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9 Capital allowances

Instructions to complete your capital allowances.

Published 30 May 2024

Small business entities

If you are a small business using the simplified depreciation rules continue to 10 Small business entity simplified depreciation.

Depreciating assets first deducted this income year

For all other entities that are not a small business using the simplified depreciation rules, complete the following labels:

A – Intangible depreciating assets first deducted

Write at item 9 – label A the cost of all intangible depreciating assets for which the company is claiming a deduction for decline in value for the first time.

The following intangible assets are regarded as depreciating assets (as long as they are not trading stock):

  • certain items of intellectual property (patents, registered designs, copyrights and licences of these)
  • computer software, or a right to use computer software, that the company acquires, develops or has someone else develop for its use for the purposes for which it is designed (in-house software)
  • mining, quarrying or prospecting rights and information
  • spectrum licences
  • certain indefeasible rights to use telecommunications cable systems (IRUs)
  • certain telecommunications site access rights.

A depreciating asset that the company holds starts to decline in value from the time the company uses it (or installs it ready for use) for any purpose. However, the company can only claim a deduction for the decline in value to the extent it uses the asset for a taxable purpose, such as for producing assessable income.

If the company has allocated any intangible depreciating assets with a cost of less than $1,000 to a low-value pool for the income year, also include the cost of those assets at label A. Don't reduce the cost for estimated non-taxable use.

Expenditure on in-house software which has been allocated to a software development pool is not included at label A.

For more information on decline in value, cost, low-value pools, in-house software and software-development pools, see Guide to depreciating assets 2024.

Consolidated or multiple entry consolidated (MEC) groups

The head company of a consolidated or MEC group must also include the cost of intangible depreciating assets that a subsidiary member would have included at label A if it had not joined the consolidated or MEC group. However, the head company must not include the cost of depreciating assets at label A if the subsidiary member deducted their decline in value before becoming a member of the consolidated or MEC group.

For a company that was a subsidiary member of a consolidated or MEC group for part of the income year and is completing a tax return because of any non-membership periods, write at label A the cost of intangible depreciating assets first deducted during the non-membership periods. However, don't include the cost of depreciating assets where the head company of the consolidated or MEC group deducted its decline in value during any period that the subsidiary was a member of the group, and that period was before the non-membership period in which the subsidiary first deducted the decline in value.

B – Other depreciating assets first deducted

A depreciating asset that the company holds starts to decline in value from the time the company uses it (or installs it ready for use) for any purpose. However, the company can only claim a deduction for the decline in value to the extent it uses the asset for a taxable purpose, such as for producing assessable income.

Write at item 9 – label B the cost of all depreciating assets (other than intangible depreciating assets) for which the company is claiming a deduction for the decline in value for the first time.

If the company has allocated any assets (other than intangible depreciating assets) with a cost of less than $1,000 to a low-value pool for the income year, also include the cost of those assets at label B. Don't reduce the cost for estimated non-taxable use.

For information, see:

Consolidated or MEC groups

The head company of a consolidated or MEC group must also include the cost of depreciating assets that a subsidiary member would have included at label B if it had not joined the consolidated or MEC group. However, the head company must not include the cost of depreciating assets at label B if the subsidiary member deducted its decline in value before becoming a member of the consolidated or MEC group.

For a company that was a subsidiary member of a consolidated or MEC group for part of the income year and is completing a tax return because of any non-membership periods, write at label B the cost of depreciating assets first deducted during the non-membership periods. However, don't include the cost of depreciating assets where the head company of the consolidated or MEC group deducted its decline in value during any period the subsidiary was a member of the group, and that period was before the non-membership period in which the subsidiary first deducted the decline in value.

C – Self-assessment of effective life

For most depreciating assets, you can choose to:

  • work out the effective life yourself (self-assess), or
  • use an effective life determined by the Commissioner.

If you have adopted the Commissioner’s effective life determination for all your depreciating assets, print X in the No box at item 9 – label C.

If you have self-assessed the effective life of any of your depreciating assets, print X in the Yes box at label C.

For all depreciating assets

Complete the following labels:

D – Recalculation of effective life

You may recalculate the effective life of assets in certain circumstances if the effective life you have been using is no longer accurate. There are also circumstances where you must recalculate the effective life of a depreciating asset.

If you have not recalculated the effective life of any of your depreciating assets in this income year, print X in the No box at label D.

If you have recalculated the effective life of any of your depreciating assets this income year, print X in the Yes box at label D.

E – Total adjustable values at end of income year

Write at item 9 – label E the total of the adjustable values of your depreciating assets as at the end of the income year. This is the value of all assets costs (first and second elements) less any decline in value up to that time, or the closing value of all assets.

If the company has allocated any assets with a cost of less than $1,000 to a low-value pool for the income year, don't include the adjustable values of those assets at label E.

F – Assessable balancing adjustments on the disposal of intangible depreciating assets

Write at item 9 – label F the total assessable income you have from balancing adjustment events where you ceased to hold intangible depreciating assets this income year (this type of assessable income may arise if, for example, you disposed of an intangible depreciating asset for more than its adjustable value). If you don't have any assessable balancing adjustment amounts for intangible assets this year, leave label F blank.

If the company has allocated any assets with a cost of less than $1,000 to a low-value pool for the income year, don't include the assessable balancing adjustments for these assets at label F.

G – Deductible balancing adjustments on the disposal of intangible depreciating assets

Write at item 9 – label G the total deductible amount you have from balancing adjustment events where you ceased to hold intangible depreciating assets this income year (this type of deduction may arise if, for example, you disposed of an intangible depreciating asset for less than its adjustable value). If you don't have any deductible balancing adjustment amounts for intangible assets this year, leave label G blank.

If the company has allocated any assets with a cost of less than $1,000 to a low-value pool for the income year, don't include the assessable balancing adjustments for these assets at label G.

H – Termination value of intangible depreciating assets

Write at item 9 – label H the termination value of each balancing adjustment event occurring for intangible depreciating assets to which the uniform capital allowances (UCA) rules in Division 40 of the ITAA 1997 apply, including assets allocated to a low-value pool.

Don't write at label H any termination value for in-house software for which the company has allocated expenditure to a software development pool.

A balancing adjustment event occurs if the company stops holding or using a depreciating asset or decides not to use it in the future, for example, assets were sold, lost or destroyed.

A balancing adjustment event may occur if the company has claimed temporary full expensing for an asset, on either the cost of acquisition or improvements in a prior year. If so, the company will need to calculate a balancing adjustment amount.

Any non-taxable use of an asset in an income year after the year in which temporary full expensing has been claimed will not reduce balancing adjustment amounts for balancing adjustment events happening after the claim year.

Generally, the termination value is the amount the company received or is deemed to have received for the balancing adjustment event. It also includes the market value of any non-cash benefits, such as goods and services that the company receives for the asset.

For more information on balancing adjustment events, termination value, in-house software and software development pools, see Guide to depreciating assets 2024.

A special balancing adjustment event will also occur in an income year after the year in which temporary full expensing has been claimed when it is no longer reasonable to conclude that:

  • the company will use the depreciating asset principally in Australia for the principal purpose of carrying on a business; or
  • the depreciating asset will never be located in Australia.

This special balancing adjustment event is not triggered with respect to companies using the simplified depreciation rules, other than for those depreciating assets that are excluded from the simplified depreciation rules. For those other depreciating assets, the event may still be triggered if temporary full expensing has been claimed with respect to that asset.

If this special balancing adjustment event is triggered:

  • the company is treated as though it had ceased to hold the asset and the termination value of the asset will be equal to its market value at that time, resulting in the temporary full expensing deduction being clawed back to the extent of the assets then market value; and
  • the first element of cost is modified so that the first element of cost of the asset is the asset’s termination value at the time of the event, such that though the company may not thereafter work out the decline in value for that asset using temporary full expensing, the company might, in a later income year, be entitled to claim other capital allowances it is entitled to for that asset (for example, under the general capital allowances rules for the proportion of business use). The company may not claim a deduction for the asset under the general capital allowance rules in the same year as the special balancing adjustment event.

For information on record keeping, see Record keeping for capital expenses.

I – Termination value of other depreciating assets

Write at item 9 – label I the termination value of each balancing adjustment event occurring for depreciating assets, including assets allocated to a low-value pool.

Don't include at label I any termination value for:

  • assets allocated in a prior year to a general small business pool
  • intangible depreciating assets
  • buildings or structures for which a deduction is available under the capital works provisions
  • assets used in R&D activities that are subject to the R&D tax incentive
  • assets falling within the provisions relating to investments in Australian films.

A balancing adjustment event occurs if the company stops holding or using a depreciating asset or decides not to use it in the future, for example, assets were sold, lost or destroyed.

A balancing adjustment event may occur if the company has claimed temporary full expensing for an asset, on either the cost of acquisition or improvements in a prior year. If so, the company will need to calculate a balancing adjustment amount.

Any non-taxable use of an asset in an income year after the year in which temporary full expensing has been claimed will not reduce balancing adjustment amounts for balancing adjustment events happening after the claim year.

Generally, the termination value is the amount the company received or is deemed to have received for the balancing adjustment event. It also includes the market value of any non-cash benefits, such as goods and services that the company received for the asset.

A special balancing adjustment event will also occur in an income year after the year in which temporary full expensing has been claimed when it is no longer reasonable to conclude that either:

  • the company will use the depreciating asset principally in Australia for the principal purpose of carrying on a business
  • the depreciating asset will never be located in Australia.

This special balancing adjustment event is not triggered with respect to companies using the simplified depreciation rules, other than for those depreciating assets that are excluded from the simplified depreciation rules. For those other depreciating assets, the event may still be triggered if temporary full expensing has been claimed with respect to that asset.

If this special balancing adjustment event is triggered:

  • the company is treated as though it had ceased to hold the asset and the termination value of the asset will be equal to its market value at that time, resulting in the temporary full expensing deduction being clawed back to the extent of the assets then market value
  • the first element of cost is modified so that the first element of cost of the asset is the asset’s termination value at the time of the event, such that though the company may not thereafter work out the decline in value for that asset using temporary full expensing, the company might, in a later income year, be entitled to claim other capital allowances it is entitled to for that asset (for example, under the general capital allowances rules for the proportion of business use). The company may not claim a deduction for the asset under the general capital allowance rules in the same year as the special balancing adjustment event.

For more information on balancing adjustment events and termination value, see the Guide to depreciating assets 2024.

N – Subsequent year accelerated depreciation deductions for assets using backing business investment

If you are an entity that used the Backing business investment – accelerated depreciation in a previous year for one or more assets, write at item 9 – label N the amount of depreciation you are claiming in 2023–24 for these assets.

For entities connected with mining operations, exploration or prospecting

Complete in this section, labels J, K and L.

Write at item 9 – label J the total of any amounts you have allocated to a project pool for mining capital expenditure or transport capital expenditure incurred this income year. If you have not allocated any such amounts to a project pool, leave label J blank.

For information on project amount and how to work out your deductions, see the Guide to depreciating assets 2024.

Item 9 – labels K and L require information on your deductions for the decline in value of depreciating assets used in exploration or prospecting. This includes deductions claimed for the cost of depreciating assets used in exploration or prospecting. If you did not claim any deductions for depreciating assets used in exploration or prospecting, you don't need to complete these items.

Write at item 9 – label K the total of your deductions for decline in value of intangible depreciating assets used in exploration or prospecting.

Write at item 9 – label L the total of your deductions for decline in value of other depreciating assets used in exploration or prospecting.

Continue to: 10 Small business entity simplified depreciation

Return to: Instructions to complete the Company tax return 2024

 

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