Record keeping for capital expenses

This page outlines the record-keeping requirements for uniform capital allowances (UCA) for:

• general depreciating assets
• low-value pools
• rollover relief.

See also:

• Guide to depreciating assets 2019 – for more information about record keeping and explanations of the technical terms used on this page

Record keeping for general depreciating assets

You must keep the following information for a depreciating asset:

• the first and second elements of cost
• the opening adjustable value for the income year
• any adjustments made to cost or adjustable value
• the date you started holding the asset and its start time
• the rate or effective life used to work out the decline in value
• the method used to work out the decline in value
• the amount of your deduction for the decline in value and any reduction for use of the asset for a non-taxable purpose
• the adjustable value at the end of the income year
• any recoupment of cost you have included in assessable income
• if a balancing adjustment event occurs for the asset during the year
  • the date of the balancing adjustment event
  • termination value
  • adjustable value at that time
  • the balancing adjustment amount
  • any reduction of the balancing adjustment amount
  • details of any rollover or balancing adjustment relief.
   

You must also keep:

• details of how you worked out the effective life of a depreciating asset where you have not adopted the effective life determined by the Commissioner of Taxation
• if you have recalculated the effective life of an asset
  • the date of the recalculation
  • the recalculated effective life
  • the reason for the recalculation
  • details of how you worked out the recalculated effective life
   
• original documents such as suppliers’ invoices and receipts for expenditure on the depreciating asset.

Note: Additional record-keeping requirements apply if you acquire an asset from an associate, or if you acquire a depreciating asset and the user is the same or is an associate of the former user.

Record keeping for low-value pools

For depreciating assets in a low-value pool, you need to keep the following details (some details relate to the assets and some to the pool):

• the start time of assets in the pool and the date you started holding them
• the closing pool balance at the end of the previous income year
• any second elements of cost incurred for the income year for assets in the pool at the end of the previous income year
• the opening adjustable value of any low-value assets you have allocated to the pool for the income year
• the first element of cost of any low-cost assets allocated to the pool for the income year
• the second element of cost of low-cost assets and low-value assets allocated to the pool for the income year
• the taxable use percentage of each amount added to the pool for the income year
• the termination value and taxable use percentage for any assets in the pool in respect of which a balancing adjustment event occurred during the income year and the date of the balancing adjustment event
• the closing pool balance
• the decline in value
• any amount included in assessable income because the taxable use percentage of the termination value exceeds the closing pool balance, and any recoupment of cost you have included in assessable income.

A capital gain or capital loss may arise when a balancing adjustment event occurs either:

• for a depreciating asset which you expect to use for a non-taxable purpose
• for a depreciating asset which you have allocated to a low-value pool and expect to use for a non-taxable purpose.

If either of the above occurs, you must keep the following information:

• the first and second elements of cost
• the termination value and taxable use percentage.

When to start keeping records

Generally, records relating to a depreciating asset allocated to a low-value pool must be kept for five years, starting from the end of the income year in which the asset is allocated to the pool.

There are two exceptions:

• If an amount is included in the second element of an asset’s cost after the asset is allocated to a low-value pool, the records of the cost must be kept for five years from the time the expenditure is incurred.
• Records of acquisitions relating to delayed claims for GST input tax credits must be kept for at least five years after lodgment. Therefore, if a claim for input tax credits relates to a depreciating asset in a low-value pool, the record of acquisition may need to be kept for five years which begins later than the end of the income year in which the asset is allocated to the pool.

Record keeping for rollover relief

If automatic rollover relief applies, the transferor must give the transferee a notice containing enough information for the transferee to work out how the UCA rules apply to the transferee’s holding of the depreciating asset. Generally, this needs to be done within six months after the end of the transferee’s income year in which the balancing adjustment event occurred.

The transferee must keep a copy of the notice for five years after the asset is:

• disposed of
• lost or destroyed (whichever happens earlier).

If a transferor and transferee jointly choose rollover relief, the decision must be in writing and must contain enough information for the transferee to work out how the UCA rules apply to the transferee’s holding of the depreciating asset. Generally, the choice needs to be made within six months after the end of the transferee’s income year in which the balancing adjustment event occurred.

The transferor must keep a copy of the agreement for five years after the balancing adjustment event occurred. The transferee must keep a copy for five years after the next balancing adjustment event that occurs for the asset.

This page outlines ATO record-keeping requirements for uniform capital allowances (UCA) for general depreciating assets, low value pools and rollover relief.