clothing not included in the uniform for an item of clothing included in the uniform when working for your employer;
except in special circumstances.
34-20 What are occupation specific clothing and protective clothing ?
(1) Occupation specific clothing is clothing that distinctively identifies you as belonging to a particular profession, trade, vocation, occupation or calling. To determine this, disregard any feature of the clothing that distinctively identifies you as a person associated (directly or indirectly) with:
(a) your employer; or
(b) a group consisting of your employer and one or more of your employer's * associates.
Example: Occupation specific clothing includes a nurse's uniform, a chef's checked pants and a religious cleric's ceremonial robes.
(2) Protective clothing is clothing of a kind that you mainly use to protect yourself, or someone else, from risk of:
(a) death; or
(b) * disease (including the contraction, aggravation, acceleration or recurrence of a disease); or
(c) injury (including the aggravation, acceleration or recurrence of an injury); or
(d) damage to clothing; or
(e) damage to an artificial limb or other artificial substitute, or to a medical, surgical or other similar aid or appliance.
Example: Protective clothing includes overalls, aprons, goggles, hard hats and safety boots, when worn to protect the wearer.
Meaning of disease
(3) Disease includes any mental or physical ailment, disorder, defect or morbid condition, whether of sudden onset or gradual development and whether of genetic or other origin.
Subdivision 34-C -- Registering the design of a non-compulsory uniform
Table of sections
34-25 Application to register the design
34-30 Industry Secretary's decision on application
34-33 Written notice of decision
34-35 When uniform becomes registered
34-25 Application to register the design
(1) The employer of an employee who has, or will have, a * non - compulsory uniform can apply to the Secretary to the Department of Industry, Science and Tourism (the Industry Secretary ) for the * design of the uniform to be registered.
Note: This Division also applies to entities that are not employers: see Subdivision 34-A.
Meaning of design of a uniform
(2) The design of a * uniform includes features such as its colouring, construction, durability, ornamentation, pattern and shape.
Form of application
(3) The application must be:
(a) in writing; and
(b) in a form approved in writing by the * Industry Secretary; and
(c) accompanied by such information as the Industry Secretary requires.
34-30 Industry Secretary's decision on application
Industry Secretary must decide to grant or refuse application
(1) After considering the application, the * Industry Secretary must decide to either grant or refuse the application.
Criteria for grant of application
(2) The * Industry Secretary must not decide to grant an application unless he or she is satisfied that the design meets the criteria set out in the * approved occupational clothing guidelines.
Note: The approved occupational clothing guidelines are created under section 34-55.
When Industry Secretary taken to have refused application
(3) The * Industry Secretary is taken to have refused an application if he or she does not make a decision by the later of the following times (the deadline ):
(a) the end of 90 days (the 90-day period ) after the day the Industry Secretary receives the application;
(b) if the
Industry Secretary, by written notice given to the applicant within the 90-day
period, requests the applicant to give further information about the
application--the end of
90 days after the Industry Secretary receives the
further information.
34-33 Written notice of decision
(1) If the * Industry Secretary makes a decision to grant or refuse an application under subsection 34-30(1) before the * deadline, the Industry Secretary must give the applicant written notice of the decision.
Reasons for refusal
(2) If the notice is a notice of a decision to refuse the application, it must also set out the reasons for the refusal.
Statements to accompany notice of decision
(3) The notice of the decision is to include the statements set out in subsections (4) and (5).
(4) There must be a statement to the effect that, subject to the Administrative Appeals Tribunal Act 1975 , an application may be made to the * AAT, by (or on behalf of) any entity whose interests are affected by the decision, for review of the decision.
(5) There must also be a statement to the effect that a request may be made under section 28 of that Act by (or on behalf of) such an entity for a statement:
(a) setting out the findings on material questions of fact; and
(b) referring to the evidence or other material on which those findings were based; and
(c) giving the reasons for the decision;
except where subsection 28(4) of that Act applies.
Failure does not affect validity
(6) If the * Industry Secretary fails to comply with subsection (4) or (5), that failure does not affect the validity of his or her decision.
34-35 When uniform becomes registered
If the * Industry Secretary decides to grant the application, the * design of the * uniform becomes registered on:
(a) the day the decision is made; or
(b) if the applicant requests--such earlier day as the Industry Secretary specifies.
Note: When the design becomes registered, an
entry for the design is made on the Register of Approved Occupational
Clothing.
Subdivision 34 - E is about the Register.
Subdivision 34-D -- Appeals from Industry Secretary's decision
Table of sections
34-40 Review of decisions by the Administrative Appeals Tribunal
34-40 Review of decisions by the Administrative Appeals Tribunal
Applications may be made to the * AAT for review of a decision made by the * Industry Secretary under subsection 34 - 30(1).
Subdivision 34-E -- The Register of Approved Occupational Clothing
Table of sections
34-45 Keeping of the Register
34-50 Changes to the Register
(1) The * Industry Secretary must keep the Register of Approved Occupational Clothing, listing the designs that are required to be entered on the Register because of this Division.
Register to be open for inspection
(2) The * Industry Secretary must arrange for the Register to be available for inspection at any reasonable time by any person on request.
Removal of registration
(1) The * Industry Secretary must remove an entry for a * design from the Register of Approved Occupational Clothing if requested to do so by the employer who applied for the design to be registered.
Correcting errors and mistakes
(2) The * Industry Secretary may correct a clerical error or an obvious mistake in an entry for a design in the Register and, if the Industry Secretary does so, the correction takes effect on the day on which the design to which the entry relates was registered.
Subdivision 34-F -- Approved occupational clothing guidelines
Table of sections
34-55 Approved occupational clothing guidelines
34-55 Approved occupational clothing guidelines
(1) The Treasurer must formulate written guidelines (the approved occupational clothing guidelines ) setting out criteria that * designs of uniforms must meet if the designs are to be registered.
Matters to be taken into account in making guidelines
(2) In making * approved occupational clothing guidelines, the matters to which the Treasurer is to have regard include:
(a) how distinctively a * uniform's * design identifies the wearer as a person associated (directly or indirectly) with:
(i) the applicant for registering the uniform's design; or
(ii) a group consisting of the applicant and one or more of the applicant's * associates; and
(b) the nature of the * business or activities the applicant carries on.
Guidelines to be published
(3) The Treasurer must arrange for the * approved occupational clothing guidelines to be:
(a) published in the Gazette ; and
(b) made available, without charge, to any interested entity.
Subdivision 34-G -- The Industry Secretary
Table of sections
34-60 Industry Secretary to give Commissioner information about entries
34-65 Delegation of powers by Industry Secretary
34-60 Industry Secretary to give Commissioner information about entries
The * Industry Secretary must give the Commissioner information about entries of * designs on the Register of Approved Occupational Clothing if the Commissioner requests him or her to do so.
34-65 Delegation of powers by Industry Secretary
The * Industry Secretary may, by writing, delegate any or all of his or her functions and powers under this Division to an individual who holds or performs the duties of:
(a) a * Senior Executive Service office; or
(b) an office of Senior Officer Grade A, B or C;
in the Department of Industry, Science and Tourism.
[The next Division is Division 36.]
8 Section 41-85 (link note)
Repeal the link note.
9 After Division 41
Insert:
Division 42 -- Depreciation of plant
Table of Subdivisions
Guide to Division 42
42-A Key operative provisions
42-B Cost of plant
42-C Effective life
42-D Depreciation rates
42-E Calculation of depreciation deductions
42-F Calculation of balancing adjustments
42-G Calculation of balancing adjustments for some cars
42-H Balancing adjustment relief
42-I Quasi-ownership
42-J Partial change of ownership
42-K Car depreciation limit
42-L Pooling
42-1 What this Division is about
This Division sets out the basis on which you can deduct amounts for depreciation of property that is a unit of plant.
To work out how this Division applies to existing plant (and some plant where roll-overs are involved), you need to refer to the transitional provisions in Division 42 of the Income Tax (Transitional Provisions) Act 1997 .
Table of sections
42-5 Key concepts used in this Division
42-5 Key concepts used in this Division
Subdivision 42-A -- Key operative provisions
42-10 What this Subdivision is about
This Subdivision contains the key operative provisions for depreciation, including the main deduction provision.
Table of sections
Operative provisions
42-15 Deduction for depreciation
42-18 Meaning of plant
42-19 References to plant
42-20 Amount you deduct
42-25 Calculation
42-30 Balancing adjustments
42-35 Application of Division 41 Common rules
42-40 Choices
42-45 Exclusions
42-48 Debt forgiveness: amounts deducted for depreciation
Non-operative provisions
42-50 What are other "amounts deducted for depreciation"?
42-55 Signposting to other parts of the Act
42-15 Deduction for depreciation
You deduct an amount for depreciation of a unit of * plant for an income year if, in that year:
(a) you are its owner or * quasi-owner; and
(b) you use it, or have it * installed ready for use, for the * purpose of producing assessable income.
Note: If there is a quasi-owner, the
owner cannot deduct: see
section 42 - 320.
(1) Plant includes:
(a) articles, machinery, tools and rolling stock; and
(b) animals used as beasts of burden or working beasts in a * business, other than a * primary production business; and
(c) fences, dams and other structural improvements, other than those used for domestic or residential purposes, on land that is used for agricultural or pastoral operations; and
(d) structural improvements, other than a * forestry road or structural improvements used for domestic or residential purposes, on land used in a business involving:
(i) planting or tending trees in a plantation or forest that are intended to be felled; or
(ii) felling trees in a plantation or forest; or
(iii) transporting trees, or parts of trees, that you felled in a plantation or forest to the place where they are first to be milled or processed, or from which they are to be transported to the place where they are first to be milled or processed; and
(e) structural improvements, other than those used for domestic or residential purposes, that are used wholly for operations (carried out in the course of a business) relating directly to:
(i) taking or culturing pearls or pearl shell; or
(ii) taking or catching trochus, bêche-de-mer or green snails;
and that are situated at or near a port or harbour from which the business is conducted; and
(f) structural improvements that are excluded from paragraph (c), (d) or (e) because they are used for domestic or residential purposes if they are provided for the accommodation of employees, tenants or sharefarmers who are engaged in or in connection with the activities referred to in that paragraph.
(2) Plant also includes plumbing fixtures and fittings (including wall and floor tiles) provided by an entity mainly for:
(a) either or both:
(i) employees in a * business carried on by the entity for the * purpose of producing assessable income; or
(ii) employees in a business carried on for that purpose by a company that is a member of the same * wholly-owned group of which the entity is a member; or
(b) * children of any of those employees.
References in the following provisions of this Division to * plant are to a unit of plant.
(1) The amount you deduct is worked out under Subdivision 42 - E. However, for * plant in a * pool, you work out the amount under Subdivision 42-L.
(2) You cannot deduct more than the * undeducted cost of the * plant.
(1) The calculation of your deduction is based on the * cost of the * plant to you.
(2) The rate you use to calculate your deduction is set out in Subdivision 42-D. Generally, the rate is based on the * effective life of the * plant.
(3) You have a choice of 2 calculation methods: the * diminishing value method and the * prime cost method. You make the choice for the income year in which a depreciation deduction is first allowable to you for the * plant.
Note: The diminishing value method calculates your deduction each year as a percentage of the balance you have left to deduct.
The prime cost method calculates your deduction each year as a percentage of your cost.
(1) You must make a balancing adjustment calculation for * plant if:
(a) you have deducted or can deduct an amount for depreciation of it or, if Common rule 1 (roll-over relief for related entities) applied to your acquisition of it, the transferor or an earlier successive transferor deducted or can deduct an amount for depreciation of it; and
(b) a * balancing adjustment event occurs.
Note 1: However, no balancing adjustment calculation is required if Common rule 1 applies to the balancing adjustment event.
Note 2: A balancing adjustment calculation may include an amount in your assessable income or allow you to deduct an amount. If you are required to include an amount in your assessable income, balancing adjustment relief may be available: see sections 42 - 285, 42 - 290 and 42-295.
(2) Balancing adjustments are calculated under:
(a) Subdivision 42-F; or
(b) Subdivision 42-G for some * cars; or
(c) section 42-390 for * plant in a * pool.
(3) A balancing adjustment event occurs as shown in the table:
A balancing adjustment event occurs: | ||
Item | If you are ... | when: |
1 | the owner of * plant | (a) you dispose of it and do not become its * quasi - owner; or (b) it is lost or destroyed; or (c) subsection 42-330(1) applies. |
2 | the * quasi-owner of * plant | (a) you cease to be the * quasi-owner of it and do not become its owner; or (b) it is lost or destroyed; or (c) subsection 42-330(2) applies. |
Note: Section 42-330 deals with partial change of ownership.
42-35 Application of Division 41 Common rules
The following Common rules apply to this Division:
(a) Common rule 1 (roll-over relief for related entities);
(b) Common rule 2 (non-arm's length transactions);
(c) Common rule 3 (anti-avoidance--ownership).
For modifications to Common rule 1, see sections 42-275 and 42-280.
For modifications to Common rule 2, see sections 42-75 and 42 - 210.
(1) Any choice you are required to make under this Division must be made:
(a) by the day you lodge your * income tax return for the income year to which the choice relates; or
(b) within a further time allowed by the Commissioner.
(2) Your choice, once made, applies to that income year and all later income years.
Primary production expenditure
(1) You cannot deduct an amount for depreciation of * plant if any expenditure incurred on it by any entity has been or can be deducted under Subdivision 387-A (Landcare operations) or 387-B (Facilities to conserve or convey water).
Research and development plant
(2) You cannot deduct an amount for depreciation of * plant that you have * installed ready for use exclusively for the purpose of carrying on * research and development activities unless you have elected under subsection 73B(18) of the Income Tax Assessment Act 1936 that the research and development provisions are not to apply to the plant.
Leisure facilities and boats
(3) You cannot deduct an amount for depreciation of a * leisure facility or a boat unless, at some time in the income year:
(a) its use constitutes a * fringe benefit; or
(b) you use the leisure facility or hold it for use as mentioned in subsection 26-50(3); or
(c) you use the boat or hold it for use as
mentioned in
paragraph 26-50(5)(b), (c) or (d).
42-48 Debt forgiveness: amounts deducted for depreciation
(1) An amount applied in reduction of deductible expenditure (within the meaning of Division 245 of Schedule 2C to the Income Tax Assessment Act 1936 ) for * plant under section 245-155 of that Schedule is taken to be an amount you have deducted under section 42-15 for depreciation of the plant.
(2) The amount is taken to have been deducted as at the first day of your income year that corresponds to the forgiveness year of income for the reduction within the meaning of Division 245 of that Schedule.
Note: Therefore, the amount must be taken into account for the plant under paragraph (a) of the definition of undeducted cost in section 42-175. Also, because the amount is taken to have been deducted as at the first day of the income year, it will reduce the opening undeducted cost of the plant if you are using the diminishing value method.
42-50 What are other "amounts deducted for depreciation"?
(1) A number of provisions in this Division require you to work out the amounts you have deducted or can deduct for depreciation of plant. Apart from amounts you have deducted or can deduct under section 42-15, other amounts may need to be taken into account.
(2) Those other amounts are:
(a) amounts you have deducted or can deduct for depreciation under Division 28 using the "log book" method or the "one - third of actual expenses" method; and
(b) amounts you treat as having been deducted for depreciation under section 42-285 or 42-290 (balancing adjustment relief); and
(c) amounts taken to be depreciation under paragraph 159GJ(1)(e) of the Income Tax Assessment Act 1936 .
42-55 Signposting to other parts of the Act
Entertainment
(1) Section 32-15 treats some property that is used for entertainment as not being used for the purpose of producing assessable income.
Environment
(2) Even if you do not use property for the purpose of producing assessable income, you will be taken to do so in some circumstances. See section 330-455 (mine site rehabilitation) and sections 82BG and 82BR of the Income Tax Assessment Act 1936 (environmental impact or protection).
Debt forgiveness
(3) Your deductions under this Division may be reduced if any of your commercial debts have been forgiven in the income year: see Subdivision 245-E of Schedule 2C to the Income Tax Assessment Act 1936 .
Anti-avoidance
(4) The anti-avoidance provisions in section 51AD, and Division 16D of Part III, of the Income Tax Assessment Act 1936 may deny a depreciation deduction.
Record-keeping
(5) The rules in Division 900 requiring individuals and certain partnerships to keep written evidence of work expenses and car expenses apply to this Division.
(6) There are special record-keeping rules that apply to this Division in section 262A of the Income Tax Assessment Act 1936 .
Subdivision 42-B -- Cost of plant
42-60 What this Subdivision is about
A depreciation deduction for plant is based on its cost. This Subdivision tells you how to work out its cost.
Table of sections
Operative provisions
42-65 How to work out your cost
42-70 Adjustment: acquiring a car at a discount
42-75 Adjustment: non-arm's length transactions
42-80 Adjustment: car depreciation limit
42-85 Adjustment: double deduction
42-90 Adjustment: previously depreciated plant limit
42-65 How to work out your cost
Method statement
Step 1. Work out the cost of the * plant using the following table. If more than one row applies, use the cost under the last applicable row.
Step 2. The table indicates provisions that may adjust the cost. Refer to them to see if an adjustment is necessary.
Step 3. If more than one provision adjusts the cost, apply them in the order they appear in the table to:
(a) the cost; or
(b) the adjusted cost after applying the last applicable provision.
Step 4. The result is your cost .
Example: An entity acquires a car in a non-arm's length transaction for $80,000. The market value of the car is $60,000. Assume the car depreciation limit for the year is $55,000.
The provisional cost is $80,000 (item 1 of the table). The non-arm's length rule is applied next to reduce it to $60,000. Then the car depreciation limit applies to further reduce it. Your cost is $55,000.
Cost table | |||
Item | For * plant ... | The cost is: | May be adjusted by: |
1 | generally | its cost to you | • car discount (42-70) • non-arm's length (42 - 75) • car limit (42-80) • double deduction (42 - 85) • prev. dep. limit (42-90) |
2 | you acquire with, or attached to, other assets without a specific value being allocated to it | so much of the overall cost as is reasonably attributable to the * plant | • car discount (42-70) • non-arm's length (42-75) • car limit (42-80) • double deduction (42 - 85) • prev. dep. limit (42-90) |
3 | you acquire under subsection 42-335(1) | the market value of the * plant immediately before its acquisition | • car limit (42 - 80) • double deduction (42 - 85) • prev. dep. limit (42-90) |
4 | attached to land over which you hold a * quasi-ownership right assigned to you | so much of any consideration for the acquisition of the right as is reasonably attributable to the * plant | • non-arm's length (42 - 75) • double deduction (42 - 85) • prev. dep. limit (42-90) |
5 | that reverts to you because of the expiry, surrender or termination of a * quasi-ownership right over land | so much of any consideration for the expiry, surrender or termination as is reasonably attributable to the * plant | • double deduction (42 - 85) • prev. dep. limit (42-90) |
6 | that reverts to you because of the expiry, surrender or termination of a * quasi-ownership right over land and you grant a new right to an * associate or an * associated government entity of the former holder | the market value of the * plant immediately before the expiry, surrender or termination, worked out as if the former holder held an estate in fee simple in the land | • double deduction (42 - 85) • prev. dep. limit (42-90) |
7 | attached to land over which you hold a * quasi-ownership right and which you acquire under subsection 42-335(2) | the market value of the * plant immediately before its acquisition, worked out as if the former holder held an estate in fee simple in the land | • double deduction (42 - 85) • prev. dep. limit (42-90)
|
8 | you
stop holding as trading stock and acquire under | the amount worked out under section 70-110 | • car limit (42 - 80) • double deduction (42 - 85) |
9 | for which you have deducted or can deduct an amount under the research and development provisions | the amount worked out under subsection 73B(21) or (22) of the Income Tax Assessment Act 1936 | • car limit (42 - 80) • double deduction (42 - 85) |
10 | you acquire in circumstances where Common rule 1 applies | the transferor's cost (see subsection 42-280(2)) |
|
11 | for which you have deducted or can deduct an amount under the mining and quarrying provisions | the amount worked | • car limit (42 - 80) • double deduction (42 - 85)
|
12 | you acquire in circumstances where section 73E of the Income Tax Assessment Act 1936 (R&D roll-over relief) applies | the amount applicable under paragraph 73E(6)(a) of the Income Tax Assessment Act 1936 | • car limit (42 - 80) • double deduction (42 - 85)
|
42-70 Adjustment: acquiring a car at a discount
(1) You must increase the cost of a * car designed mainly for carrying passengers and which you acquire at a discount if:
(a) it is reasonable to conclude that any portion ( discount portion ) of the discount is referable to you or another entity selling other * plant for less than its market value; and
(b) you, or another entity, deducted or can deduct an amount for depreciation of the other plant for any income year; and
(c) the sum of the cost of the car and the
discount portion exceeds the * car depreciation limit calculated under
section
42-345 for the * financial year in which you first use the car for any
purpose.
(2) The cost of the * car is increased by the discount portion.
Note: The termination value of the other plant is also increased by the discount portion: see section 42-205.
(3) This
section does not apply to a * car that is excluded from
section 42-80 by
subsection 42-80(2).
42-75 Adjustment: non-arm's length transactions
Common rule 2 applies for the purpose of working out the cost of * plant, but with the following modifications:
(a) it applies to cost rather than expenditure; and
(b) it compares the cost with the amount that would have been the cost if the parties had dealt with each other at arm's length, and substitutes that amount instead of market value.
42-80 Adjustment: car depreciation limit
(1) If the cost of a * car designed mainly for carrying passengers would exceed the * car depreciation limit for the * financial year in which you first use the car for any purpose, your cost is reduced to that limit.
(2) This section does not apply to a * car that, immediately before you first used it for any purpose, was specially fitted out for transporting disabled people in wheelchairs unless, at that time:
(a) it was for your personal transportation; and
(b) it would be covered by subitem 96(1) or 97(1) of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 .
42-85 Adjustment: double deduction
(1) The cost of * plant is reduced by any portion of its cost that you have deducted or can deduct, or that has been or will be taken into account in working out an amount you can deduct, other than for depreciation.
(2) Subsection (1) does not apply to deductions for:
(a) research and development (section 73B of the Income Tax Assessment Act 1936 );
(b) development and investment allowances (Subdivisions B and BA of Division 3 of Part III of that Act);
(c) drought investment allowance (Part XII of that Act).
42-90 Adjustment: previously depreciated plant limit
(1) The Commissioner may limit the cost to you of * plant for which an amount has been deducted or can be deducted for depreciation by any earlier owner or * quasi-owner.
(2) The cost of the * plant may be limited to the sum of:
(a) its * written down value, immediately before the * balancing adjustment event occurred, in the hands of the last entity who had deducted or can deduct an amount for depreciation of it; and
(b) any balancing adjustment included in that entity's assessable income for the plant under Subdivision 42-F or 42-G; and
(c) any balancing adjustment that would have been included in that entity's assessable income for the plant if balancing adjustment relief under section 42-285 (same year relief) or 42-290 (later year relief) had not applied.
(3) If the last entity had the * plant in a * pool for the income year in which the * balancing adjustment event occurred, its cost may be limited to the sum of:
(a) any balancing adjustment included in that entity's assessable income for the plant under section 42-390; and
(b) any balancing adjustment that would have been included in that entity's assessable income for the plant if balancing adjustment relief under section 42-285 or 42 - 290 had not applied.
(4) The matters to be taken into account by the Commissioner in deciding whether to limit the cost of * plant include:
(a) whether you acquired the plant from an * associate; and
(b) the market value of the plant; and
(c) how the purchase price of the plant was calculated; and
(d) how the acquisition was financed; and
(e) whether the plant is for use by the entity from whom you acquired it or by an associate of the entity.
Subdivision 42-C -- Effective life
42-95 What this Subdivision is about
The rate at which you depreciate plant is generally determined by its effective life. There are 2 methods of working out effective life.
Table of sections
Operative provisions
42-100 Choice of method
42-105 How to work out effective life
42-110 Commissioner's determination of effective life
(1) You must either:
(a) work out the * effective life of * plant; or
(b) adopt the * effective life specified by the Commissioner (if any) for the plant under section 42-110.
(2) You make the choice for the income year in which a depreciation deduction is first allowable to you for the * plant.
42-105 How to work out effective life
(1) You work out the * effective life of * plant by estimating how long it can be used by any entity for income producing purposes. You do this as at the time you first use it, or have it * installed ready for use, for the * purpose of producing assessable income.
(2) In making that estimate, you assume that the * plant:
(a) is new; and
(b) will be subject to wear and tear at a rate that was reasonable for you to expect when you were working it out having regard to the expected circumstances of your use; and
(c) will be maintained in reasonably good order and condition.
(3) If, at that time, you conclude that you would be likely to scrap the * plant, sell it for scrap or abandon it before the end of the period worked out under subsection (1), its * effective life ends at the earlier time. This conclusion is also to be made on the assumption that the plant is new.
42-110 Commissioner's determination of effective life
(1) The Commissioner may make a written determination specifying the * effective life of * plant.
(2) Any conditions in the determination must be satisfied when you first use the * plant, or have it * installed ready for use, for the * purpose of producing assessable income.
Subdivision 42-D -- Depreciation rates
42-115 What this Subdivision is about
This Subdivision sets out the depreciation rates. More than one rate can apply depending on the nature of the plant and its use.
Table of sections
Operative provisions
42-120 Which rate do you use?
42-123 Change of rate
42-125 General rates
42-130 Low cost plant
42-135 Cars and motor cycles
42-140 Artworks
42-145 Scientific research
42-150 Employee amenities
(1) If more than one rate can apply to your * plant, choose the one you prefer. However, in any case, you may choose a lower rate.
(2) You make the choice for the income year in which a depreciation deduction is first allowable to you for the * plant.
(1) You must make a new choice of rate if you were using the * plant as mentioned in section 42-145 (scientific research) or 42-150 (employee amenities) and you cease to use it in that way.
(2) You may make a new choice of rate if you start using the * plant as mentioned in section 42-150.
(1) The general rates are set out in the following table.
General rates table | |||
Item | Years in * effective life | * Diminishing value rate | * Prime cost rate |
1 | fewer than 3 | not applicable | 100% |
2 | 3 to fewer than 5 | 60% | 40% |
3 | 5 to fewer than 6 2 / 3 | 40% | 27% |
4 | 6 2 / 3 to fewer than 10 | 30% | 20% |
5 | 10 to fewer than 13 | 25% | 17% |
6 | 13 to fewer than 30 | 20% | 13% |
7 | 30 or more | 10% | 7% |
(2) These rates do not apply to a * car, or a motor cycle or similar vehicle, or an * artwork.
The * prime cost rate for * plant is 100% if its * cost does not exceed $300 (or a higher prescribed amount).
The rates for * cars, and motor cycles or similar vehicles, are set out in the following table.
Cars and motor cycles rates table | |||
Item | Years in * effective life | * Diminishing value rate | * Prime cost rate |
1 | fewer than 3 | not applicable | 100% |
2 | 3 to fewer than 5 | 50% | 33% |
3 | 5 to fewer than 6 2 / 3 | 30% | 20% |
4 | 6 2 / 3 to fewer than 10 | 22.5% | 15% |
5 | 10 to fewer than 13 | 15% | 10% |
6 | 13 to fewer than 20 | 11.25% | 8% |
7 | 20 to fewer than 40 | 7.5% | 5% |
8 | 40 or more | 3.75% | 3% |
(1) The * diminishing value rate for * artworks is the percentage worked out using the formula:
(2) The * prime cost rate for * artworks is the percentage worked out using the formula:
(3) However, the * prime cost rate for an * artwork having an * effective life of fewer than 3 years is 100%.
For * plant that you acquired before 1 July 1995 and use only for scientific research in the fields of natural or applied science:
(a) the * diminishing value rate is 50%; and
(b) the * prime cost rate is 33%.
(1) There is a rate for * plant an entity uses mainly for providing clothing cupboards, first aid, rest-room or recreational facilities, or meals or facilities for meals for:
(a) either or both:
(i) employees in a * business carried on by the entity for the * purpose of producing assessable income; or
(ii) employees in a business carried on for that purpose by a company that is a member of the same * wholly-owned group of which the entity is a member; or
(b) * children of any of those employees.
(2) The * diminishing value rate is 50%, and the * prime cost rate is 33%.
Subdivision 42-E -- Calculation of depreciation deductions
42-155 What this Subdivision is about
This Subdivision shows you how to work out the amount of a depreciation deduction. There are 2 calculation formulae: one for each calculation method.
Table of sections
Operative provisions
42-160 Diminishing value method
42-165 Prime cost method
42-170 Reducing deductions
42-175 Meaning of undeducted cost
42-160 Diminishing value method
Calculate your deduction using the formula:
where:
"opening undeducted cost" is the * undeducted cost of the * plant on the first day of the income year on which you were its owner or * quasi-owner.
"days owned" is the number of days in the income year you were the owner or * quasi-owner of the * plant.
(1) Calculate your deduction using the formula:
where:
"days owned" is the number of days in the income year you were the owner or * quasi-owner of the * plant.
(2) However, if you are using the 100% rate, your deduction is your * cost.
(3) In applying this section, the * cost of the * plant is reduced by:
(a) any amount that you choose under section 42-285 or 42-290 (balancing adjustment relief) to treat as having been deducted for depreciation of the plant; and
(b) any amount you are taken to have deducted for depreciation of the plant under subsection 42-48(2) (debt forgiveness).
Note: You cannot deduct more than the undeducted cost of the plant.
General
(1) Reduce your deduction by an amount that reasonably reflects the extent (if any) you neither used the * plant, nor had it * installed ready for use, for the * purpose of producing assessable income during the period in the income year you were its owner or * quasi-owner.
Leisure facilities and boats
(2) You may have to make a further reduction if your * plant is a * leisure facility or a boat. That reduction is made for any period in the income year during which you:
(a) were its owner or * quasi-owner; and
(b) used it, or had it * installed ready for use, for the * purpose of producing assessable income.
(3) The reduction must reflect the extent (if any) to which you did not satisfy any of the exceptions in paragraphs 42-45(3)(a), (b) and (c) for the * leisure facility or boat in that period.
Note: Paragraphs 42-45(3)(a), (b) and (c) set out the limited circumstances in which you can deduct an amount for a leisure facility or a boat.
42-175 Meaning of undeducted cost
The undeducted cost of * plant is its * cost less the sum of:
(a) for plant that is not a * car--the amounts you have deducted or can deduct for depreciation of the plant; and
(b) for plant that is not a car--any further amounts you could have deducted for depreciation of the plant for any period you were its owner or * quasi-owner and used it, or had it * installed ready for use, assuming that:
(i) you used it wholly for the * purpose of producing assessable income during that period; and
(ii) you used the same rate and method during that period as you used for the income year in which a depreciation deduction was first allowable to you for the plant; and
(iii) no provision of this Act denied a depreciation deduction for it; and
(c) if the plant is a car--the amounts you could have deducted under this Division for any period you were its owner and used it, or had it installed ready for use, assuming that:
(i) you used it wholly for the purpose of producing assessable income during that period; and
(ii) you used the same rate and method during that period as you used for the income year in which a depreciation deduction was first allowable to you for the car; and
(iii) no provision of this Act denied a depreciation deduction for it; and
(iv) Division 28 (Car expenses) did not apply; and
(d) if Common rule 1 applied to your acquisition of the plant--the sum of the amounts that would apply under paragraphs (a), (b) and (c) to the transferor and earlier successive transferors.
Subdivision 42-F -- Calculation of balancing adjustments
42-180 What this Subdivision is about
This Subdivision explains how to calculate your balancing adjustment when a balancing adjustment event occurs.
The calculation may result in:
ï‚· an amount being included in your assessable income; or
ï‚· you being able to deduct an amount; or
ï‚· no further action being required.
Table of sections
42-182 Diagram showing the application of this Subdivision
Operative provisions
42-185 When do you mak e a balancing adjustment calculation?
42-190 Including an amount in assessable income
42-195 Deducting an amount
42-200 Meaning of written down value
42-205 Meaning of termination value
42-210 Adjustment: non-arm's length transactions
42-215 Adjustment: car depreciation limit
42-220 Plant used for research and development
42-182 Diagram showing the application of this Subdivision
42-185 When do you make a balancing adjustment calculation?
You must make a balancing adjustment calculation for the income year in which a * balancing adjustment event occurs.
42-190 Including an amount in assessable income
(1) You include an amount in your assessable income if the * termination value of * plant exceeds its * written down value.
(2) You include the lesser of:
(a) the amounts you have deducted or can deduct for depreciation of the * plant; and
(b) the excess referred to in subsection (1).
For balancing adjustment relief, see sections 42-285, 42-290 and 42-295.
For plant used for research and development, see section 42-220.
(3) If Common rule 1 applied to your acquisition of the * plant, the amounts you have deducted or can deduct are taken to include amounts the transferor, and earlier successive transferors, deducted or can deduct for depreciation of it.
(1) You deduct an amount if the * termination value of * plant is less than its * undeducted cost.
(2) The amount you deduct is the difference between those amounts.
(3) However, you reduce that difference to reasonably reflect the extent (if any) to which you used the * plant, or had it * installed ready for use, other than for the * purpose of producing assessable income when you were its owner or * quasi-owner.
42-200 Meaning of written down value
The written down value of * plant is its * cost less the sum of:
(a) the amounts you have deducted or can deduct for depreciation of it; and
(b) if Common rule 1 applied to your acquisition of it--the amounts the transferor, and earlier successive transferors, deducted or can deduct for depreciation of it.
42-205 Meaning of termination value
Method statement
Step 1. Work out the termination value of the * plant using the following table. If more than one row applies, use the value under the last applicable row.
Step 2. The table indicates provisions which may adjust the value. Refer to them to see if an adjustment is necessary.
Step 3. If more than one provision adjusts the value, apply them in the order they appear in the table to:
(a) the termination value; or
(b) the adjusted termination value after applying the last applicable provision.
Step 4. The result is your termination value .
Termination value table | |||
|
| The termination value is: |
|
1 | you sell for a specific price | the sale price less the reasonably attributable expenses of sale | • non-arm's length (42 - 210) • car limit (42-215) |
2 | you sell with, or attached to, other assets without a specific price being allocated to it | the part of the total sale price that is reasonably attributable to the * plant less the part of the reasonably attributable expenses of the sale | • non-arm's length (42 - 210) • car limit (42-215) |
3 | you sell as part of a transaction involving the acquisition of a * car the * cost of which has been increased under section 42 - 70 | the sum of the sale price (less the reasonably attributable expenses of sale) and the discount portion referred to in section 42-70 | • non-arm's length (42 - 210) • car limit (42-215) |
4 | you dispose of other than by sale | the market value of the * plant immediately before its disposal | • car limit (42-215) |
5 | for which a * balancing adjustment event occurs because of subsection 42 - 330(1) | the market value of the * plant immediately before the * balancing adjustment event | • car limit (42-215) |
6 | attached to land over which you hold a * quasi-ownership right that you assign | so much of the consideration received for the assignment of the * quasi-ownership right as is reasonably attributable to the * plant |
|
7 | attached to land over which you hold a * quasi-ownership right that you assign to an * associate or an * associated government entity | the market value of the * plant immediately before the assignment, worked out as if you had held an estate in fee simple in the land |
|
8 | attached to land over which you hold a * quasi-ownership right that expires, is surrendered or is terminated | so much of the consideration received for the expiry, surrender or termination of the * quasi-ownership right as is reasonably attributable to the * plant |
|
9 | attached to land over which you hold a * quasi-ownership right that expires, is surrendered or is terminated and a new right or an estate in fee simple is granted to an * associate or an * associated government entity of yours | the market value of the * plant immediately before the expiry, surrender or termination, worked out as if you had held an estate in fee simple in the land |
|
10 | attached to land over which you hold a * quasi-ownership right and for which a * balancing adjustment event occurs because of subsection 42 - 330(2) | the market value of the * plant immediately before the * balancing adjustment event, worked out as if you had held an estate in fee simple in the land |
|
11 | you start holding as trading stock and you sell under | the amount worked out under section 70-30 | • car limit (42-215) |
12 | that is lost or destroyed | the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction | • car limit (42-215) |
Note 1: Section 42-70 increases the cost of a car you acquire at a discount in certain circumstances.
Note 2: Section 42-330 sets out the circumstances in which a partial change of ownership results in a balancing adjustment event.
42-210 Adjustment: non-arm's length transactions
(1) Common rule 2 applies for the purpose of working out the * termination value of * plant.
(2) However, that Common rule has a different application for depreciation purposes in 2 respects:
(a) it only applies to disposals by sale; and
(b) instead of requiring the party disposing of the property to have incurred capital expenditure, it is taken to require that party to have incurred a * cost.
42-215 Adjustment: car depreciation limit
For a * car the * cost of which was worked out by applying section 42 - 80 (Car depreciation limit), adjust the value by multiplying it by the fraction:
where:
"CDL" is the * car depreciation limit for the * car for the * financial year in which you first used it for any purpose.
"original cost" is the * cost of the * car (ignoring the * car depreciation limit).
42-220 Plant used for research and development
(1) The amounts referred to in paragraph 42-190(2)(a) are increased if you have deducted or can deduct an amount for the * plant under section 73B of the Income Tax Assessment Act 1936 . However, this subsection does not apply if subsection (3) applies.
(2) The increase for * plant to which subsection (1) applies is the difference between:
(a) its cost under section 73B, ignoring subsection 73B(6); and
(b) its written down value under that section.
Note: Subsection 73B(6) imposed a ceiling of $10,000,000 on the cost of certain pilot plant for research and development purposes.
(3) The amounts referred to in paragraph 42-190(2)(a) are increased if you acquired the * plant under a disposal to which Common rule 1 or section 73E of the Income Tax Assessment Act 1936 (roll-over relief) applied and:
(a) the transferor had deducted or could deduct an amount for the plant under section 73B of that Act; or
(b) your acquisition of the plant was the last of 2 or more successive transfers to which Common rule 1 or section 73E applied and any of the prior transferors had deducted or could deduct an amount for the plant under section 73B.
(4) The increase for * plant to which subsection (3) applies is worked out using the formula:
where:
"transferor's original cost" means:
(a) the * plant's cost; or
(b) if paragraph (3)(b) applies--the plant's cost to the earliest successive transferor;
under section 73B, ignoring subsection 73B(6).
"modified written down value" means the written down value under section 73B worked out as though:
(a) the transferor's original cost were your cost; and
(b) the amount mentioned in paragraph (3)(a) or (b) had been deducted or deductible by you.
Subdivision 42-G -- Calculation of balancing adjustments for some cars
42-225 What this Subdivision is about
This Subdivision explains how to calculate your balancing adjustment when a balancing adjustment event occurs for a car for which you have:
ï‚· deducted depreciation; and
ï‚· chosen the "cents per kilometre" method or the "12% of original value" method for deducting your car expenses.
Table of sections
42-230 Explanatory material
42-232 Diagram showing the operation of this Subdivision
Operative provisions
42-235 When do you use this Subdivision for a car?
42-240 Including an amount in assessable income
42-245 Deducting an amount
42-250 Reduction to take account of days when depreciation not claimed
42-255 Meaning of notional depreciation amount
42-260 Meaning of notional written down value
(1) This Subdivision has limited application because:
(a) if you have used only the "cents per kilometre" method or the "12% of original value" method since you began using the car, you will not have been able to deduct depreciation and so balancing adjustments are not relevant; and
(b) if you have used only the "log
book" method or the
"one-third of actual expenses" method since
you began using the car, balancing adjustments are calculated under
Subdivision 42-F.
(2) If this Subdivision applies, you have to reduce your balancing adjustment to reflect the extent to which you have chosen the "cents per kilometre" method or the "12% of original value" method: see section 42-250.
42-232 Diagram showing the operation of this Subdivision
42-235 When do you use this Subdivision for a car?
(1) A balancing adjustment for a * car is calculated under this Subdivision if, for the period you were its owner:
(a) you deducted or can deduct an amount for depreciation of the car in one or more income years; and
(b) you chose:
(i) the "cents per kilometre" method in
Subdivision 28 - C; or
(ii) the "12% of original
value" method in
Subdivision 28 - D;
for deducting your * car expenses for the car for one or more other income years.
(2) You must make that calculation for the income year in which a * balancing adjustment event occurs for the * car.
42-240 Including an amount in assessable income
(1) You include an amount in your assessable income if the * termination value of the * car exceeds its * notional written down value.
(2) First, work out the lesser of:
(a) the sum of the * notional depreciation amount and the amounts you have deducted or can deduct for depreciation of the * car; and
(b) the excess referred to in subsection (1).
(3) Then apply the reduction rule in section 42-250 and include the result in your assessable income.
For balancing adjustment relief, see sections 42-285, 42-290 and 42-295.
(4) If Common rule 1 applied to your acquisition of the * car, the amounts you have deducted or can deduct are taken to include amounts the transferor, and earlier successive transferors, deducted or can deduct for depreciation of it.
(1) You deduct an amount if the * termination value of the * car is less than its * undeducted cost.
(2) Work out the difference between those amounts.
(3) Reduce that difference to reasonably reflect the extent (if any) to which you used the * car, or had it * installed ready for use, other than for the * purpose of producing assessable income when you were its owner. In working out the reduction for the income years for which you chose the "cents per kilometre" method or the "12% of original value" method for the car, you apply the assumptions in section 42-255.
(4) Then apply the reduction rule in section 42-250 and deduct the result.
42-250 Reduction to take account of days when depreciation not claimed
Multiply the amount from subsection 42-240(2) or 42-245(3) by the fraction calculated using the formula:
where:
"depreciation days" is the total number of days you were the owner of the * car in each income year for which you have deducted or can deduct an amount for depreciation of it.
"non-depreciation days" is the total number of days you were the owner of the * car in each income year for which you chose the "cents per kilometre" method or the "12% of original value" method for deducting your * car expenses.
42-255 Meaning of notional depreciation amount
The notional depreciation amount for a * car is the sum of the amounts you could have deducted for depreciation of the car for the income years for which you chose the "cents per kilometre" method or the "12% of original value" method for the car assuming that:
(a) you had not chosen either of those methods for the car; and
(b) Division 28 (car expenses) had not applied to the car; and
(c) you used the car for the * purpose of producing assessable income:
(i) to the extent of 20% if you used the "cents per kilometre" method; or
(ii) to the extent of one-third if you used the "12% of original value" method.
42-260 Meaning of notional written down value
The notional written down value of a * car is its * written down value less its * notional depreciation amount.
Subdivision 42-H -- Balancing adjustment relief
42-265 What this Subdivision is about
This Subdivision explains how to apply the various forms of relief that may be available when a balancing adjustment event occurs.
Table of sections
42-270 Explanatory material
Roll-over relief
42-275 Modifications of Common rule 1
42-280 Additional consequences
Offsetting
42-285 Same year relief
42-290 Later year relief
Concessional rate
42-295 Concessional rate
42-300 Working out notional income and abnormal income for the concessional rate
(1) There are 3 forms of balancing adjustment relief.
(2) The first is in Common rule 1. If it applies, you do not have to make a balancing adjustment calculation.
(3) The second is an alternative, or partial alternative, to including an amount in your assessable income.
(4) The third may reduce your income tax payable in certain circumstances where a balancing adjustment amount is included in your assessable income.
42-275 Modifications of Common rule 1
(1) The following provisions of Common rule 1 do not apply for the purposes of this Division:
(a) section 41-40;
(b) section 41-45.
(2)
Despite section 41-30, the transferor and the transferee must
pro-rate
their depreciation deductions for the income year in which the * roll-over
event occurred on the basis of the number of days in the income year each of
them was its owner or * quasi-owner.
(3) The obligation in subsection 41-50(4) applies to the transferee as if the period for keeping the notice referred to in subsection 41-50(2) were until the end of 5 years after the next * balancing adjustment event occurs for the * plant.
(4) The obligation in subsection 41-55(5) applies to the transferee as if the period for keeping the election referred to in subsection 41 - 55(2) or a copy of it were until the end of 5 years after the next * balancing adjustment event occurs for the * plant.
42-280 Additional consequences
(1) In addition to the consequences of the roll-over set out in
section
41-30 (about the transferor's and transferee's right to a deduction),
the roll-over has the consequences set out in this section for the purposes of
this Division.
Note: For other consequences of the roll-over, see the definitions of written down value in section 42-200 and undeducted cost in section 42-175 and the provisions dealing with balancing adjustments.
Cost
(2) The * cost of the * plant is the same for the transferee as it is for the transferor.
Method
(3) The transferee must use the same method for calculating depreciation deductions for the * plant as the transferor was using for the income year in which the * roll-over event occurred.
Effective life
(4) The * effective life of the * plant in the hands of the transferee is the same as that worked out by the transferor, or the earliest successive transferor, under Subdivision 42-C.
Scientific research
(5) If the transferor was deducting amounts for depreciation of the * plant using the special rate for plant used for scientific research in the fields of natural or applied science--the transferee is taken to have acquired the plant before 1 July 1995.
Note: This subsection allows the transferee to satisfy the condition of the special rate about date of acquisition, but the transferee will still have to satisfy the other conditions of the special rate in order to use it.
(1) You do not have to include an amount in your assessable income for * plant as a result of a balancing adjustment calculation to the extent that you choose to treat that amount as an amount you have deducted for depreciation of other * plant.
(2) You make the choice, for the same income year in which the * balancing adjustment event occurred, successively for:
(a) any replacement * plant you acquire in that year; and
(b) other * plant you acquire in that year; and
(c) any other * plant.
(3) You can only make this choice if:
(a) at the end of the income year in which the * balancing adjustment event occurred, you used the replacement or other * plant, or had it * installed ready for use, wholly for the * purpose of producing assessable income; and
(b) you can deduct an amount for depreciation of that plant.
(4) The amount covered by the choice is taken to be an amount you have deducted for depreciation of the replacement or other * plant as at the first day of the income year in which the * balancing adjustment event occurred.
Note: Therefore, the amount must be taken into account for the plant under paragraph (a) of the definition of undeducted cost in section 42-175. Also, because the amount is taken to have been deducted as at the first day of the income year, it will reduce the opening undeducted cost of the plant if you are using the diminishing value method.
(1) You may exclude an amount that has been included in your assessable income for * plant as a result of a balancing adjustment calculation to the extent that you choose to treat that amount as an amount you have deducted for depreciation of replacement * plant.
(2) You can only make this choice for the replacement * plant if:
(a) you acquire it within 2 income years after the end of the income year in which the * balancing adjustment event occurred; 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 depreciation of it; and
(d) you have not made a choice under section 42-285 for the balancing adjustment event.
(3) The amount covered by the choice is taken to be an amount you have deducted for depreciation of the replacement * plant as at the first day of the income year in which you acquired it.
Note: Therefore, the amount must be taken into account for the plant under paragraph (a) of the definition of undeducted cost in section 42-175. Also, because the amount is taken to have been deducted as at the first day of the income year, it will reduce the opening undeducted cost of the plant if you are using the diminishing value method.
(1) If this section applies, you may choose to request, in writing, the Commissioner to determine a * notional income under section 42-300 that is less than your taxable income. That notional income must be used for the purposes of any Act that fixes an income tax rate by reference to a notional income.
(2) This section applies if:
(a) a * balancing adjustment event causes the cessation of a * business carried on by:
(i) you; or
(ii) a partnership of which you are a partner; or
(iii) the trustee of a trust in which you have a present entitlement to a share of the net income and are not under a legal disability; and
(b) as a result of the following balancing adjustment calculation, an amount is included in your assessable income or the assessable income of the partnership or trust.
(3) This section does not apply if, for the income year in which the * balancing adjustment event occurred:
(a) you are a company, other than a corporate trustee; or
(b) you are the trustee of a trust and are liable to be assessed under section 99A of the Income Tax Assessment Act 1936 (Certain trust income to be taxed at special rate); or
(c) the * plant was in a * pool; or
(d) Division 16 of Part III of that Act (averaging of income) applies to your assessment; or
(e) you chose balancing adjustment relief under section 42-285 (same year relief) or 42 - 290 (later year relief) for the balancing adjustment event.
42-300 Working out notional income and abnormal income for the concessional rate
(1) Your notional income for the income year in which the * balancing adjustment event occurred is:
(a) if your taxable income is greater than your * abnormal income--your taxable income less 2 / 3 of your abnormal income;
(b) if your taxable income is equal to or less than your abnormal income-- 1 / 3 of your taxable income;
(c) if section 86 of the Income Tax Assessment Act 1936 (Notional income of a taxpayer deriving a premium) applies to you and your notional income under that section is:
(i) greater than your abnormal income--your notional income under that section less 2 / 3 of your abnormal income;
(ii) equal to or less than your abnormal income-- 1 / 3 of your notional income under that section.
(2) Your abnormal income is worked out using the following table.
Abnormal income table | ||
| If
the * balancing adjustment event referred to in | And the balancing adjustment calculation causes an amount to be included in assessable income, your abnormal income is ... |
1 | by you, other than in partnership or as trustee of a trust | that amount |
2 | by a partnership of which you were a partner | the part of the amount included in your individual interest in the net income of the partnership |
3 | by you as trustee of a trust and you are being assessed as trustee under Division 6 of Part III of the Income Tax Assessment Act 1936 | the part of the amount included in the net income of the trust to which the assessment relates |
4 | by a trustee of a trust and you were a beneficiary in the trust | the part of the amount that is included in the share of the net income of the trust to which you are presently entitled and on which you are assessed |
Subdivision 42-I -- Quasi-ownership
42-305 What this Subdivision is about
This Subdivision explains the circumstances in which you are the quasi-owner of plant.
Table of sections
Operative provisions
42-310 Meaning of quasi-owner
42-315 Grant of new quasi-ownership right
42-320 Only one entity can deduct
(1) You are a quasi-owner of * plant if:
(a) it is attached to land you hold under a * quasi-ownership right granted by an * exempt Australian government agency or an * exempt foreign government agency; and
(b) you either:
(i) attached the plant to the land after you acquired the right; or
(ii) acquired the right from the entity that attached the plant or from a later successive holder of the right; and
(c) you are not its owner.
(2) You are not a * quasi-owner under subsection (1) if, when you would otherwise have become a quasi-owner, you had entered into a * scheme:
(a) under which an entity, other than the grantor of the right or that person's successor, would become the owner of the * plant at a later time; or
(b) that has a purpose of providing finance to enable an entity, other than you, the grantor of the right or that person's successor, to become the end-user of the plant:
(i) if you attached the plant to the land--for the whole, or a substantial part, of the * effective life of the plant as worked out or adopted by you; or
(ii) if the plant was already attached to the land when you acquired the * quasi-ownership right--for the whole, or a substantial part, of the remainder of the * effective life of the plant as worked out or adopted by the person who first attached the plant to the land.
42-315 Grant of new quasi-ownership right
If your * quasi-ownership right over land expires, is surrendered or is terminated and that event is followed by a grant of a new * quasi-ownership right over the land to you:
(a) the new right is taken to be a continuation of the original right; and
(b) you are taken not to have ceased to be the * quasi-owner of * plant attached to the land.
42-320 Only one entity can deduct
If there is both an owner and a * quasi-owner of * plant, only the quasi-owner can deduct an amount for depreciation.
Subdivision 42-J -- Partial change of ownership
42-325 What this Subdivision is about
This Subdivision sets out when a partial change of ownership will result in a balancing adjustment event.
Table of sections
Operative provisions
42-330 Partial change of ownership
42-335 Acquisition and roll-over relief
42-330 Partial change of ownership
(1) This subsection applies if:
(a) for any reason, a change occurs in the ownership of, or in the interests of entities in, * plant; and
(b) the entity or one of the entities that owned the plant before the change has an interest in it after the change.
(2) This subsection applies if:
(a) there is a * quasi-owner of * plant; and
(b) for any reason, a change occurs in the quasi-ownership of, or in the interests of quasi-owners in, the plant; and
(c) the entity or one of the entities that was a quasi-owner of the plant before the change has an interest in it after the change.
Note: If subsection (1) or (2) applies, a balancing adjustment event occurs for the plant, see subsection 42-30(3).
(3) However, subsection (1) or (2) applies only if a * balancing adjustment event does not otherwise occur for the * plant.
(4) The reasons for the change occurring include:
(a) the formation or dissolution of a partnership; and
(b) a variation in the constitution of a partnership, or in the interests of the partners.
42-335 Acquisition and roll-over relief
(1) If subsection 42-330(1) applies, the owners of the * plant after the change (the transferee ) are taken to have acquired it from its owners before the change (the transferor ).
(2) If subsection 42-330(2) applies, the * quasi-owners of the * plant after the change (the transferee ) are taken to have acquired it from its * quasi-owners before the change (the transferor ).
(3) Common rule 1 applies if the transferor and transferee jointly elect for roll-over relief.
Note: For the conditions relating to the election, see section 41-55.
Subdivision 42-K -- Car depreciation limit
42-340 What this Subdivision is about
This Subdivision explains how to calculate the car depreciation limit referred to in section 42-80.
Table of sections
Operative provisions
42-345 Calculation of limit
(1) The car depreciation limit for the 1996-97 * financial year is $55,134.
(2) The car depreciation limit for a later * financial year is the amount calculated using the formula:
where:
"depreciation limit" is the * car depreciation limit for the * financial year immediately before the financial year for which the limit is being calculated.
"indexation factor" is the number calculated, to 3 decimal places, under subsection (3) for the * financial year for which the limit is being calculated.
(3) The indexation factor for a * financial year is the number calculated using the formula:
where:
"index number" , for a quarter, means the index number for the motor vehicle purchase sub-group of the Consumer Price Index, being the weighted average of the 8 capital cities, first published by the Australian Statistician for the quarter.
"first March year" means the period of 12 months ending on
31 March
immediately before the * financial year for which the limit is being
calculated.
"second March year" means the period of 12 months immediately before the first March year.
(4) If the Australian Statistician changes the reference base for the motor vehicle purchase sub-group of the Consumer Price Index, only index numbers published in terms of the new base are to be used after the change.
(5) The Commissioner must publish before the beginning of each * financial year the indexation factor and the * car depreciation limit for that financial year.
42-350 What this Subdivision is about
You can reduce the number of depreciation calculations you have to make by allocating a number of units of plant that have the same depreciation rate to a pool. One calculation is made for all plant in the pool.
You cannot pool plant for the year you acquire it.
Table of sections
Operative provisions
42-355 Creating a pool
42-360 Allocating plant to a pool
42-365 What plant is eligible for allocation to a pool?
42-370 Removal of plant from a pool
42-375 Calculating depreciation deductions for pooled plant
42-380 Meaning of opening balance
42-385 Meaning of closing balance
42-390 Calculation of balancing adjustments for pooled plant
42-395 Application of CGT to pooled plant
You may choose to create a pool by recording in writing:
(a) the first income year for which * plant may be allocated to it; and
(b) the pool percentage.
42-360 Allocating plant to a pool
You may choose to allocate * plant to a * pool by recording in writing:
(a) the pool to which you are allocating it; and
(b) the income year for which it is allocated.
42-365 What plant is eligible for allocation to a pool?
You can only allocate * plant to a * pool for an income year if:
(a) you can deduct an amount for depreciation of it for that year; and
(b) the * diminishing value rate for the plant matches the pool percentage; and
(c) during the period you were its owner or * quasi-owner before that year, you used it, or had it * installed ready for use, wholly for the * purpose of producing assessable income; and
(d) you were its owner or * quasi-owner immediately after the beginning of that year; and
(e) it has not been allocated to another * pool for that year.
42-370 Removal of plant from a pool
(1) * Plant is removed from a * pool if you choose to remove it and you record the removal and the date of removal in writing.
Note: You may re-allocate the plant to a pool under section 42-360.
(2) * Plant is automatically removed from a * pool if:
(a) you cease to use it, or to have it * installed ready for use, wholly for the * purpose of producing assessable income and the cessation was not caused by a * balancing adjustment event; or
(b) the * diminishing value rate for the plant no longer matches the pool percentage; or
(c) a balancing adjustment event occurs for the plant and Common rule 1 applies to that event.
Note: Property removed from a pool because of paragraph (b) can be allocated to another pool under section 42-360.
(3) If * plant is removed from a * pool:
(a) it is taken not to have been in the pool for the income year in which it is removed; and
(b) you are taken to have deducted amounts for depreciation of it for the period it was in the pool as if you had used the pool percentage as your rate and the * diminishing value method; and
(c) you must use the diminishing value method in calculating future depreciation deductions for it.
42-375 Calculating depreciation deductions for pooled plant
Calculate your deduction for a * pool using the formula:
42-380 Meaning of opening balance
The opening balance of a * pool for an income year is worked out using the formula:
where:
"closing balance for last year" means the * closing balance for the * pool for the preceding income year worked out under section 42 - 385.
"undeducted cost of new plant" means the sum of the * undeducted costs, as at the beginning of the income year, of * plant allocated to the * pool for that year that was not in the pool for the preceding year.
"reduction for removed plant" means the sum of the * undeducted costs, as at the beginning of the income year, of any * plant removed for that year that was in the * pool for the preceding year. You work out those undeducted costs as if you had deducted amounts for depreciation of it for the period it was in the pool using the pool percentage as your rate and the * diminishing value method.
42-385 Meaning of closing balance
The closing balance of a * pool for an income year is worked out using the formula:
where:
"total depreciation" means the total amount you have deducted for depreciation for the income year for all * plant in the * pool for that year.
42-390 Calculation of balancing adjustments for pooled plant
(1) You must make a balancing adjustment calculation under this section for * plant if it is in a * pool for the income year in which a * balancing adjustment event occurs for it.
Note: However, if the plant is removed from the pool for the year in which the balancing adjustment event occurred, your balancing adjustment is calculated under Subdivision 42-F or 42-G.
(2) You include in your assessable income the lesser of:
(a) the * termination value of the * plant; and
(b) its * cost.
For balancing adjustment relief, see sections 42-285 and 42-290.
(3) If a balancing adjustment calculation is made under this section, you can continue to deduct amounts for depreciation of the * plant as part of the * pool.
42-395 Application of CGT to pooled plant
(1) This section applies if * plant that is in a * pool for an income year is disposed of within the meaning of Part IIIA of the Income Tax Assessment Act 1936 (Capital gains and capital losses).
(2) Section 160ZK of that Act (Reduction of amounts for purposes of reduced cost base) applies to the disposal as if you had deducted amounts for depreciation of it for the period it was in the * pool using the pool percentage as your rate and the * diminishing value method.
10 Section 43-260 (link note)
Repeal the link note, substitute:
[The next Part is Part 2-15.]
Insert:
Division 50 -- Exempt entities
Table of Subdivisions
50-A Various exempt entities
Subdivision 50-A -- Various exempt entities
Table of sections
50-1 Entities whose ordinary income and statutory income is exempt
50-5 Charity, education, science and religion
50-10 Community service
50-15 Employees and employers
50-20 Finance
50-25 Government
50-30 Health
50-35 Mining
50-40 Primary and secondary resources, and tourism
50-45 Sports, culture, film and recreation
50-1 Entities whose ordinary income and statutory income is exempt
The total * ordinary income and * statutory income of the entities covered by the following tables is exempt from income tax. In some cases, the exemption is subject to special conditions.
Note 1: Ordinary and statutory income that is exempt from income tax is called exempt income: see section 6-20. The note to subsection 6 - 15(2) describes some of the other consequences of it being exempt income.
Note 2: Even if you are an exempt entity, the Commissioner can still require you to lodge an income tax return or information under section 161 of the Income Tax Assessment Act 1936 .
50-5 Charity, education, science and religion
Charity, education, science and religion | ||
Item | Exempt entity | Special conditions |
1.1 | charitable institution | none |
1.2 | religious institution | none |
1.3 | scientific institution | none |
1.4 | public educational institution | none |
1.5 | fund established for public charitable purposes by will or instrument of trust | fund applied for the purpose for which it was established |
1.6 | fund established to enable scientific research to be conducted by or in conjunction with a public university or public hospital | fund applied for the purpose for which it was established |
1.7 | society, association or club established for the encouragement of science | not carried on for the profit or gain of its individual members |
Community service | ||
Item | Exempt entity | Special conditions |
2.1 | society, association or club established for community service purposes (except political or lobbying purposes) | not carried on for the profit or gain of its individual members |
Employees and employers | ||
Item | Exempt entity | Special conditions |
3.1 | (a) employee association; or (b) employer association | registered under an * Australian law relating to the settlement of industrial disputes |
3.2 | trade union | none |
Note: Despite items 3.1 and 3.2, certain ordinary and statutory income of some associations of employees and some registered trade unions may be subject to income tax under Division 8A of Part III of the Income Tax Assessment Act 1936 .
Finance | ||
Item | Exempt entity | Special conditions |
4.1 | a * friendly society (except a * friendly society dispensary) | not carried on for the profit or gain of its individual members |
Government | ||
Item | Exempt entity | Special conditions |
5.1 | (a) a municipal corporation; or (b) a local governing body | none |
5.2 | a public authority constituted under a * Commonwealth law | none |
Note: The ordinary and statutory income of a State or Territory body is exempt: see Division 1AB of Part III of the Income Tax Assessment Act 1936 .
Health | ||
Item | Exempt entity | Special conditions |
6.1 | public hospital | none |
6.2 | hospital carried on by a society or association | not carried on for the profit or gain of its individual members |
6.3 | the following organisations registered for the purposes of the National Health Act 1953 : (a) a medical benefits organisation; (b) a health benefits organisation; (c) a hospital benefits organisation | not carried on for the profit or gain of its individual members |
Mining | ||
Item | Exempt entity | Special conditions |
7.1 | the Phosphate Mining Company of Christmas Island Limited (incorporated in the Australian Capital Territory ) | none |
7.2 | the British Phosphate Commissioners Banaba Contingency Fund (established on 1 June 1981 ) | none |
50-40 Primary and secondary resources, and tourism
Primary and secondary resources, and tourism | ||
Item | Exempt entity | Special conditions |
8.1 | a society or association established for the purpose of promoting the development of: (a) aviation; or (b) tourism | not carried on for the profit or gain of its individual members |
8.2 | a society or association established for the purpose of promoting the development of any of the following Australian resources: (a) agricultural resources; (b) horticultural resources; (c) industrial resources; (d) manufacturing resources; (e) pastoral resources; (f) viticultural resources | not carried on for the profit or gain of its individual members |
50-45 Sports, culture, film and recreation
Sports, culture, film and recreation | ||
Item | Exempt entity | Special conditions |
9.1 | a society, association or club established for the encouragement of: (a) animal racing; or (b) art; or (c) a game or sport; or (d) literature; or (e) music | not carried on for the profit or gain of its individual members |
9.2 | a society, association or club established for musical purposes | not carried on for the profit or gain of its individual members |
9.3 | the Australian Film Finance Corporation Pty Limited (incorporated under the Companies Act 1981 on 12 July 1988 ) | none |
[The next Division is Division 51.]
Table of sections
51-1 Amounts of ordinary income and statutory income that are exempt
51-5 Defence
51-10 Education and training
51-15 Vice-regal representatives
51-25 Mining
51-30 Welfare
51-45 Mining payments made to an Aboriginal or a distributing body
51-50 Maintenance payments to a spouse or child
51-1 Amounts of ordinary income and statutory income that are exempt
The amounts of * ordinary income and * statutory income covered by the following tables are exempt from income tax. In some cases, the exemption is subject to exceptions or special conditions, or both.
Note 1: Ordinary and statutory income that is exempt from income tax is called exempt income: see section 6-20. The note to subsection 6 - 15(2) describes some of the other consequences of it being exempt income.
Note 2: Even if an exempt payment is made to you, the Commissioner can still require you to lodge an income tax return or information under section 161 of the Income Tax Assessment Act 1936 .
Defence | |||
|
|
| ... subject to these exceptions and special conditions: |
1.1 | a member of the Defence Force | (a) payments of allowances or bounty of a kind prescribed in the regulations; and (b) the market value of rations and quarters supplied to you without charge | none |
1.2 | a recipient of a payment in respect of a member of the Defence Force | payments of allowances or bounty of a kind prescribed in the regulations | none |
1.3 | a member of: (a) the Naval Emergency Reserve Force; or (b) the Regular Army Emergency Reserve; or (c) the Air Force Emergency Force | (a) pay and allowances as a member; and (b) gratuities for the calling out for continuous service of all or part of the force | except pay and allowances for continuous full time service |
1.4 | a member of: (a) the Australian Naval Reserve; or (b) the Australian Army Reserve; or (c) the Australian Air Force Reserve | pay and allowances as a member | except pay and allowances for continuous full time service |
Education and training | |||
|
|
| ... subject to these exceptions and special conditions: |
2.1 | a recipient of a grant made by the Australian-American Educational Foundation | the grant | the grant is from funds made available to the Foundation under the agreement establishing it |
2.2 | an employer | payments under
the CRAFT Scheme (the Commonwealth Rebate for Apprentice | none |
51-15 Vice-regal representatives
Vice-regal representatives | |||
|
|
| ... subject to these exceptions and special conditions: |
3.1 | (a) the Governor-General; or (b) a State Governor | (a) official salary; and (b) * ordinary income derived from a source outside Australia ; and (c) * statutory income that has a source outside Australia | none |
[The next section is section 51-25.]
Mining | |||||||
|
|
| ... subject to these exceptions and special conditions: | ||||
4.1 | an * Aboriginal | a * mining payment or a payment by a * distributing body out of a * mining payment | see section 51-45 | ||||
4.2 | a * distributing body | a * mining payment or a payment by a * distributing body out of a * mining payment | see section 51-45 | ||||
Welfare | |||
|
|
| ... subject to these exceptions and special conditions: |
5.1 | an individual in receipt of periodic payments in the nature of maintenance | the payments | see section 51-50 |
5.2 | a person who pays or is liable to pay rent | rent subsidy payments under the Mortgage and Rent Relief Scheme by an * Australian government agency | none |
5.3 | a recipient of an open employment incentive bonus | payments under Part VIIIA of the Handicapped Persons Assistance Act 1974 | none |
[The next section is section 51-45.]
51-45 Mining payments made to an Aboriginal or a distributing body
(1) The following are exempt from income tax:
(a) a * mining payment made to a * distributing body;
(b) a * mining payment made to one or more * Aboriginals, or applied for their benefit.
(2) A payment:
(a) made to a * distributing body; or
(b) made to one or more * Aboriginals, or applied for their benefit;
is exempt from income tax if the payment is made by a * distributing body out of a * mining payment that it has received.
(3) A payment made to a * distributing body by another distributing body, out of a * mining payment received by the other distributing body, is taken to be a mining payment for the purposes of:
(a) any further applications of subsection (2); and
(b) any further applications of this subsection.
(4) Subsection (2) does not exempt a payment by a * distributing body for the purposes of meeting its administrative costs.
(5) An amount paid to or applied for the benefit of a person is not exempt from income tax because of section 51-25 if it is remuneration or consideration for goods or services provided by that person.
51-50 Maintenance payments to a spouse or child
(1) This section sets out the conditions on which a periodic payment, in the nature of maintenance, that:
(a) is made by an individual (the maintenance payer ); or
(b) is attributable to a payment made by an individual (also the maintenance payer );
is exempt from income tax under item 5.1 of the table in section 51-30.
(2) The maintenance payment is exempt from income tax only if it is made:
(a) to an individual who is or has been the maintenance payer's * spouse; or
(b) to or for the benefit of an individual who is or has been:
(i) a child of the maintenance payer; or
(ii) a child who is or has been a child of an individual who is or has been a * spouse of the maintenance payer.
(3) The maintenance payment is not exempt if, in order to make it or a payment to which it is attributable, the maintenance payer:
(a) divested any income-producing assets; or
(b) diverted * ordinary income or * statutory income upon which the maintenance payer would otherwise have been liable to income tax.
Division 52 -- Certain pensions, benefits and allowances are exempt from income tax
52-1 What this Division is about
Certain payments made under various Acts are wholly or partly exempt from income tax. This Division tells you if a payment is exempt and how much is exempt.
Table of Subdivisions
52-A Exempt payments under the Social Security Act 1991
52-B Exempt payments under the Veterans' Entitlements Act 1986
52-C Exempt payments made because of the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986
Subdivision 52-A -- Exempt payments under the Social Security Act 1991
52-5 What this Subdivision is about
This Subdivision tells you:
(a) the payments under the Social Security Act 1991 that are wholly or partly exempt from income tax; and
(b) any special circumstances, conditions or exceptions that apply to a payment in order for it to be exempt; and
(c) how to work out how much of a payment is exempt.
Table of sections
Operative provisions
52-10 How much of a social security payment is exempt?
52 - 15 Supplementary amounts of payments
52-20 Tax-free amount of an ordinary payment after the death of your partner
52-25 Tax-free amount of certain bereavement lump sum payments
52-30 Tax-free amount of certain other bereavement lump sum payments
52-35 Tax-free amount of a lump sum payment made because of the death of a person you are caring for
52-40 Provisions of the Social Security Act 1991 under which payments are made
52-10 How much of a social security payment is exempt?
(1) The table in this section tells you about the income tax treatment of social security payments.
Note: Section 52-40 sets out the provisions of the Social Security Act 1991 under which the payments are made.
(2) Expressions used in this Subdivision that are also used in the Social Security Act 1991 have the same meaning as in that Act.
(3) Ordinary payment means a payment other than a payment made because of a person's death.
Income tax treatment of social security payments | |||||
Item | Payment | Case 1 | Case 2 | Case 3 | Case 4 |
1.1 | Advance pharmaceutical supplement | Exempt | Exempt | Not applicable | Not applicable |
2.1 | Age pension | Supplementary amount is exempt | Supplementary amount, and tax - free amount, are exempt | Exempt | Exempt up to the tax - free amount |
3.1 | Bereavement allowance | Supplementary amount is exempt | Supplementary amount is exempt | Exempt | Not applicable |
4.1 | Carer pension : you are pension age or over | Supplementary amount is exempt
| Supplementary amount, and tax - free amount, are exempt
| Exempt | (a) exempt up to the tax-free
amount if it is made under section 236A of the Social Security Act 1991 (b) exempt up to the tax-free amount if it is made
under section 239 of that Act |
4.2 | Carer pension : the severely handicapped person is pension age or over | Supplementary amount is
exempt | Supplementary amount, and tax - free amount, are
exempt | Exempt | (a) exempt up to the
tax-free amount if it is made under section 236A of the
Social Security Act 1991 (b) exempt up to the
tax-free amount if it is made under section 239 of that Act |
4.3 | Carer pension : both you and the severely handicapped person are under pension age | Exempt | Exempt | Exempt | (a) exempt up to the tax-free
amount if it is made under section 236A of the Social Security Act 1991 (b) exempt up to the tax-free amount if it is made
under section 239 of that Act |
4.4 | Carer pension : you are under pension age and the severely handicapped person has died | Exempt | Exempt | Exempt | (a) exempt up to the tax-free amount if it is made under
section 236A of the Social Security Act 1991 (b)
exempt up to the tax-free amount if it is made under section 239 of
that Act |
5.1 | Child disability allowance | Exempt | Exempt | Exempt | Not applicable |
6.1 | Disability support pension : you are pension age or over | Supplementary amount is exempt | Supplementary
amount, and tax - free amount, are exempt | Exempt | Exempt up to the tax - free amount |
6.2 | Disability support pension : you are under pension age | Exempt | Exempt | Exempt | Exempt up to
the tax - free amount |
7.1 | Disability wage supplement : you are pension age or over | Supplementary amount is exempt | Supplementary amount, and tax - free amount, are exempt | Exempt | Exempt up to the tax - free amount |
7.2 | Disability wage supplement : you are under pension age | Exempt | Exempt | Exempt | Exempt up to the tax - free amount |
8.1 | Disaster relief payment | Exempt | Exempt | Not applicable | Not applicable |
9.1 | Double orphan pension | Exempt | Exempt | Exempt | Not applicable |
10.1 | Employment entry payment | Exempt | Exempt | Not applicable | Not applicable |
11.1 | Family payment | Exempt | Exempt | Not applicable | Not applicable |
12.1 | Family payment advance | Exempt | Exempt | Not applicable | Not applicable |
13.1 | Family tax payment | Exempt | Exempt | Not applicable | Not applicable |
14.1 | Maternity allowance | Exempt | Exempt | Not applicable | Not applicable |
15.1 | Mature age allowance (paid under Part 2.12A) | Supplementary
amount is exempt | Supplementary amount, and tax - free
amount, are exempt | Exempt | Exempt up to the
tax - free amount |
16.1 | Mature age allowance (paid under Part 2.12B) | Supplementary amount is exempt | Supplementary amount, and
tax - free amount, are exempt | Exempt | Exempt
up to the tax - free amount |
17.1 | Mature age partner allowance | Supplementary amount is exempt | Supplementary
amount is exempt | Exempt | Exempt up to the tax - free
amount |
18.1 | Mobility allowance | Exempt | Exempt | Not applicable | Not applicable |
19.1 | Newstart allowance | Supplementary amount is
exempt | Supplementary amount, and tax - free amount, are
exempt | Exempt | Exempt up to the tax - free
amount |
20.1 | Parenting allowance (benefit parenting allowance) | Supplementary amount is exempt | Supplementary
amount is exempt | Exempt | Exempt up to the tax - free
amount |
21.1 | Parenting allowance (non - benefit parenting allowance) | Exempt | Exempt | Not applicable | Not applicable |
22.1 | Partner allowance | Supplementary amount is exempt | Supplementary amount is
exempt | Exempt | Exempt up to the tax - free amount |
23.1 | Sickness allowance | Supplementary amount is exempt | Supplementary amount, and tax - free amount, are exempt | Exempt | Exempt up to the tax - free amount |
24.1 | Sole parent pension | Supplementary amount is exempt | Supplementary amount, and tax - free amount, are exempt | Exempt | Exempt up to the tax - free amount |
25.1 | Special benefit | Supplementary amount is exempt | Supplementary amount, and tax - free amount, are exempt | Exempt | Exempt up to the tax - free amount |
26.1 | Special needs age pension | Supplementary amount is exempt
| Supplementary amount, and tax - free amount, are exempt
| Exempt | Exempt up to the tax - free amount
|
27.1 | Special needs disability support pension : you are pension age or over | Supplementary amount is exempt | Supplementary amount, and tax - free amount, are exempt | Exempt | Exempt up to the tax - free amount |
27.2 | Special needs disability support pension : you are under pension age | Exempt | Exempt | Exempt | Exempt up to the tax - free amount |
28.1 | Special needs sole parent pension | Supplementary amount is exempt | Supplementary amount is exempt | Not applicable | Not applicable |
29.1 | Special needs widow B pension | Supplementary
amount is exempt | Supplementary amount is exempt | Not applicable | Not applicable |
30.1 | Special needs wife pension : you are pension age or over | Supplementary amount is exempt | Supplementary amount, and tax - free amount, are exempt | Exempt | Exempt up to the tax - free amount |
30.2 | Special needs wife pension : your partner is pension age or over | Supplementary amount is exempt | Supplementary amount, and
tax - free amount, are exempt | Exempt | Exempt
up to the tax - free amount |
30.3 | Special needs wife pension : both you and your partner are under pension age | Exempt | Exempt | Exempt | Exempt up to the tax - free amount |
30.4 | Special needs wife pension : you are under pension age and your partner has died | Exempt | Exempt | Exempt | Exempt up to the tax - free amount |
31.1 | Telephone allowance | Exempt | Exempt | Not applicable | Not applicable |
32.1 | Widow allowance | Supplementary amount is exempt | Supplementary amount is
exempt | Not applicable | Not applicable |
33.1 | Widow B pension | Supplementary amount is exempt | Supplementary
amount is exempt | Exempt | Not applicable |
34.1 | Wife pension : you are pension age or over | Supplementary
amount is exempt | Supplementary amount is exempt | Exempt | Exempt up to the tax - free amount |
34.2 | Wife pension : your partner is pension age or over | Supplementary amount
is exempt | Supplementary amount is exempt | Exempt | Exempt up to the tax - free amount |
34.3 | Wife pension : both you and your partner are under pension age | Exempt | Exempt | Exempt | Exempt up to the tax - free amount |
34.4 | Wife pension : you are under pension age and your partner has died | Exempt | Exempt | Exempt | Exempt up
to the tax - free amount |
52 - 15 Supplementary amounts of payments
You work out the supplementary amount of a social security payment using the following table:
Supplementary amount of a social security payment | ||
| For this category of social security payment: | the supplementary amount is the total of: |
1 | Age pension Bereavement allowance Carer pension Disability support pension Disability wage supplement Mature age allowance (paid under Part 2.12A) Mature age partner allowance Sole parent pension Special needs age pension Special needs disability support pension Special needs sole parent pension Special needs widow B pension Special needs wife pension Widow B pension Wife pension | (a) so much of the payment as is included by way of rental assistance; and (b) so much of the payment as is included by way of remote area allowance; and (c) so much of the payment as is included by way of pharmaceutical allowance; and (d) so much of the payment as is included by way of incentive allowance; and (e) so much of the payment as is included by way of residential care charge |
2 | Mature age allowance (paid under Part 2.12B) Newstart allowance Partner allowance Sickness allowance Special benefit Widow allowance | (a) so much of the payment as is included by way of rental assistance; and (b) so much of the payment as is included by way of remote area allowance; and (c) so much of the payment as is included by way of pharmaceutical allowance; and (d) so much of the payment as is included by way of residential care charge |
3 | Parenting allowance (benefit parenting allowance) | (a) so much of the payment as is included by way of rental assistance; and (b) so much of the payment as is included by way of remote area allowance; and (c) so much of the payment as is included by way of pharmaceutical allowance; and (d) so much of the payment as is included by way of residential care charge; and (e) so much of the payment as is included by way of provisional rate of parenting allowance up to the maximum basic component of the parenting allowance worked out using the method statement in point 1068A - A3 of the Social Security Act 1991 |
52 - 20 Tax-free amount of an ordinary payment after the death of your partner
(1) You work out under this section the * tax-free amount of an * ordinary payment made under the Social Security Act 1991 after the death of your partner if:
(a) you do not qualify for payments under a * bereavement Subdivision; and
(b) the ordinary payment became due to you on any of the
7
pension paydays after the death of your partner.
Note: For the provisions of the Social Security Act 1991 that tell you if you qualify for payments under a bereavement Subdivision: see subsection (3).
(2) This is how to work out the tax - free amount :
Method statement
Step 1. Work out the * supplementary amount of the payment.
Note: The supplementary amount is also exempt and is worked out under section 52 - 15.
Step 2. Subtract the * supplementary amount from the amount of the payment.
Step 3. Work out what would have been the amount of the payment if your partner had not died.
Step 4. Work out what would have been the * supplementary amount of the payment if your partner had not died.
Step 5. Subtract the amount at Step 4 from the amount at Step 3.
Step 6. Subtract the amount at Step 5 from the amount at Step 2: the result is the tax - free amount .
(3) This table sets out:
(a) the Subdivisions of the Social Security Act 1991 that are bereavement Subdivisions ; and
(b) the provision of that Act that tells you if you qualify for payments under the relevant bereavement Subdivision.
Bereavement Subdivisions | ||
|
| This provision tells you if you qualify for payments under it: |
1 | Subdivision A of Division 9 of Part 2.2 | paragraph 82(1)(e) |
2 | Subdivision A of Division 10 of Part 2.3 | paragraph 146F(1)(e) |
3 | Subdivision B of Division 9 of Part 2.5 | paragraph 237(1)(e) |
4 | Subdivision B of Division 9 of Part 2.6 | paragraph 303(1)(e) |
5 | Subdivision A of Division 10 of Part 2.9 | paragraph 469(1)(e) |
6 | Subdivision AA of Division 9 of Part 2.12 | paragraph 660LA(1)(f) |
7 | Subdivision A of Division 11 of Part 2.12A | paragraph 660XKA(1)(e) |
8 | Subdivision C of Division 11 of Part 2.12B | paragraph 660YKC(1)(e) |
9 | Subdivision AA of Division 9 of Part 2.14 | paragraph 728PA(1)(f) |
10 | Subdivision AA of Division 9 of Part 2.15 | paragraph 768A(1)(f) |
11 | Subdivision A of Division 10 of Part 2.16 | paragraph 822(1)(e) |
52-25 Tax-free amount of certain bereavement lump sum payments
(1) This section applies if a lump sum of any of these categories of social security payments becomes due to you because of your partner's death.
Category of social security payment |
Age pension |
Carer pension |
Disability support pension |
Disability wage supplement |
Mature age allowance (paid under Part 2.12A) |
Mature age partner allowance |
Sole parent pension |
Special needs age pension |
Special needs disability support pension |
Special needs wife pension |
Wife pension |
(2) The total of the following are exempt up to the * tax-free amount:
(a) the lump sum payment;
(b) all other payments that become due to you under the Social Security Act 1991 on pension paydays that occur during the bereavement lump sum period.
(3) This is how to work out the tax - free amount :
Method statement
Step 1. Work out the payments under the Social Security Act 1991 that would have become due to you on each of the pension paydays during the bereavement lump sum period if:
(a) your partner had not died; and
(b) your partner had been under pension age; and
(c) immediately before your partner died, you and your partner had been neither an illness separated couple nor a respite care couple.
Step 2. Work out how much of those payments would have been exempt in those circumstances.
Step 3. Work out the payments under the Social Security Act 1991 or Part III of the Veterans' Entitlements Act 1986 that would have become due to your partner on each of the pension paydays during the bereavement lump sum period if:
(a) your partner had not died; and
(b) immediately before your partner died, you and your partner were neither an illness separated couple nor a respite care couple;
even if the payments would not have been exempt.
Step 4. Total the payments worked out at Steps 2 and 3: the result is the tax - free amount .
Example: You are receiving a disability support pension of $300 a fortnight and a pharmaceutical allowance of $5 a fortnight. You are over pension age. Your partner is receiving a partner allowance of $250 a fortnight and rental assistance of $75 a fortnight.
Your partner dies. There are 7 pension paydays during the bereavement lump sum period. You work out the tax-free amount as follows:
Step 1: The payments that would have become due to you on each of those 7 paydays are $300 + $5 = $305. The total for the 7 paydays is $2,135.
Step 2: The exempt component of the $305 you receive on each of the 7 paydays is $5. The total for the 7 paydays is $35.
Step 3: The payments that would have become due to your partner on each of those 7 paydays are $250 + $75 = $325. The total for the 7 paydays is $2,275.
Step 4: The tax - free amount is $35 + $2,275 = $2,310.
52-30 Tax-free amount of certain other bereavement lump sum payments
(1) This section applies if a lump sum of any of these categories of social security payments becomes due to you because of your partner's death.
Category of social security payment |
Mature age allowance (paid under Part 2.12B) |
Newstart allowance |
Parenting allowance (benefit parenting allowance) |
Partner allowance |
Sickness allowance |
Special benefit |
(2) The total of the following are exempt up to the * tax-free amount:
(a) the lump sum payment;
(b) all other payments that become due to you under the Social Security Act 1991 on pension paydays that occur during the bereavement lump sum period.
(3) This is how to work out the tax - free amount :
Method statement
Step 1. Work out the payments under the Social Security Act 1991 that would have become due to you on each of the pension paydays during the bereavement lump sum period if:
(a) your partner had not died; and
(b) your partner had been under pension age; and
(c) immediately before your partner died, you and your partner had been neither an illness separated couple nor a respite care couple.
Step 2. Work out how much of those payments would have been exempt in those circumstances.
Step 3. Work out the payments under the Social Security Act 1991 that would have become due to your partner on each of the pension paydays during the bereavement lump sum period if your partner had not died, even if the payments would not have been exempt.
Step 4. Total the payments worked out at Steps 2 and 3: the result is the tax - free amount .
52-35 Tax-free amount of a lump sum payment made because of the death of a person you are caring for
(1) This section applies if a lump sum payment becomes due to you under section 236A of the Social Security Act 1991 because of the death of the severely handicapped person you are caring for.
(2) The total of the following are exempt up to the * tax-free amount:
(a) the lump sum payment;
(b) all other payments that become due to you under the Social Security Act 1991 on pension paydays that occur during the bereavement lump sum period.
(3) This is how to work out the tax - free amount :
Method statement
Step 1. Work out the payments under the Social Security Act 1991 that would have become due to you on each of the pension paydays during the bereavement lump sum period if:
(a) the severely handicapped person had not died; and
(b) the severely handicapped person had been under pension age.
Step 2. Work out how much of those payments would have been exempt in those circumstances.
Step 3. Work out the payments under the Social Security Act 1991 that would have become due to the severely handicapped person on each of the pension paydays during the bereavement lump sum period if the severely handicapped person had not died, even if the payments would not have been exempt.
Step 4. Total the payments worked out at Steps 2 and 3: the result is the tax - free amount .
52-40 Provisions of the Social Security Act 1991 under which payments are made
This table lists the provisions of the Social Security Act 1991 under which social security payments are made that are wholly or partly exempt from income tax under this Subdivision.
Provisions under which social security payments are made | ||||
|
|
| Payment made because of a person's death (unless covered by next column) |
|
1 | Advance pharmaceutical supplement | Part 2.23 | Not applicable | Not applicable |
2 | Age pension | Part 2.2 | Sections 83, 86 and 91 | Section 84 |
3 | Bereavement allowance | Part 2.7 | Section 359 | Not applicable |
4 | Carer pension | Part 2.5 | Sections 238, 241 and 246 | Sections 236A and 239 |
5 | Child disability allowance | Part 2.19 | Sections 992 and 992A | Not applicable |
6 | Disability support pension | Part 2.3 | Sections 146G, 146K and 146Q | Section 146H |
7 | Disability wage supplement | Part 2.9 | Sections 470, 473, 475 and 476 | Section 471 |
8 | Disaster relief payment | Part 2.24 | Not applicable | Not applicable |
9 | Double orphan pension | Part 2.20 | Sections 1034 and 1034A | Not applicable |
10 | Employment entry payment | Part 2.13 | Not applicable | Not applicable |
11 | Family payment | Part 2.17 | Not applicable | Not applicable |
12 | Family payment advance | Part 2.17 | Not applicable | Not applicable |
13 | Family tax payment | Part 2.17AA or section 1070 | Not applicable | Not applicable |
14 | Maternity allowance | Part 2.17A | Not applicable | Not applicable |
15 | Mature age allowance (paid under Part 2.12A) | Part 2.12A | Sections 660XKB, 660XKE and 660XKG | Section 660XKC |
16 | Mature age allowance (paid under Part 2.12B) | Part 2.12B | Section 660YKD | Section 660YKE |
17 | Mature age partner allowance | Part 2.12A | Sections 660XKK and 660XKM | Section 660XKL |
18 | Mobility allowance | Part 2.21 | Not applicable | Not applicable |
19 | Newstart allowance | Part 2.12 | Section 660LB | Section 660LC |
20 | Parenting allowance (benefit parenting allowance) | Part 2.18 | Sections 951Y and 951ZB | Section 951ZC |
21 | Parenting allowance (non - benefit parenting allowance) | Part 2.18 | Not applicable | Not applicable |
22 | Partner allowance | Part 2.15A | Section 771NW | Section 771NX |
23 | Sickness allowance | Part 2.14 | Section 728PB | Section 728PC |
24 | Sole parent pension | Part 2.6 | Sections 304, 307 and 312 | Section 305 |
25 | Special benefit | Part 2.15 | Section 768B | Section 768C |
26 | Special needs age pension | Section 772 | Sections 823, 826 and 830 | Section 824 |
| 27 | Special needs disability support pension | Section 773 | Sections 823, 826 and 830 | Section 824 |
28 | Special needs sole parent pension | Section 775 | Not applicable | Not applicable |
29 | Special needs widow B pension | Section 778 | Not applicable | Not applicable |
30 | Special needs wife pension | Section 774 | Sections 823, 826 and 830 | Section 824 |
31 | Telephone allowance | Part 2.25 | Not applicable | Not applicable |
32 | Widow allowance | Part 2.8A | Not applicable | Not applicable |
33 | Widow B pension | Part 2.8 | Section 407 | Not applicable |
34 | Wife pension | Part 2.4 | Sections 189 and 191 | Section 190 |
Subdivision 52-B -- Exempt payments under the Veterans' Entitlements Act 1986
52-60 What this Subdivision is about
This Subdivision tells you:
(a) the payments under the Veterans' Entitlements Act 1986 that are wholly or partly exempt from income tax; and
(b) any special circumstances, conditions or exceptions that apply to a payment in order for it to be exempt; and
(c) how to work how much of a payment is exempt.
Table of sections
Operative provisions
52-65 How much of a veterans' affairs payment is exempt?
52-70 Supplementary amounts of payments
52-75 Provisions of the Veterans' Entitlements Act 1986 under which payments are made
52-65 How much of a veterans' affairs payment is exempt?
(1) The table in this section tells you about the income tax treatment of veterans' affairs payments.
Note: Section 52-75 sets out the provisions of the Veterans' Entitlements Act 1986 under which the payments are made.
(2) Expressions (except "pension age") used in this Subdivision that are also used in the Veterans' Entitlements Act 1986 have the same meaning as in that Act.
(3) Pension age has the meaning given by subsection 23(1) of the Social Security Act 1991 .
(4) Ordinary payment means a payment other than a payment made because of a person's death.
Income tax treatment of veterans' affairs payments | |||
|
|
| Payment made because of a person's death |
1.1 | Age service pension | Supplementary amount is exempt | Exempt |
2.1 | Attendant allowance | Exempt | Not applicable |
3.1 | Carer service pension : unless covered by item 3.2 or 3.3 | Supplementary amount is exempt | Exempt |
3.2 | Carer service pension : both you and your partner are under pension age and your partner is receiving an invalidity service pension | Exempt | Exempt |
3.3 | Carer service pension : you are under pension age, your partner has died and was receiving an invalidity service pension at death | Exempt | Exempt |
4.1 | Clothing allowance | Exempt | Not applicable |
5.1 | Decoration allowance | Exempt | Not applicable |
6.1 | Income support supplement : unless covered by item 6.2, 6.3, 6.4 or 6.5 | Supplementary amount is exempt | Exempt |
6.2 | Income support supplement : you are under pension age and receiving the supplement on the grounds of permanent incapacity | Exempt | Exempt |
6.3 | Income support supplement : both you and the severely handicapped person you are caring for are under pension age and you are receiving the supplement for providing constant care for that person | Exempt | Exempt |
6.4 | Income support supplement : both you and your partner are under pension age and your partner is an invalidity service pensioner or a disability support pensioner | Exempt | Exempt |
6.5 | Income support supplement : both you and your partner are under pension age and your partner is receiving the supplement on the grounds of permanent incapacity | Exempt | Exempt |
7.1 | Invalidity service pension : you are pension age or over | Supplementary amount is exempt | Exempt |
7.2 | Invalidity service pension : you are under pension age | Exempt | Exempt |
8.1 | Loss of earnings allowance | Exempt | Not applicable |
9.1 | Partner service pension : unless covered by item 9.2 or 9.3 | Supplementary amount is exempt | Exempt |
9.2 | Partner service pension : both you and your partner are under pension age and your partner is receiving an invalidity service pension | Exempt | Exempt |
9.3 | Partner service pension : you are under pension age, your partner has died and was receiving an invalidity service pension at death | Exempt | Exempt |
10.1 | Pension for defence-caused death or incapacity | Exempt | Not applicable |
11.1 | Pension for war-caused death or incapacity | Exempt | Not applicable |
12.1 | Pharmaceutical allowance | Exempt | Not applicable |
13.1 | Recreation transport allowance | Exempt | Not applicable |
14.1 | Section 98A Bereavement payment | Not applicable | Exempt |
15.1 | Section 99 funeral benefit | Not applicable | Exempt |
16.1 | Section 100 funeral benefit | Not applicable | Exempt |
17.1 | Special assistance | Exempt | Not applicable |
18.1 | Telephone allowance | Exempt | Not applicable |
19.1 | Temporary incapacity allowance | Exempt | Not applicable |
20.1 | Travelling expenses | Exempt | Not applicable |
21.1 | Vehicle Assistance Scheme | Exempt | Not applicable |
22.1 | Victoria Cross allowance | Exempt | Not applicable |
52-70 Supplementary amounts of payments
The supplementary amount of a veterans' affairs payment is the total of:
(a) so much of the payment as is included by way of rental assistance; and
(b) so much of the payment as is included by way of an additional amount for each of your dependent children; and
(c) so much of the payment as is included by way of remote area allowance; and
(d) so much of the payment as is included by way of residential care charge.
52-75 Provisions of the Veterans' Entitlements Act 1986 under which payments are made
This table lists the provisions of the Veterans' Entitlements Act 1986 under which veterans' affairs payments are made that are wholly or partly exempt from income tax under this Subdivision.
Provisions under which veterans' affairs payments are made | |||
| Category of veterans' affairs payment | Ordinary payment | Payment made because of a person's death |
1 | Age service pension | Division 3 of Part III | Parts III and IIIA |
Attendant allowance | Section 98 | Not applicable | |
3 | Carer service pension | Division 6 of Part III | Parts III and IIIA |
4 | Clothing allowance | Section 97 | Not applicable |
5 | Decoration allowance | Section 102 | Not applicable |
6 | Income support supplement | Part IIIA | Parts III and IIIB |
7 | Invalidity service pension | Division 3 of Part III | Parts III and IIIA |
8 | Loss of earnings allowance | Section 108 | Not applicable |
9 | Partner service pension | Division 5 of Part III | Parts III and IIIA |
10 | Pension for defence-caused death or incapacity | Part IV | Not applicable |
11 | Pension for war-caused death or incapacity | Part II | Not applicable |
12 | Pharmaceutical allowance | Part VIIA | Not applicable |
13 | Recreation transport allowance | Section 104 | Not applicable |
14 | Section 98A Bereavement payment | Not applicable | Section 98A |
15 | Section 99 funeral benefit | Not applicable | Section 99 |
16 | Section 100 funeral benefit | Not applicable | Section 100 |
17 | Special assistance | Section 106 | Not applicable |
18 | Telephone allowance | Part VIIB | Not applicable |
19 | Temporary incapacity allowance | Section 107 | Not applicable |
20 | Travelling expenses | Section 110 | Not applicable |
21 | Vehicle Assistance Scheme | Section 105 | Not applicable |
22 | Victoria Cross allowance | Section 103 | Not applicable |
Subdivision 52-C -- Exempt payments made because of the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986
52-100 What this Subdivision is about
This Subdivision tells you:
(a) the payments made because of the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986 that are wholly or partly exempt from income tax; and
(b) any special circumstances, conditions or exceptions that apply to a payment in order for it to be exempt; and
(c) how to work out how much of a payment is exempt.
Table of sections
Operative provisions
52-105 Supplementary amount of a payment made under the Repatriation Act 1920 is exempt
52-110 Other exempt payments
52-105 Supplementary amount of a payment made under the Repatriation Act 1920 is exempt
(1) The * supplementary amount of a payment made to you is exempt from income tax if:
(a) you are a parent of a * member of the Forces who has died (but you are neither a widow nor a woman divorced or deserted by her husband) and you are of * pension age or over; or
(b) you are the mother of a * member of the Forces who has died and you are also a widow, or divorced or deserted by your husband;
and the payment is covered by subsection (2).
(2) The payment must be made in circumstances that are a prescribed case under:
(a) Table A in Schedule 3 to the Repatriation Act 1920 ; or
(b) that Table as applying because of the Repatriation ( Far East Strategic Reserve) Act 1956 ; or
(c) that Table as applying because of the Repatriation (Special Overseas Service) Act 1962 ; or
(d) that Table as applying because of the Interim Forces Benefits Act 1947 ;
as in force because of subsection 4(6) of the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986 .
(3) The supplementary amount is the total of:
(a) so much of the payment as is included by way of rental assistance; and
(b) so much of the payment as is included by way of an additional amount for each of your dependent children; and
(c) so much of the payment as is included by way of remote area allowance.
(4) Member of the Forces has the same meaning as in the Act referred to in the relevant paragraph of subsection (2).
(5) Expressions (except pension age ) used in this Subdivision that are also used in the Veterans' Entitlements Act 1986 have the same meaning as in that Act.
(6) Pension age has the meaning given by subsection 23(1) of the Social Security Act 1991 .
Payments (except those covered by section 52-105) made because of subsection 4(6) of the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986 are exempt from income tax.
Division 53 -- Various exempt payments
53-1 What this Division is about
This Division tells you:
(a) about various payments that are wholly or partly exempt from income tax; and
(b) any special conditions that apply to a payment in order for it to be exempt; and
(c) how to work out how much of a payment is exempt.
Table of sections
Operative provisions
53-10 Exemption of various types of payments
53-15 Supplementary amount of a drought relief payment
53-20 Exemption of similar Australian and United Kingdom veterans' payments
53-10 Exemption of various types of payments
This table tells you about the income tax treatment of various types of payments.
Exemption of various payments | |||
|
|
| ... is exempt subject to these exceptions and special conditions: |
1 | Disability services payment | Part III of the Disability Services Act 198 6 | None |
2 | Domiciliary nursing care benefit | Part VB of the National Health Act 1953 | None |
3 | Drought relief payment : payment made other than because of a person's death | Only the supplementary amount is exempt
| |
4 | Drought relief payment : payment made because of a person's death | Paragraph 49(b) of the Farm Household Support Act 1992 | None
|
5 | Wounds and disability pension | Not applicable | The payment must be: (a) of a kind specified in subsection 315(2) of the Income and Corporation Taxes Act 1988 of the United Kingdom ; and (b) similar in nature to payments that are exempt under Division 52 or this Division |
53-15 Supplementary amount of a drought relief payment
The supplementary amount of a drought relief payment is the total of:
(a) so much of the payment as is included by way of rental assistance; and
(b) so much of the payment as would have been included by way of remote area allowance if it had been a payment of newstart allowance under the Social Security Act 1991 instead of a drought relief payment; and
(c) so much of the payment as is included because of paragraph 24A(1)(c) (about family payment) of the Farm Household Support Act 1992.
53-20 Exemption of similar Australian and United Kingdom veterans' payments
The following payments made by the Government of Australia, or the Government of the United Kingdom , are exempt from income tax:
(a) payments similar to payments under the Veterans' Entitlements Act 1986 that are exempt under Subdivision 52 - B;
(b) payments similar to payments that are made because of the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986 and are exempt under Subdivision 52 - C.
[The next Division is Division 55.]
Division 55 -- Payments that are not exempt from income tax
55-1 What this Division is about
A variety of payments are not exempt from income tax even though they are similar in nature to payments that are wholly or partly exempt under this Part.
Table of sections
Operative provisions
55-5 Occupational superannuation payments
55-10 Education entry payments
55-5 Occupational superannuation payments
(1) This Part does not exempt from income tax any amount or pension paid under the following provisions or Acts, or under schemes established under any of them:
(a) Defence Force Retirement and Death Benefits Act 1973 ;
(b) Defence Forces Retirement Benefits Act 1948 ;
(c) Military Superannuation and Benefits Act 1991 ;
(d) Papua New Guinea (Staffing Assistance) Act 1973 ;
(e) Parliamentary Contributory Superannuation Act 1948 ;
(f) section 10 of the Superannuation (Pension Increases) Act 1971 ;
(g) section 9 or 14 of the Superannuation Act (No. 2) 1956 ;
(h) subsection 8(1) of the Superannuation Act 1948 ;
(i) Superannuation Act 1922 ;
(j) Superannuation Act 1976 ;
(k) Superannuation Act 1990 .
(2) This section operates despite anything contained in any other provision of this Part.
55-10 Education entry payments
This Part does not exempt from income tax an education entry payment under Part 2.13A of the Social Security Act 1991 .
[The next Part is Part 2-20.]
12 At the end of section 61-320
Add:
[The next Part is Part 2-25.]
13 After Part 2-20
Insert:
Table of Subdivisions
Guide to Division 70
70-A What is trading stock
70-B Acquiring trading stock
70-C Accounting for trading stock you hold at the start or end of the income year
70-D Assessable income arising from disposals of trading stock and certain other assets
70-E Miscellaneous
70-1 What this Division is about
This Division deals with amounts you can deduct, and amounts included in your assessable income, because of these situations:
ï‚· you acquire an item of trading stock;
ï‚· you carry on a business and hold trading stock at the start or the end of the income year;
ï‚· you dispose of an item of trading stock outside the ordinary course of business, or it ceases to be trading stock in certain other circumstances.
Table of sections
70-5 The 3 key features of tax accounting for trading stock
70-5 The 3 key features of tax accounting for trading stock
The purpose of income tax accounting for trading stock is to produce an overall result that (apart from concessions) properly reflects your activities with your trading stock during the income year.
There are 3 key features:
(1) You bring your gross outgoings and earnings to account, not your net profits and losses on disposal of trading stock.
(2) Those outgoings and earnings are on revenue account, not capital account. As a result:
(a) the gross outgoings are usually deductible as general deductions under section 8- 1 (when the trading stock becomes trading stock on hand); and
(b) the gross earnings are usually assessable as ordinary income under section 6-5 (when the trading stock stops being trading stock on hand).
(3) You must bring to account any difference between the value of your trading stock on hand at the start and at the end of the income year. This is done in such a way that, in effect:
(a) you account for the value of your trading stock as assessable income; and
(b) you carry that value over as a corresponding deduction for the next income year.
Subdivision 70-A -- What is trading stock
Table of sections
70-10 Meaning of trading stock
70-10 Meaning of trading stock
Trading stock includes:
(a) anything produced, manufactured or acquired that is held for purposes of manufacture, sale or exchange in the ordinary course of a * business; and
(b) * live stock.
Note 1: Shares in a PDF are not trading stock. See section 124ZO of the Income Tax Assessment Act 1936 .
Note 2: If a company becomes a PDF, its shares are taken not to have been trading stock before it became a PDF. See section 124ZQ of the Income Tax Assessment Act 1936 .
Subdivision 70-B -- Acquiring trading stock
Table of sections
70-15 In which income year do you deduct an outgoing for trading stock?
70-20 Non-arm's length transactions
70-25 Cost of trading stock is not a capital outgoing
70-30 Starting to hold as trading stock an item you already own
70-15 In which income year do you deduct an outgoing for trading stock?
(1) This section tells you in which income year to deduct under section 8- 1 (about general deductions) an outgoing incurred in connection with acquiring an item of * trading stock. (The outgoing must be deductible under that section.)
(2) If the item becomes part of your * trading stock on hand before or during the income year in which you incur the outgoing, deduct it in that income year.
(3) Otherwise, deduct the outgoing in the first income year:
(a) during which the item becomes part of your * trading stock on hand; or
(b) for which an amount is included in your assessable income in connection with the disposal of that item.
Note: You can deduct your capital costs of acquiring land carrying trees or of acquiring a right to fell trees, to the extent that the trees are felled for sale, or for use in manufacture, by you. (This is because the trees will then usually become your trading stock.) See section 70-120.
70-20 Non-arm's length transactions
If:
(a) you incur an outgoing that is directly attributable to your buying or obtaining delivery of an item of your * trading stock; and
(b) you and the seller of the item did not deal with each other at arm's length; and
(c) the amount of the outgoing is greater than the market value of what the outgoing is for;
the amount of the outgoing is instead taken to be that market value. This has effect for the purposes of applying this Act to you and also to the seller.
Note 1: This section also affects the value of the item of trading stock at the end of an income year if you value it at its cost under section 70-45 (Value of trading stock at end of income year).
Note 2: This section is disregarded in applying Division 13 (about transfer-pricing arrangements) of Part III of the Income Tax Assessment Act 1936 .
70-25 Cost of trading stock is not a capital outgoing
An outgoing you incur in connection with acquiring an item of * trading stock is not an outgoing of capital or of a capital nature.
Note: This means that paragraph 8-1(2)(a) does not prevent the outgoing from being a general deduction under section 8- 1.
70-30 Starting to hold as trading stock an item you already own
(1) If you start holding as * trading stock an item you already own, but do not hold as trading stock, you are treated as if:
(a) just before it became trading stock, you had sold the item to someone else (at arm's length) for whichever of these amounts you elect:
• its cost (as worked out under subsection (3) or (4));
• its market value just before it became trading stock; and
(b) you had immediately bought it back for the same amount.
Example: You start holding a unit of depreciable plant as part of your trading stock. You are treated as having sold it just before that time, and immediately bought it back, for its cost or market value, whichever you elect. (Subdivision 42-F provides for the consequences of selling depreciated property.)
The same amount is normally a general deduction under section 8- 1 as an outgoing in connection with acquiring trading stock. The amount is also taken into account in working out the item's cost for the purposes of section 70-45 (about valuing trading stock at the end of the income year).
Note: Depending on how you elect under paragraph (1)(a), the sale may or may not give rise to a capital gain or a capital loss for the purposes of Part IIIA (Capital gains and capital losses) of the Income Tax Assessment Act 1936 . It does not if you elect to be treated as having sold the item for what would have been its cost: see subsection 160ZB(7) of that Act. However, it can if you elect market value.
When you must make the election
(2) You must make the election by the time you lodge your * income tax return for the income year in which you start holding the item as * trading stock. (If you do not make the election by then because you do not realise until later that you started to hold the item as trading stock, you must make the election as soon as is reasonable after realising that.)
However, the Commissioner can allow you to make it later (in either case).
How to work out the item's cost
(3) The item's cost is what would have been its cost for the purposes of section 70-45 (about valuing trading stock at the end of the income year) if it had been your trading stock ever since you last acquired it. In working that out, disregard section 70-55 (about acquiring live stock by natural increase).
(4) However, if you last acquired the item for no consideration and the acquisition involved:
(a) a disposal of the item to you for the purposes of Part IIIA (Capital gains and capital losses) of the Income Tax Assessment Act 1936 ; or
(b) the item passing to you as someone's * legal personal representative, or as a beneficiary in a dead person's estate;
its cost is taken to be its market value when you last acquired it.
Exceptions
(5) Subsection (1) does not apply if you start holding any of the following as * trading stock because they are severed from land:
(a) standing or growing crops;
(b) crop-stools;
(c) trees planted and tended for sale.
(This does not prevent subsection (1) from applying to a severed item that you later start holding as * trading stock.)
Note: A transaction that this section treats as having occurred is disregarded for the purpos es of these provisions of the Income Tax Assessment Act 1936 :
Subdivision 70-C -- Accounting for trading stock you hold at the start or end of the income year
Table of sections
General rules
70-35 You include the value of your trading stock in working out your assessable income and deductions
70-40 Value of trading stock at start of income year
70-45 Value of trading stock at end of income year
Special valuation rules
70-50 Valuation if trading stock obsolete etc.
70-55 Working out the cost of natural increase of live stock
70-60 Valuation of horse breeding stock
70-65 Working out the horse opening value and the horse reduction amount
70-70 Valuing interests in FIFs
(1) If you carry on a * business, you compare:
(a) the * value of all your * trading stock on hand at the start of the income year; and
(b) the * value of all your * trading stock on hand at the end of the income year.
(2) Your assessable income includes any excess of the * value at the end of the income year over the value at the start of the income year.
(3) On the other hand, you can deduct any excess of the * value at the start of the income year over the value at the end of the income year.
70-40 Value of trading stock at start of income year
(1) The value of an item of * trading stock on hand at the start of an income year is the same amount at which it was taken into account under this Division at the end of the last income year.
(2) The value of the item is a nil amount if the item was not taken into account under this Division at the end of the last income year.
Note: For the value of trading stock at the start of the 1997-98 income year, see section 70-40 of the Income Tax (Transitional Provisions) Act 1997 .
70-45 Value of trading stock at end of income year
(1) You must elect to value each item of * trading stock on hand at the end of an income year at:
(a) its * cost; or
(b) its market selling value; or
(c) its replacement price.
Note: An item's market selling value at a particular time may not be the same as its market value.
(2) The rest of this Subdivision deals with cases where the normal operation of this section is modified, or where a different valuation method may or must be used. The table sets out other cases where that happens because of provisions outside this Subdivision.
Rules about the value of trading stock | ||
Item | For this situation: | See: |
1 | In working out the inter-corporate dividend rebate, a company can sometimes be treated as having chosen the lowest of the 3 values. | Subsections 46(7A) and (7B) of the Income Tax Assessment Act 1936 |
2 | In working out the attributable income of a non-resident trust estate, trading stock is taken to be valued at cost. | |
3 | In working out the attributable income of a controlled foreign corporation, the corporation must value at cost. | |
4 | Some anti-avoidance provisions reduce the amount that is taken to be the cost of an item of trading stock. | Subsections 52A(7), 82KH(1N), 82KL(6) and 100A(6B) of the Income Tax Assessment Act 1936 |
70-50 Valuation if trading stock obsolete etc.
You may elect to value an item of your * trading stock below all the values in section 70-45 if:
(a) that is warranted because of obsolescence or any other special circumstances relating to that item; and
(b) the value you elect is reasonable.
70-55 Working out the cost of natural increase of live stock
(1) The cost of an animal you hold as * live stock that you acquired by natural increase is whichever of these you elect:
(a) the actual cost of the animal;
(b) the cost prescribed by the regulations for each animal in the applicable class of live stock.
(2) However, if you incur a service fee for insemination and, as a result, acquire a horse by natural increase, its cost is the greater of:
(a) the amount worked out under subsection (1); and
(b) the part of the service fee that is attributable to your acquiring the horse.
(3) An election under this section must be made by the time you lodge your * income tax return for the income year in which you acquired the animal. However, the Commissioner can allow you to make it later.
70-60 Valuation of horse breeding stock
(1) For a horse at least 3 years old that you acquired under a contract and hold for breeding, you can elect a value other than the values in section 70-45.
(2) The value you can elect for the horse at the end of the income year is worked out using the table:
Value of horse breeding stock | |
If the horse is: | ... you can value it at this amount: |
female 12 years or over | $1
|
any other horse | the * horse opening value less the * horse reduction amount (see section 70-65) |
(3) However, if the value worked out under subsection (2) would be less than $1, you must elect the value of $1.
(4) A horse's age is to be measured in whole years as at the end of the relevant income year. The age of a horse not born on 1 August is determined as if the horse had been born on the last 1 August before it was actually born.
70-65 Working out the horse opening value and the horse reduction amount
(1) The horse opening value is:
(a) if the horse has been your * live stock ever since the start of the income year--its * value as * trading stock at the start of the income year; or
(b) otherwise--the horse's base amount (see subsection (3)).
(2) The horse reduction amount is worked out as follows:
(a) for female horses under 12 years of age:
(b) for any male horse:
(3) In this section:
"base amount" is the lesser of:
(a) the horse's * cost; and
(b) the horse's * undeducted cost when it most recently became your * live stock.
"breeding days" is the number of whole days in the income year since you most recently began to hold the horse for breeding.
"nominated percentage" is any percentage, up to 25%, you nominate when you make the election in section 70 - 60.
"reduction factor" is the greater of:
(a) 3; and
(b) the difference between 12 and the horse's age when you most recently began to hold it for breeding.
70-70 Valuing interests in FIFs
(1) You must value at its cost an item of your * trading stock that is an interest in a * foreign investment fund (a * FIF).
Note: For special rules about valuing an interest in a FIF that was an item of your trading stock on hand at the start of the 1991-92 income year, see section 70-70 of the Income Tax (Transitional Provisions) Act 1997 .
(2) However, you may elect to value all your interests in * FIFs at their market value instead. If you make this election, then for the income year of the election, and for all later income years, you must value at their market value all your interests in FIFs.
(3) You can only make this election before you lodge your * income tax return for the first income year in which a * notional accounting period of any * FIF you have an interest in ends.
70-75 What this Subdivision is about
Your assessable income includes the market value of an item of trading stock if you dispose of it outside the ordinary course of business or it ceases to be trading stock in certain other circumstances.
This Subdivision treats certain other assets in the same way as trading stock.
Table of sections
70-80 Why the rules in this Subdivision are necessary
Operative provisions
70-85 Application of this Subdivision to certain other assets
70-90 Assessable income on disposal of trading stock outside the ordinary course of business
70-95 Purchase price is taken to be market value
70-100 Notional disposal when you stop holding an item as trading stock
70-105 Death of owner
70-110 You stop holding an item as trading stock but still own it
70-115 Compensation for lost trading stock
70-80 Why the rules in this Subdivision are necessary
(1) When you dispose of an item of your trading stock in the ordinary course of business, what you get for it is included in your assessable income (under section 6-5) as ordinary income.
(2) If an item stops being your trading stock for certain other reasons, an amount is generally included in your assessable income to balance the reduction in trading stock on hand, which is a transaction on revenue account.
(3) The other reasons for an item to stop being your trading stock are:
(a) you dispose of it outside the ordinary course of * business; or
(b) interests in it change; or
(c) you die; or
(d) you stop holding it as trading stock.
70-85 Application of this Subdivision to certain other assets
This Subdivision (except section 70-115) applies to certain assets of a * business as if they were * trading stock on hand of the entity that carries on that business. The assets are:
(a) standing or growing crops; and
(b) crop-stools; and
(c) trees planted and tended for sale.
Note: Section 70-115 assesses insurance or indemnity amounts for lost trading stock.
70-90 Assessable income on disposal of trading stock outside the ordinary course of business
(1) If you dispose of an item of your * trading stock outside the ordinary course of a * business:
(a) that you are carrying on; and
(b) of which the item is an asset;
your assessable income includes the market value of the item on the day of the disposal.
(2) Any amount that you actually receive for the disposal is not included in your assessable income (nor is it * exempt income).
Note 1: In the case of an asset covered by section 70-85 (which applies this Subdivision to certain other assets), the disposal will usually involve disposing of the land of which the asset forms part.
Note 2: For certain disposals of live stock by primary producers, special rules apply: see Subdivision 385 - E.
Note 3: If the disposal is by way of gift, you may be able to deduct the gift: see Division 30 (Gifts).
Note 4: If the disposal is of trees, you can deduct the relevant portion of your capital costs of acquiring the land carrying the trees or of acquiring a right to fell the trees: see section 70-120.
70-95 Purchase price is taken to be market value
If an entity disposes of an item of the entity's * trading stock outside the ordinary course of * business, the entity acquiring the item is treated as having bought it for the market value included in the disposing entity's assessable income under section 70-90.
70-100 Notional disposal when you stop holding an item as trading stock
(1) An item of * trading stock is treated as having been disposed of outside the ordinary course of * business if it stops being trading stock on hand of an entity (the transferor ) and, immediately afterwards:
(a) the transferor is not the item's sole owner; but
(b) an entity that owned the item (alone or with others) immediately beforehand still has an interest in the item.
Example: A grocer decides to take her daughters into partnership with her. Her trading stock becomes part of the partnership assets, owned by the partners equally. As a result, it becomes trading stock on hand of the partnership instead of the grocer. This section treats the grocer as having disposed of the trading stock to the partnership outside the ordinary course of her business.
Note: If the transferor is the item's sole owner after it stops being trading stock on hand of the transferor, section 70-110 applies instead of this section.
(2) As a result, the transferor's assessable income includes the market value of the item on the day it stops being * trading stock on hand of the transferor.
(3) The entity or entities (the transferee ) that own the item immediately after it stops being * trading stock on hand of the transferor are treated as having bought the item for the same value on that day.
Election to treat item as disposed of at closing value
(4) However, an election can be made to treat the item as having been disposed of for what would have been its * value as * trading stock of the transferor on hand at the end of an income year ending on that day.
(5) If this election is made, this * value is included in the transferor's assessable income for the income year that includes that day. The transferee is treated as having bought the item for the same value on that day.
(6) This election can only be made if:
(a) immediately after the item stops being * trading stock on hand of the transferor, it is an asset of a * business carried on by the transferee; and
(b) immediately after the item stops being * trading stock on hand of the transferor, the entities that owned it immediately beforehand have (between them) interests in the item whose total value is at least 25% of the item's market value on that day; and
(c) the * value elected is less than that market value; and
(d) the item is not a thing in action.
(7) Also, the election can only be made before 1 September following the end of the * financial year in which the item stops being * trading stock on hand of the transferor. However, the Commissioner can allow the election to be made later.
(8) An election must be in writing and signed by or on behalf of each of:
(a) the entities that own the item immediately before it stops being * trading stock on hand of the transferor; and
(b) the entities that own it immediately afterwards.
(9) If a person whose signature is required for the election has died, the * legal personal representative of that person's estate may sign instead.
When election has no effect
(10) An election has no effect if:
(a) the item stops being * trading stock on hand of the transferee outside the course of ordinary family or commercial dealing; and
(b) the * consideration receivable by the transferor (or by any of the entities constituting the transferor) substantially exceeds what would reasonably be expected to be the consideration receivable by the entity concerned if the market value of the item immediately before it stops being * trading stock on hand of the transferor were the * value elected under subsection (4).
(11) Consideration receivable by an entity means so much of the value of any benefit as it is reasonable to expect that the entity will obtain in connection with the item ceasing to be * trading stock on hand of the transferor.
(1) When you die, your assessable income up to the time of your death includes the market value at that time of the * trading stock of your * business (if any).
Note: In the case of trees, you can deduct the relevant portion of your capital costs of acquiring the land carrying the trees or of acquiring a right to fell the trees: see section 70-120.
(2) The person on whom the * trading stock devolves is treated as having bought it for its market value at that time.
(3) However, your * legal personal representative can elect to have included in your assessable income (instead of the market value) the amount that would have been the * value of the * trading stock at the end of an income year ending on the day of your death.
(4) In the case of an asset covered by section 70-85 (which applies this Subdivision to certain other assets), your * legal personal representative can elect to have a nil amount included in your assessable income (instead of the market value).
(5) Your * legal personal representative can make an election only if:
(a) the * business is carried on after your death; and
(b) the * trading stock continues to be held as trading stock of that business, or the asset continues to be held as an asset of that business, as appropriate.
(6) If an election is made, the person on whom the * trading stock devolves is treated as having bought it for the amount referred to in subsection (3) or (4).
(7) An election can only be made on or before the day when your * legal personal representative lodges your * income tax return for the period up to your death. However, the Commissioner can allow it to be made later.
70-110 You stop holding an item as trading stock but still own it
If you stop holding an item as * trading stock, but still own it, you are treated as if:
(a) just before it stopped being trading stock, you had sold it to someone else (at arm's length and in the ordinary course of business) for its * cost; and
(b) you had immediately bought it back for the same amount.
Example 1: You are a sheep grazier and take a sheep from your stock to slaughter for personal consumption. You are treated as having sold it for its cost. This amount is assessable income, just like the proceeds of sale of any of your trading stock.
Although you are also treated as having bought the sheep for the same amount, it would not be deductible because the sheep is for personal consumption.
Example 2: You stop holding an item as trading stock and begin to use it as plant for the purpose of producing your assessable income. You are treated as having sold it for its cost. This amount is assessable income, just like the proceeds of sale of any of your trading stock.
You are also treated as having bought the item for the same amount, which is relevant to working out the item's cost for depreciation purposes: see Subdivision 42-B.
Note: A transaction that this section treats as having occurred is disregarded for the purposes of these provisions of the Income Tax Assessment Act 1936 :
70-115 Compensation for lost trading stock
Your assessable income includes an amount that:
(a) you receive by way of insurance or indemnity for a loss of * trading stock; and
(b) is not assessable as * ordinary income under section 6 - 5.
Subdivision 70-E -- Miscellaneous
Table of sections
70-120 Deducting capital costs of acquiring trees
70-120 Deducting capital costs of acquiring trees
(1) This section gives you deductions for your capital costs of acquiring land carrying trees or of acquiring a right to fell trees.
Note: This section is included in this Division because:
Land carrying trees
(2) You can deduct an amount for the price you paid to acquire land carrying trees if:
(a) some or all of the trees are felled during the income year for sale, or for use in manufacture, by you for the * purpose of producing assessable income; or
(b) some or all of the trees are felled during the income year under a right you granted to another entity in consideration of payments as or by way of * royalty; or
(c) the market value of some or all of the trees is included in your assessable income for the income year by section 70-90 (because you disposed of the trees outside the ordinary course of * business) or section 70-105 (because of your death).
(It does not matter when you acquired the land.)
Note: The market value of trees is not included in your assessable income for the income year by section 70-105 (because of your death) if your legal personal representative elects under subsection 70-105(4) to have a nil amount included instead.
Right to fell trees
(3) You can deduct an amount for the price you paid to acquire a right to fell trees if:
(a) some or all of the trees are felled during the income year for sale, or for use in manufacture, by you for the * purpose of producing assessable income; or
(b) some or all of the trees are felled during the income year under a right you granted to another entity in consideration of payments as or by way of * royalty.
(It does not matter when you acquired the right.)
How much you can deduct for costs of acquiring land or right
(4) You can deduct for the income year so much of the price you paid as is attributable to the trees covered by a paragraph of subsection (2) or (3).
(5) If you can deduct an amount because of paragraph (2)(c), you can also deduct for the income year so much of any other capital expenditure you incurred as is attributable to acquiring the trees covered by that paragraph (except so far as you have deducted it, or can deduct it, for any income year under a provision of this Act outside this section).
Non-arm's length transactions
(6) If:
(a) you can deduct an amount under this section for expenditure incurred in connection with a transaction; and
(b) the parties to the transaction did not deal with each other at arm's length; and
(c) the amount of the expenditure is greater than the market value of what the expenditure is for;
the amount of the expenditure is instead taken to be that market value. This has effect for the purposes of working out what you can deduct under this section.
[The next Chapter is Chapter 3.]
14 Section 375-820 (link note)
Repeal the link note, substitute:
[The next Division is Division 385.]
15 At the end of Part 3 - 45
Add:
Division 385 -- Primary production
Guide to Division 385
385-E Primary producer can elect to spread or defer tax on profit from forced disposal or death of live stock
385-F Insurance for loss of live stock or trees
385-G Double wool clips
385-H Rules that apply to all elections made under Subdivisions 385-E, 385-F and 385 - G
385-1 What this Division is about
This Division contains rules that are specific to primary producers.
Table of sections
385-5 Where to find some other rules relevant to primary producers
385-5 Where to find some other rules relevant to primary producers
Rules relevant to primary producers | ||
Item | For rules about this topic: | See: |
1 | The rules about assessable income arising from disposals of trading stock apply to live stock, because live stock is trading stock. | Subdivision 60-D |
2 | The rules about assessable income arising from disposals of trading stock apply to: (a) standing or growing crops; and (b) crop-stools; and (c) trees planted and tended for sale. | Subdivision 60-D |
3 | There are some capital allowances for primary producers and some other land-holders. | Division 387 |
[The next Subdivision is Subdivision 385-E.]
385-90 What this Subdivision is about
You can elect to exclude from your assessable income the profit on a forced disposal or death of live stock that you held as assets of a primary production business you carry on in Australia .
The excluded profit is then brought into your assessable income over a 5 year period in one of 2 ways.
Table of sections
385-95 Basic principles for elections under this Subdivision
Operative provisions
385-100 Cases where you can make an election
385-105 Election to spread tax profit over 5 years
385-110 Alternative election to defer tax profit and reduce cost of replacement live stock
385-115 Your assessable income includes an amount for replacement live stock you breed
385-120 Purchase price of replacement live stock is reduced
385-125 Alternative election because of bovine tuberculosis has effect over 10 years not 5
385-95 Basic principles for elections under this Subdivision
(1) You can elect:
ï‚· to spread the profit on the disposal or death over the income year of the disposal or death and the next 4 income years ( election to spread ); or
ï‚· to defer including the profit in your assessable income, if you will use the proceeds of the disposal or death mainly to replace the live stock ( election to defer ).
(2) If you make an election to defer, the profit is "used" over the next 5 income years:
ï‚· by reducing the price for which you are taken to have bought replacement stock (as a result, your tax profit on the disposal of the replacement stock is increased); and
ï‚· by including in your assessable income amounts for replacement stock that you breed.
Any unused part of the profit is included in your assessable income for the fifth income year.
385-100 Cases where you can make an election
(1) You can make an election if:
(a) you dispose of * live stock, or they die, because:
(i) land is compulsorily acquired or resumed under an Act; or
(ii) a State or Territory leases land for a cattle tick eradication campaign; or
(iii) pasture or fodder is destroyed by fire, drought or flood and you will use the * proceeds of the disposal or death mainly to buy replacement stock or to maintain breeding stock for the purpose of replacing the live stock; or
(iv) they are compulsorily destroyed under an * Australian law for the control of a * disease or they die of such a * disease; or
(v) you receive an official notification under an * Australian law dealing with contamination of property; and
(b) you held the live stock as assets of a * primary production business you carry on in Australia ; and
(c) apart from this Subdivision, your assessable income for any income year would include the * proceeds of the disposal or death.
(2) The proceeds of the disposal or death are:
(a) if you dispose of the * live stock or their carcases in the ordinary course of * business--the total of:
(i) any amount you receive as payment for the live stock or carcases; and
(ii) any compensation you receive for the death or destruction, or a reduction in market value, of the live stock or their carcases from an * Australian government agency; or
(b) if you dispose of the * live stock or their carcases outside the ordinary course of * business--the total of:
(i) the market value of the live stock or their carcases, at the time of disposal; and
(ii) any compensation you receive for the death or destruction, or a reduction in market value, of the live stock or their carcases from an * Australian government agency; or
(c) if the * live stock die, and you do not dispose of their carcases to someone else--any compensation you receive for their death or destruction from an * Australian government agency.
385-105 Election to spread tax profit over 5 years
(1) You can elect:
(a) to include in your assessable income for the * disposal year the * proceeds of the disposal or death, reduced by the * tax profit on the disposal or death; and
(b) to include 20% of the tax profit on the disposal or death in your assessable income for the disposal year; and
(c) to include 20% of the tax profit on the disposal or death in your assessable income for each of the next 4 income years.
For rules about the making and effect of an election, see Subdivision 385-H.
(2) The disposal year is the income year in which you dispose of the * live stock, or they die, as mentioned in subsection 385-100(1).
(3) The tax profit on the disposal or death is any amount remaining after subtracting from the * proceeds of the disposal or death the sum of:
(a) the purchase price of as many of the * live stock as you purchased during the income year; and
(b) the * value of the rest of the live stock as * trading stock on hand at the start of the income year.
385-110 Alternative election to defer tax profit and reduce cost of replacement live stock
(1) Alternatively, you can elect:
(a) to include in your assessable income for the * disposal year the * proceeds of the disposal or death, reduced by the * tax profit on the disposal or death; and
(b) to reduce the cost of replacement * live stock you buy in the disposal year (or any of the next 5 income years) by amounts totalling not more than the tax profit on the disposal or death; and
(c) to include in your assessable income for the last of the 5 income years following the disposal year any * unused tax profit on the disposal or death on the last day of that year.
Note: If the election is made because of bovine tuberculosis, it has effect over 10 income years instead of 5: see section 385 - 125.
For rules about the making and effect of an election, see Subdivision 385-H
(2) However, you can only make this election if you will use the * proceeds of the disposal or death mainly to buy replacement * live stock, or to maintain breeding stock for the purpose of replacing the live stock that were disposed of or died.
(3) The unused tax profit on the disposal or death is the * tax profit on the disposal or death less the total of:
(a) the amounts included in your assessable income under section 385-115 for replacement animals you breed; and
(b) the amounts by which the purchase price of replacement animals is reduced under section 385-120.
385-115 Your assessable income includes an amount for replacement live stock you breed
If you make the election in section 385-110, then for the * disposal year and each of the next 5 income years, your assessable income includes any amount you choose for each replacement animal you breed during that income year. (However, you can choose not to include an amount.)
385-120 Purchase price of replacement live stock is reduced
(1) If you make the election in section 385-110, then the purchase price of each replacement animal you buy in the * disposal year, or in the next 5 income years, is treated as if it were reduced by the * reduction amount.
Meaning of reduction amount
(2) The reduction amount is:
ï‚· so much of the * tax profit on the disposal or death as is attributable to live stock of the species you are replacing;
divided by:
ï‚· the number of animals of that species that you disposed of or that died.
(3) However, if:
(a) you purchase a replacement animal of a different species from the * live stock it replaces; and
(b) you pay substantially more for it than you could have paid for a replacement animal of the same species;
the reduction amount for the animal is any reasonable amount at least equal to the amount worked out under subsection (2).
Exception to avoid reducing unused tax profit to less than nil
(4) However, if applying subsection (1) to a particular purchase would reduce the * unused tax profit on the disposal or death to less than nil, instead reduce the purchase price of each replacement animal in that purchase by:
ï‚· the * unused tax profit on the disposal or death;
divided by:
ï‚· the number of animals in the purchase.
385-125 Alternative election because of bovine tuberculosis has effect over 10 years not 5
If you can make an election under this Subdivision because:
(a) * live stock are compulsorily destroyed under an * Australian law for the control of bovine tuberculosis; or
(b) * live stock die of that * disease;
sections 385-110 to 385-120 apply as if they referred to 10 income years instead of 5 years.
Subdivision 385-F -- Insurance for loss of live stock or trees
Table of sections
385-130 Insurance for loss of live stock or trees
385-130 Insurance for loss of live stock or trees
If your assessable income for an income year would otherwise include an insurance recovery for a loss of * live stock, or for a loss by fire of trees, that you hold as assets of a * primary production business you carry on in Australia , you can elect:
(a) to include only 20% of the insurance recovery in your assessable income for that income year; and
(b) to include 20% of the insurance recovery in your assessable income for each of the next 4 income years.
For rules about the making and effect of an election, see Subdivision 385-H.
Subdivision 385-G -- Double wool clips
Table of sections
385-135 Election to defer including profit on second wool clip
385-135 Election to defer including profit on second wool clip
(1) If your assessable income for an income year would otherwise include the * proceeds of the sale of 2 wool clips because fire, drought or flood causes you to shear your sheep earlier than normal, you can elect to include in your assessable income for the next income year the * profit on the sale of the earlier than normal wool clip.
For rules about the making and effect of an election, see Subdivision 385-H.
(2) However, at the time the wool was shorn, the sheep must have been assets of a * primary production business you carried on in Australia . Also, the fire, drought or flood must have been in an area of Australia where you carried on that business at that time.
(3) The proceeds of the sale of 2 wool clips are:
(a) the proceeds of the sale of the earlier than normal wool clip; and
(b) an amount covered by one or more of the following:
(i) proceeds of the sale of another wool clip in the income year;
(ii) proceeds of the sale of wool shorn in the previous income year that you hold at the start of the income year and that you took into account at cost in working out the * value of your trading stock under Division 60 at the end of the previous income year;
(iii) an amount for wool shorn in the previous income year that is included in your assessable income of the income year because of a previous election under this section.
(4) The profit on the sale of the earlier than normal wool clip is the proceeds of the sale of the wool clip that would otherwise be included in your assessable income for the income year, less the expenses you incur in the income year that are directly attributable to the earlier shearing and sale.
Table of sections
385-145 Partnerships and trusts
385-150 Time for making election
385-155 Amounts are assessable income from carrying on the primary production business
385-160 Effect of certain events on election
385-163 Disentitling events
385-165 New partnership can elect to be treated as same entity as old partnership
385-170 New partnership can elect to take advantage of election made by former owner of the business
385-145 Partnerships and trusts
If a partnership or trustee carries on a * primary production business, only the partnership or trustee can make an election under Subdivision 385-E, 385-F or 385-G.
385-150 Time for making election
You can only make an election under Subdivision 385-E, 385-F or 385-G before you lodge your * income tax return for the last income year for which your assessable income would (apart from the election) include any of:
(a) the * proceeds of the disposal or death of * live stock; or
(b) the insurance recovery for the loss of * live stock or trees; or
(c) the * proceeds of the sale of the 2 wool clips.
The Commissioner may allow you further time to make the election.
385-155 Amounts are assessable income from carrying on the primary production business
The following are taken to be assessable income from carrying on a * primary production business in Australia :
(a) an amount included in your assessable income because of an election under Subdivision 385-E, 385-F or 385-G; or
(b) an amount included in your assessable income because of section 385-160 (Effect of certain events on election).
385-160 Effect of certain events on election
(1) You cannot make an election under Subdivision 385-E, 385-F or 385 - G after a * disentitling event happens.
(2) If a * disentitling event happens after you make an election under Subdivision 385-E, 385-F or 385-G, your assessable income for the income year in which the event happens includes:
(a) the * proceeds of the disposal or death of * live stock; or
(b) the insurance recovery for the loss of * live stock or trees; or
(c) the * proceeds of the sale of 2 wool clips;
reduced by each amount that, because of the election, is included in your assessable income for that or an earlier income year.
(3) However, if a * disentitling event happens after you make an election under section 385-110 (Alternative election to defer tax profit and reduce cost of replacement live stock), your assessable income for the income year in which the event happens includes any * unused tax profit on the disposal or death on the last day of that income year.
(1) A disentitling event happens when:
(a) you die; or
(b) you become bankrupt, insolvent, commence to be wound up, apply to take the benefit of a law for the relief of bankrupt or insolvent debtors, compound with creditors, or make an assignment of any property for the benefit of creditors; or
(c) you leave Australia permanently, or it appears to the Commissioner that you are about to do so; or
(d) you cease to carry on the * primary production business to which the election relates.
(2) In the case of a partnership, a disentitling event happens when:
(a) a partner in the partnership becomes bankrupt, insolvent, commences to be wound up, applies to take the benefit of a law for the relief of bankrupt or insolvent debtors, compounds with creditors, or makes an assignment of any property for the benefit of creditors; or
(b) a partner leaves Australia permanently, or it appears to the Commissioner that a partner is about to do so; or
(c) the partnership ceases to carry on the * primary production business to which the election relates; or
(d) there is a variation in the constitution of the partnership or the interests of the partners.
(3) In the case of a trust, a disentitling event happens when:
(a) a beneficiary dies; or
(b) an order for the administration of the trust estate is made under a law relating to bankruptcy; or
(c) a beneficiary becomes bankrupt, insolvent, commences to be wound up, applies to take the benefit of a law for the relief of bankrupt or insolvent debtors, compounds with creditors, or makes an assignment of any property for the benefit of creditors; or
(d) the trustee or a beneficiary leaves Australia permanently, or it appears to the Commissioner that the trustee or a beneficiary is about to do so; or
(e) the trustee ceases to carry on the * primary production business to which the election relates.
385-165 New partnership can elect to be treated as same entity as old partnership
(1) Under Subdivision 385-E, 385-F or 385-G a new partnership can elect to be treated as a continuation of an old partnership that would otherwise cease to exist if:
(a) it immediately takes over the relevant * primary production business of the old partnership; and
(b) partners, together entitled to at least 25% of the income of the new partnership, were also partners in the old partnership.
(2) The new partnership must make this election before it lodges its * income tax return for the income year in which it takes over the * business.
385-170 New partnership can elect to take advantage of election made by former owner of the business
(1) If an entity (except a partnership):
(a) has made an election under Subdivision 385-E, 385-F or 385-G; and
(b) transfers the relevant * primary production business to a partnership; and
(c) is entitled to at least 25% of the income of that partnership;
the partnership may elect to apply the Subdivision under which the entity made the election to all future events as if it were that entity.
(2) The partnership must make this election before it lodges its * income tax return for the income year in which the * business is transferred to it.
[The next Division is Division 387.]
Division 387 -- Capital allowances for primary producers and some land-holders
Table of Subdivisions
Guide to Division 387
387-A Landcare operations
387-B Facilities to conserve or convey water
387-D Establishing grapevines
387-E Mains electricity supply
387-F Telephone lines
387-G Forestry roads and timber mill buildings
387 - 1 What this Division is about
Primary producers, and some land-holders whose land is used for business, can deduct capital expenditure on some infrastructure, operations and plants under this Division. The period over which the expenditure can be deducted varies.
Subdivision 387-A -- Landcare operations
387-50 What this Subdivision is about
You can deduct your capital expenditure on landcare operations for:
ï‚· land that you use for a primary production business; or
ï‚· rural land that you use for business.
You deduct the expenditure for the income year in which you incur it.
Table of sections
Deductions
387-55 Deductions for expenditure on landcare operations
387 - 60 Meaning of landcare operation for land
Limits on deductions
387-65 Limits on expenditure for which you can deduct
387-70 Reduced deduction if your use of the land changes
Partnerships
387 - 75 How this Subdivision applies to partners and partnerships
Approved management plans and farm consultants
387-80 Meaning of approved management plan
387-85 Approval of persons as farm consultants
387-90 Review of decisions relating to approvals
387-55 Deduction for expenditure on landcare operations
(1) You can deduct capital expenditure you incur at a particular time on a * landcare operation for:
(a) land in Australia you use at the time for carrying on a * primary production business; or
(b) rural land in Australia you use at the time for carrying on a * business for the * purpose of producing assessable income from the use of that land (except a * business of mining or quarrying).
(2) You deduct the expenditure for the income year in which you incur it.
Note 1: Various provisions of this A ct may reduce the amount you can deduct or stop you deducting. For example, see:
Note 2: If you recoup an amount of the expenditu re, the amount will be included in your assessable income. See Subdivision 20 - A.
387 - 60 Meaning of landcare operation for land
(1) Landcare operation for land means:
(a) erecting a fence (including an extension, alteration or addition to a fence) to separate different land classes on the land in accordance with an * approved management plan for the land; or
(b) erecting a fence (including an extension, alteration or addition to a fence) on the land primarily and principally for the purpose of excluding animals from an area affected by land degradation:
(i) to prevent or limit extension or worsening of land degradation in the area; and
(ii) to help reclaim the area; or
(c) constructing a levee, or a similar improvement with a similar use, on the land; or
(d) constructing surface or subsurface drainage works on the land, if the construction is primarily and principally for the purpose of controlling salinity or assisting in drainage control; or
(e) an operation primarily and principally for the purpose of:
(i) eradicating or exterminating from the land animals that are pests; or
(ii) eradicating, exterminating or destroying plant growth detrimental to the land; or
(iii) preventing or fighting land degradation (except by erecting fences on the land); or
(f) an extension of an operation described in paragraph (a), (b), (c), (d) or (e).
(2) Paragraph (1)(d) does not apply to an operation draining swamp or low-lying land.
387-65 Limits on expenditure for which you can deduct
No deductions for expenditure on most plant
(1) You cannot deduct an amount under this Subdivision for your capital expenditure on * plant, except:
(a) a fence erected for a purpose described in paragraph 387 - 60(1)(a) or (b); or
(b) a dam or structural improvement (except a fence) covered by paragraph (c), (d), (e) or (f) of the definition of plant in subsection 42 - 18(1).
Application of Common rule 2
(2) Subdivision 41-B (which sets out Common rule 2 dealing with non-arm's length transactions) applies to expenditure on * landcare operations for land. However, subsection 41 - 65(2) (about disposal of property) does not apply.
387-70 Reduced deduction if your use of the land changes
Despite section 387-55, you can deduct only a reasonable amount under this Subdivision for your capital expenditure in an income year on * landcare operations for land if, at some time after you incurred the expenditure but during the income year, you used the land for a purpose other than the purpose of carrying on:
(a) a * primary production business; or
(b) a * business for the * purpose of producing assessable income from the use of rural land (except a * business of mining or quarrying).
387 - 75 How this Subdivision applies to partners and partnerships
Application
(1) This section applies to allocate expenditure to you for the purposes of this Subdivision if you were a partner in a partnership when it incurred capital expenditure during an income year.
Allocation of partnership expenditure to partners
(2) For the purposes of this Subdivision, you are taken to have incurred during that income year:
(a) the amount of the expenditure that the partners agreed you should bear; or
(b) if there was no such agreement--the proportion of the expenditure equal to the proportion of your individual interest in the net income or partnership loss of the partnership for that income year.
This Subdivision does not apply to net income or partnership loss
(3) Disregard this Subdivision when working out the net income or partnership loss of the partnership under section 90 of the Income Tax Assessment Act 1936 .
Approved management plans and farm consultants
387-80 Meaning of approved management plan
An approved management plan for land is a plan that:
(a) shows:
(i) the different land classes within the land; and
(ii) the location of any fencing needed to separate any of the land classes primarily and principally to prevent land degradation; and
(b) describes the kind of fencing and how it will prevent land degradation; and
(c) has been prepared by, or approved in writing as a suitable plan for the land by:
(i) an officer of a State or Territory Government department or authority responsible for land conservation who has authority to do so; or
(ii) a person who was at the time approved in writing as a farm consultant under this Subdivision.
387-85 Approval of persons as farm consultants
(1) A person may be approved in writing as a farm consultant by:
(a) the Secretary to the Department of Primary Industries and Energy; or
(b) an officer of that Department who has been authorised in writing by that Secretary to approve persons as farm consultants.
Note: This subsection also allows the approval of a person as a farm consultant to be revoked. See subsection 33(3) of the Acts Interpretation Act 1901 .
(2) The following matters must be taken into account when deciding whether to approve a person as a farm consultant:
(a) the person's qualifications, experience and knowledge relating to land conservation and farm management;
(b) the person's standing in the professional community;
(c) any other relevant matters.
387-90 Review of decisions relating to approvals
A person may apply to the * AAT for review of a decision (as defined in the Administrative Appeals Tribunal Act 1975 ):
(a) to refuse to approve the person as a farm consultant; or
(b) to revoke the approval of the person as a farm consultant.
Subdivision 387-B -- Facilities to conserve or convey water
387-120 What this Subdivision is about
You can deduct over 3 years capital expenditure on a facility, if you incur the expenditure to conserve or convey water for a primary production business you conduct on land in Australia .
Table of sections
Deductions
387-125 Deduction for expenditure on water facilities
387 - 130 Meaning of water facility
Limits on deductions
387 - 135 Reduced deduction for certain uses of water facility
387 - 140 No deduction for acquisition of water facility if anyone can deduct certain earlier expenditure on the facility
387-145 Application of Common rule 2
Partnerships
387 - 150 How this Subdivision applies to partners and partnerships
387-125 Deduction for expenditure on water facilities
(1) You can deduct an amount under subsection (2) for capital expenditure that you incur on the construction, manufacture, installation or acquisition of a * water facility, if you incur it primarily and principally for the purpose of conserving or conveying water for use in a * primary production business that you conduct on land in Australia.
(2) You can deduct one third of your capital expenditure:
(a) for the income year in which you incur the expenditure; and
(b) for each of the next 2 income years.
Note 1: Various provisions may reduce the amount you can deduct or stop you deducting. For example, see:
Note 2: If you recoup an amount of the expenditure, the amount will be included in your assessable income. See Subdivision 20 - A.
387 - 130 Meaning of water facility
(1) A water facility is:
(a) an item of * plant; or
(b) a structural improvement; or
(c) an alteration, addition or extension to an item of * plant or a structural improvement.
(2) Examples of a * water facility include a dam, earth tank, underground tank, concrete tank, metal tank, tank stand, bore, well, irrigation channel (or similar improvement), pipe, pump, water tower or windmill.
387 - 135 Reduced deduction for certain uses of water facility
Your deduction for expenditure relating to a * water facility is reduced to a reasonable amount if the facility:
(a) was not wholly for use in carrying on a * primary production business on land in Australia ; or
(b) was not wholly for use for the * purpose of producing assessable income.
(1) You cannot deduct an amount for any income year for capital expenditure on the acquisition of a * water facility if any person has deducted or can deduct an amount under this Subdivision for any income year for earlier capital expenditure on:
(a) the construction or manufacture of the facility; or
(b) a previous acquisition of the facility.
Note: Treat expenditure covered by section 75A or 75B of the Income Tax Assessment Act 1936 as if it had been deducted under this Subdivision. See section 387 - 140 of the Income Tax (Transitional Provisions) Act 1997 .
(2) A * water facility and an alteration, addition or extension to that facility are not the same water facility for the purposes of subsection (1).
387-145 Application of Common rule 2
Subdivision 41-B (which sets out Common rule 2 dealing with non-arm's length transactions) applies to expenditure for which you can deduct an amount under this Subdivision. However, subsection 41 - 65(2) (about disposal of property) does not apply.
387 - 150 How this Subdivision applies to partners and partnerships
Application
(1) This section applies to allocate expenditure to you for the purposes of this Subdivision if you were a partner in a partnership when it incurred capital expenditure during an income year.
Allocation of partnership expenditure to partners
(2) For the purposes of this Subdivision, you are taken to have incurred during that income year:
(a) the amount of the expenditure that the partners agreed you should bear; or
(b) if there was no such agreement--the proportion of the expenditure equal to the proportion of your individual interest in the net income or partnership loss of the partnership for that income year.
This Subdivision does not apply to net income or partnership loss
(3) Disregard this Subdivision when working out the net income or partnership loss of the partnership under section 90 of the Income Tax Assessment Act 1936 .
[The next Subdivision is Subdivision 387 - D.]
Subdivision 387 - D -- Establishing grapevines
387 - 300 What this Subdivision is about
You can deduct expenditure on establishing a grapevine that you own and use in a primary production business. You can usually deduct it over 5 income years.
Table of sections
Deductions
387 - 305 Deduction for establishment of grapevine
387 - 310 Expenditure on draining swamps and clearing land not counted
387 - 315 Additional deduction if grapevine is destroyed
387 - 320 Deductions for quasi-owners of land with grapevines
387 - 305 Deduction for establishment of grapevine
(1) You can deduct an amount for an income year if:
(a) an entity has incurred capital expenditure relating to the establishment of a grapevine in Australia for use in a * primary production business; and
(b) you owned the grapevine, and used it in a * primary production business for the * purpose of producing assessable income, on at least one day during the income year.
Note 1: Various provisions may reduce the amount you can deduct or st op you deducting. For example, see:
Note 2: If you recoup an amount of the expenditure, the amount will be included in your assessable income. See Subdivision 20 - A.
Amount of deduction
(2) The amount you can deduct for the income year is worked out using the formula:
where:
"establishment expenditure" is the amount of the capital expenditure that is attributable to the establishment of the grapevine.
"write-off days in income year" is the number of days in the income year on which you owned the grapevine and used it in a * primary production business for the * purpose of producing assessable income.
No deduction for period more than 4 years after grapevine established
(3) Disregard your use of the grapevine on a day that is more than 4 years after the grapevine was established.
Note: That 4-year period will be spread over 5 income years, unless the grapevine is established on the first day of an income year.
387 - 310 Expenditure on draining swamps and clearing land not counted
When working out the amount of a deduction under this Subdivision, do not count expenditure incurred in draining swamp or low-lying land or in clearing land.
387 - 315 Additional deduction if grapevine is destroyed
(1) If a grapevine in Australia that you own and use in a * primary production business for the * purpose of producing assessable income is destroyed at any time up to 4 years after the day it was established, you can deduct an amount for the income year during which the grapevine is destroyed.
(2) Work out the amount you can deduct as follows:
Method statement
Step 1. Work out the total of the amounts you could have deducted under section 387 - 305 for that expenditure if you had owned the grapevine and used it in a * primary production business for the * purpose of producing assessable income for the whole of the period:
(a) starting when the grapevine was established; and
(b) ending when the grapevine was destroyed.
Step 2. Subtract from the establishment expenditure worked out under subsection 387 - 305(2):
(a) the result from Step 1; and
(b) any amount you received (under an insurance policy or otherwise) for the destruction of the grapevine.
The remaining amount (if any) is the amount you can deduct under subsection (1).
Note: In Step 1 you must take into account any amounts you could have deducted if section 387 - 305 had applied to assessments for income years before the 1997-98 income year. See section 387 - 315 of the Income Tax (Transitional Provisions) Act 1997 .
(3) This deduction is in addition to a deduction under section 387 - 305 for expenditure on establishing the grapevine.
387 - 320 Deductions for quasi-owners of land with grapevines
(1) You are treated for the purposes of this Subdivision as if you own a grapevine so long as:
(a) the grapevine is attached to land you hold under a
*
quasi-ownership right granted by an * exempt Australian government agency or
an * exempt foreign government agency; and
(b) the grapevine was planted by you or a previous holder of the land under the quasi-ownership right; and
(c) apart from this section, you do not own the grapevine.
(2) So long as you are treated under this section as owning the grapevine, no other entity is taken to own it for the purposes of this Subdivision.
Subdivision 387 - E -- Mains electricity supply
387 - 350 What this Subdivision is about
You can deduct over 10 years your capital expenditure on connecting or upgrading the supply of mains electricity to land for use in a business if you have an interest in the land.
Table of sections
Deductions
387 - 355 Deducting expenditure on connecting power to land or upgrading the connection
387 - 360 Meaning of connecting power to land or upgrading the connection
Limits on deductions
387-365 Deduction denied if electricity not used as intended
387 - 370 Expenditure relating to mining cannot be deducted
387 - 375 Deductions under this Subdivision prevent other deductions for same expenditure
Partnerships
387 - 380 How this Subdivision applies to partners and partnerships
Other deductible expenditure
387 - 390 Contributions to cost of connecting power to land or upgrading the connection
387 - 355 Deducting expenditure on connecting power to land or upgrading the connection
(1) You can deduct an amount under subsection (2) if:
(a) you incur capital expenditure on * connecting power to land or upgrading the connection; and
(b) when you incur the expenditure:
(i) you have an interest in the land or are a share-farmer carrying on a * business on the land; and
(ii) you or another person intends to use some or all of the electricity to be supplied as a result of the expenditure in carrying on a * business on the land for the * purpose of producing assessable income at a time when you have an interest in the land or are a share-farmer carrying on a * business on the land.
Note 1: You can also deduct your contribution to the cost of connecting power to land or upgrading the connection. See section 387 - 390.
Note 2: You will be denied the deduction if the electricity is not used as intended within 12 months after it is first supplied as a result of the expenditure. See section 387 - 365.
(2) You can deduct 10% of the expenditure:
(a) for the income year in which you incur it; and
(b) for each of the next 9 income years.
Note 1: Various provisions may reduce the amount you can deduct or stop you deducting. For example, see:
Note 2: If you recoup an amount of the expenditure, the amount will be included in your assessable income. See Subdivision 20 - A.
387 - 360 Meaning of connecting power to land or upgrading the connection
(1) Each of the following operations is connecting power to land or upgrading the connection :
(a) connecting a mains electricity cable to a * metering point on the land (whether or not the point from which the cable is connected is on the land);
(b) providing or installing equipment designed to measure the amount of electricity supplied through a mains electricity cable to a * metering point on the land;
(c) providing or installing equipment for use directly in connection with the supply of electricity through a mains electricity cable to a * metering point on the land;
(d) work to increase the amount of electricity that can be supplied through a mains electricity cable to a * metering point on the land;
(e) work to modify or replace equipment designed to measure the amount of electricity supplied through a mains electricity cable to a * metering point on the land, if the modification or replacement results from increasing the amount of electricity supplied to the land;
(f) work to modify or replace equipment for use directly in connection with the supply of electricity through a mains electricity cable to the land, if the modification or replacement results from increasing the amount of electricity supplied to the land.
(2) However, an operation described in subsection (1) done in the course of replacing or relocating mains electricity cable or equipment is connecting power to land or upgrading the connection only if done to increase the amount of electricity that can be supplied to a * metering point on the land.
(3) A metering point on land is a point where consumption of electricity supplied to the land through a mains electricity cable is measured.
(4) Operations described in subsection (1) are the only kinds of operations that can be connecting power to land or upgrading the connection .
387-365 Deduction denied if electricity not used as intended
(1) You cannot deduct an amount under this Subdivision if, during the 12 months after electricity is first supplied to the land as a result of the expenditure, no electricity supplied as a result of the expenditure is used in carrying on a * business on the land for the * purpose of producing assessable income.
(2) If you deducted an amount for any income year under this Subdivision for the expenditure, your assessment for that income year may be amended under section 170 of the Income Tax Assessment Act 1936 to disallow the deduction.
387 - 370 Expenditure relating to mining cannot be deducted
You cannot deduct an amount under this Subdivision for:
(a) expenditure in providing water, light or power for use on, access to or communication with the site of * eligible mining operations; or
(b) a contribution to the cost of providing water, light or power for one of those purposes.
Note: You may be able to deduct amounts for such expenditure under Subdivision 330 - C: see section 330 - 80 and paragraph 330 - 85(d).
387 - 375 Deductions under this Subdivision prevent other deductions for same expenditure
(1) If you can deduct, or have deducted, an amount for any income year under this Subdivision for your expenditure:
(a) an entity cannot deduct an amount for any income year under a provision of this Act (except this Subdivision) for the expenditure; and
(b) the expenditure cannot be taken into account to work out the amount of an entity's deduction for any income year under a provision of this Act (except this Subdivision).
(2) Subsection (1) also applies in working out the net income, or partnership loss, of a partnership under section 90 of the Income Tax Assessment Act 1936 .
387 - 380 How this Subdivision applies to partners and partnerships
Application
(1) This section applies to allocate expenditure to you for the purposes of this Subdivision if you were a partner in a partnership when it incurred capital expenditure during an income year.
Allocating partnership expenditure to partners
(2) For the purposes of this Subdivision, you are taken to have incurred during that income year:
(a) the amount of the expenditure that the partners agreed you should bear; or
(b) if there was no such agreement--the proportion of the expenditure equal to the proportion of your individual interest in the net income or partnership loss of the partnership for that income year.
This Subdivision does not apply to net income or partnership loss
(3) Disregard this Subdivision when working out the net income or partnership loss of the partnership under section 90 of the Income Tax Assessment Act 1936 .
[The next section is section 387 - 390.]
387 - 390 Contributions to cost of connecting power to land or upgrading the connection
For the purposes of this Subdivision, a contribution to the cost of * connecting power to land or upgrading the connection is treated in the same way as capital expenditure on * connecting power to land or upgrading the connection.
Subdivision 387-F -- Telephone lines
387-400 What this Subdivision is about
You can deduct over 10 years your capital expenditure:
ï‚· on a telephone line on land; or
ï‚· on a telephone line extending to land;
if you have an interest in the land and the land is used for a primary production business.
Table of sections
Deductions
387 - 405 Deduction for expenditure on a telephone line
Limits on deductions
387 - 410 Expenditure that you cannot deduct
387 - 415 Relationship with other deductions
Partnerships
387 - 420 How this Subdivision applies to partners and partnerships
387 - 405 Deduction for expenditure on a telephone line
(1) You can deduct an amount under subsection (2) for your capital expenditure on a telephone line on or extending to land if, when you incurred the expenditure:
(a) a * primary production business was carried on on the land; and
(b) you had an interest in the land or you were a share-farmer carrying on a * primary production business on the land.
Note: Special rules apply to partners and partnerships. See section 387 - 420.
(2) You can deduct 10% of the expenditure:
(a) for the income year in which you incurred the expenditure; and
(b) for each of the next 9 income years.
Note: Various provisions may reduce the amount you can deduct or stop you deducting. For example, see:
387 - 410 Expenditure that you cannot deduct
(1) Despite section 387 - 405, you cannot deduct an amount under this Subdivision for any income year for your capital expenditure on a part of a telephone line if:
(a) any entity has deducted, or can deduct, an amount for any income year for the cost of that part under a provision of this Act (except this Subdivision); or
(b) the cost of that part has been, or must be, taken into account in working out:
(i) the amount of any entity's deduction (including a deduction for depreciation) for any income year under a provision of this Act (except this Subdivision); or
(ii) the net income, or partnership loss, of a partnership under section 90 of the Income Tax Assessment Act 1936 .
Note: The fact that you have deducted, or can deduct, an amount under section 70 of the Income Tax Assessment Act 1936 for your expenditure on part of a telephone line does not prevent you from deducting an amount under this Subdivision for your expenditure on that part of a telephone line. See section 387 - 410 of the Income Tax (Transitional Provisions) Act 1997 .
(2) However, you can deduct an amount under this Subdivision for your expenditure on a part of a telephone line even if:
(a) an entity that worked on installing that part has deducted, or can deduct, an amount relating to that part for any income year under this Act (except this Subdivision); or
(b) the cost of that part has been, or must be, taken into account:
(i) in working out the amount of such an entity's deduction (including a deduction for depreciation) for any income year under a provision of this Act (except this Subdivision); or
(ii) under section 90 of the Income Tax Assessment Act 1936 in working out the net income, or partnership loss, of a partnership that worked on installing that part.
(3) Subsection (2) has effect whether the entity did the work itself or through one or more employees or agents.
387 - 415 Relationship with other deductions
(1) If you can deduct or have deducted an amount under this Subdivision for any income year for expenditure on all or part of a telephone line:
(a) an entity cannot deduct an amount for any income year under a provision of this Act (except this Subdivision) for capital expenditure relating to that line or part of the line; and
(b) an amount of capital expenditure relating to that line or part of the line cannot be taken into account in working out the amount of an entity's deduction for any income year under a provision of this Act (except this Subdivision).
(2) Subsection (1) also applies in working out the net income, or partnership loss, of a partnership under section 90 of the Income Tax Assessment Act 1936 .
387 - 420 How this Subdivision applies to partners and partnerships
Application
(1) This section applies to allocate expenditure to you for the purposes of this Subdivision if you were a partner in a partnership when it incurred capital expenditure during an income year.
Allocation of partnership expenditure to partners
(2) For the purposes of this Subdivision, you are taken to have incurred during that income year:
(a) the amount of the expenditure that the partners agreed you should bear; or
(b) if there was no such agreement--the proportion of the expenditure equal to the proportion of your individual interest in the net income or partnership loss of the partnership for that income year.
This Subdivision does not apply to net income or partnership loss
(3) Disregard this Subdivision when working out the net income or partnership loss of the partnership under section 90 of the Income Tax Assessment Act 1936 .
Subdivision 387 - G -- Forestry roads and timber mill buildings
387-450 What this Subdivision is about
You can deduct your capital expenditure on constructing or acquiring a forestry road or a timber mill building.
The period over which you can deduct depends on how long you estimate the road or building can be used for the main purpose for which you constructed or acquired it.
Table of sections
387 - 455 How this Subdivision applies to pre-1997-98 expenditure
Deductions
387 - 460 What expenditure you can deduct
387 - 465 Meaning of forestry road , timber operation and timber mill building
387 - 470 How much you can deduct for the current year
Limits on deductions
387 - 475 Limits on expenditure on acquiring a road or building
387 - 480 When you cannot deduct
Balancing adjustments
387 - 485 Making a balancing adjustment when an event stops you deducting
387 - 490 Meaning of termination value
387 - 495 Meaning of written down value
Resuming deductions
387 - 500 Resuming deductions after you stop using a road or building
Application of Common rules
387 - 505 Application of Common rules 1, 2 and 3
387 - 455 How this Subdivision applies to pre-1997-98 expenditure
(1) This Subdivision applies to your capital expenditure on a forestry road or a timber mill building, even if you incurred it before the 1997-98 income year.
Note: Sections 387 - 450 to 387 - 507 of the Income Tax (Transitional Provisions) Act 1997 explain how this Subdivision applies if you incurred expenditure before that income year.
(2) In that case, you may have taken the expenditure into account in working out your deductions under Division 10A of Part III of the Income Tax Assessment Act 1936 (which provided for deductions for expenditure on access roads and timber mill buildings for the 1996-97 income year and earlier income years).
(3) If so, you treat any deductions that you made, or could make, under that Division for the 1996-97 income year and earlier income years as if you had made them in those years under this Subdivision.
387 - 460 What expenditure you can deduct
You can deduct an amount for capital expenditure you have incurred:
(a) on a * forestry road, in connection with carrying on a * timber operation for the * purpose of producing assessable income; or
(b) for the construction or acquisition of a * timber mill building.
To work out how much you can deduct, see section 387 - 470.
Note: Various provisions may r educe the amount you can deduct or stop you deducting. For example, see:
387 - 465 Meaning of forestry road , timber operation and timber mill building
(1) A forest ry road is a road constructed primarily and principally for the purpose of providing access to an area to enable:
(a) trees to be planted or tended in the area; or
(b) timber felled in the area to be removed.
For this purpose, a road includes any bridge, culvert or similar work forming part of the road.
(2) A timber operation is:
(a) planting or tending trees for felling; or
(b) felling standing timber; or
(c) removing felled timber; or
(d) milling felled timber or processing it in another way.
(3) A timber mill building is a building:
(a) for use primarily and principally:
(i) in carrying on your * business of milling timber for the * purpose of producing assessable income; or
(ii) as residential accommodation for your employees engaged in connection with the * business, or for their dependants; and
(b) located in a forest, and in or adjacent to the area where timber milled in the business is, or is to be, felled.
387 - 470 How much you can deduct for the current year
Work out the amount you can deduct for the * current year using the formula:
where:
"capital expenditure" is the amount of your capital expenditure.
"previous deductions" is the sum of the amounts that you have deducted or can deduct for income years before the * current year under this Subdivision for your capital expenditure.
"remaining life" is the number of whole years for which you estimate that the road or building will be used after the * current year for the purpose for which it was primarily and principally constructed or acquired. However, if that number is more than 25, remaining life is 25.
Note 1: Section 387 - 475 may limit the amount of expenditure on acquiring a forestry road or timber building that you can count for this purpose.
Note 2: When working out previous deductions, take account of amounts deducted or deductible under section 124F or 124JA of the Income Tax Assessment Act 1936 for the road or building. See section 387 - 472 of the Income Tax (Transitional Provisions) Act 1997 .
387 - 475 Limits on expenditure on acquiring a road or building
(1) If you acquired the road or building from another entity, the Commissioner may limit your capital expenditure for the purposes of section 387 - 470.
(2) Your capital expenditure may be limited to the sum of:
(a) the amount that, if the entity had not disposed of the road or building to you, would have been the difference between the entity's capital expenditure and previous deductions (as those terms are defined in section 387 - 470) at the end of the income year during which the disposal took place; and
(b) any amount included in the entity's assessable income under subsection 387 - 485(3) as a result of a balancing adjustment required by the disposal.
(3) If you incurred capital expenditure acquiring a building that is * plant for which an amount has been deducted or can be deducted for depreciation by any earlier owner or * quasi-owner, your capital expenditure may be limited to the sum of:
(a) the * written down value (as defined in section 42-200, which relates to deductions for depreciation) of the building immediately before it was disposed of by the last entity who had deducted or can deduct an amount for depreciation of it; and
(b) any balancing adjustment included in that entity's assessable income for the building under Subdivision 42 - F (which explains how to make a balancing adjustment for depreciated * plant); and
(c) any balancing adjustment that would have been included in that entity's assessable income if balancing adjustment relief had not applied under section 42 - 285 or 42 - 290 (both of which let you exclude from your assessable income amounts that would be included in that income under the balancing adjustment).
(4) The matters the Commissioner must take into account in deciding whether to limit your capital expenditure include:
(a) whether you acquired the road or building from an * associate; and
(b) the market value of the road or building; and
(c) how the purchase price of the road or building was calculated; and
(d) how your acquisition of the road or building was financed.
387 - 480 When you cannot deduct
When your deductions equal your whole expenditure
(1) You cannot deduct an amount under this Subdivision for the * current year for your expenditure on a * forestry road or a * timber mill building if the sum of the amounts that you have deducted or can deduct under this Subdivision for that expenditure for earlier income years equals that expenditure.
Note: Take account of amounts deducted or deductible under section 124F or 124JA of the Income Tax Assessment Act 1936 for the road or building. See section 387 - 472 of the Income Tax (Transitional Provisions) Act 1997 .
When you have deducted or can deduct amounts otherwise
(2) You cannot deduct an amount under this Subdivision for the * current year for your expenditure on a * forestry road or a * timber mill building if:
(a) you can deduct, or have deducted, an amount for the expenditure under a provision of this Act (other than this Subdivision) for the * current year or an earlier income year; or
(b) the expenditure is being, or was, taken into account in calculating the amount of one of your deductions for the * current year or an earlier income year under a provision of this Act (other than this Subdivision).
Note: Disregard amounts deducted or deductible under section 124F or 124JA of the Income Tax Assessment Act 1936 for the road or building. See section 387 - 472 of the Income Tax (Transitional Provisions) Act 1997 .
When the road or building has been disposed of or destroyed, or is no longer used
(3) You cannot deduct an amount under section 387 - 460 for the * current year for your expenditure on a * forestry road or a * timber mill building if, during the current year or an earlier income year:
(a) you disposed of the road or building; or
(b) the road or building was destroyed; or
(c) for some other reason, you stopped using it for the purpose for which it was primarily and principally constructed or acquired.
Note: Although you cannot deduct an amount under section 387
- 460 if you have stopped using, or disposed of, the road or building or it
has been destroyed, you may be able to deduct an amount because of the
balancing adjustment that you must make in this case. See
section 387 - 485.
387 - 485 Making a balancing adjustment when an event stops you deducting
(1) You must make a balancing adjustment for the * current year if:
(a) you have deducted or can deduct an amount for an earlier income year under this Subdivision for your capital expenditure relating to constructing or acquiring a * forestry road or a * timber mill building; and
(b) one or more of the following events happens during the current year:
(i) you
dispose of the road or building in circumstances in which Subdivision 41-A
(which sets out Common
rule 1 dealing with roll-over relief for related
entities) does not apply;
(ii) the road or building is destroyed;
(iii) for some other reason, you stop using it for the purpose for which it was primarily and principally constructed or acquired.
Note: Take account of amounts deducted or deductible under section 124F or 124JA of the Income Tax Assessment Act 1936 for the road or building. See section 387 - 472 of the Income Tax (Transitional Provisions) Act 1997 .
(2) You make the balancing adjustment by comparing the * termination value of the road or building with its * written down value.
Note: If there has been an
earlier disposal of the road or building covered by Subdivision 41-A (which
sets out Common rule 1 dealing with
roll-over relief for related entities),
the balancing adjustment is modified as described in section 41-20.
(3) If the * termination value exceeds the * written down value, the excess is included in your assessable income for the * current year. However, if the excess is more than the total of the amounts you deducted or can deduct under this Subdivision for earlier income years for your capital expenditure relating to the road or building, that total is included in your assessable income instead.
(4) If the * termination value is less than the * written down value, you can deduct the amount of the difference.
387 - 490 Meaning of termination value
(1) The termination value of a * forestry road or * timber mill building is the value shown in the following table, depending on the circumstances that require you to make a balancing adjustment.
Termination value of a forestry road or timber mill building | ||
Item | For a road or building that ... | the termination value is ... |
1 | you sell for a specific price | the sale price less the expenses reasonably attributable to the sale |
2 | you sell with other property without a specific price being allocated to the road or building | the difference between: ï‚· the part of the total sale price that is reasonably attributable to selling the road or building; and ï‚· the part of the total expens es of the sale that is reasonably attributable to selling the road or building |
3 | you dispose of (except by sale) | the market value of the road or building immediately before disposal |
4 | is destroyed | the amount or value received or receivable under an insurance policy or otherwise in respect of the destruction |
5 | you stop using for the purpose for which it was primarily and principally constructed or acquired (even though it has not been disposed of or destroyed) | the market value of the road or building when you stopped using it |
(2) However, the termination value does not include:
(a) an amount that is included, or when received will be included, in your assessable income for any income year as a lease premium under Division 4 (Leases) of Part III of the Income Tax Assessment Act 1936 ; or
(b) if a net capital gain is or will be included in your assessable income for any income year under Part IIIA (Capital gains and capital losses) of the Income Tax Assessment Act 1936 --the part of the net capital gain that is attributable to a premium on the grant or assignment of a lease.
387 - 495 Meaning of written down value
The written down value of a road or building is:
ï‚· your total capital expenditure of a kind that qualifies for a deduction under this Subdivision in respect of the road or building;
less:
ï‚· the total of the amounts you deducted or can deduct in relation to the road or building under this Subdivision for income years before the * current year.
Note: Take account of amounts deducted or deductible under section 124F or 124JA of the Income Tax Assessment Act 1936 for the road or building. See section 387 - 472 of the Income Tax (Transitional Provisions) Act 1997 .
387 - 500 Resuming deductions after you stop using a road or building
(1) This section explains how this Subdivision applies if:
(a) you incurred capital expenditure relating to a * forestry road or * timber mill building as described in section 387 - 460 (which allows you to deduct for the expenditure); and
(b) for a reason other than the disposal or destruction of the road or building, you stopped using it for the purpose for which it was primarily and principally constructed or acquired; and
(c) you started to use the road or building again for that purpose.
(2) This Subdivision applies as if:
(a) you had incurred a reasonable amount of capital expenditure relating to the road or building when you started to use the road or building again; and
(b) you had not, and could not have, deducted amounts relating to the road or building for income years ending before you started to use it again.
Note: This section allows you to make deductions for the income year during which you started to use the road or building again and for later income years, despite the fact that you stopped using the road or building as described in paragraph (b).
387 - 505 Application of Common rules 1, 2 and 3
(1) Subdivision 41-A (which sets out Common rule 1 dealing with roll-over relief for related entities) applies to a disposal of a * forestry road or * timber mill building in the circumstances set out in section 41-20.
(2) Subdivision 41-B (which sets out Common rule 2 dealing with non-arm's length transactions) applies to transactions involving expenditure on, or disposal of, a * forestry road or * timber mill building.
(3) Subdivision 41-C (which sets out Common rule 3 dealing with anti-avoidance provisions relating to the ownership of property) applies in relation to a * forestry road or * timber mill building in relation to which you can deduct an amount.
[The next Chapter is Chapter 4.]