(relevant to Australian owned R&D only)
Notes on balancing adjustments
If a balancing adjustment event (within the meaning of section 40-295 of the ITAA 1997) occurs in relation to a 73BA depreciating asset, you may be entitled to a deduction under section 73BF of the ITAA 1936 (for a balancing loss) or required under that section to include an amount in your assessable income (a balancing profit). Generally, where an asset's termination value (worked out under section 40-300 of the ITAA 1997) is more than its adjustable value (worked out under section 40-85 of the ITAA 1997) just before a balancing adjustment event, an amount is included in your assessable income (balancing profit) under section 40-292 of the ITAA 1997. Where an asset's termination value is less than its adjustable value immediately before a balancing adjustment event, you can deduct an amount for the income year in accordance with that section (balancing loss).
If the section 73BA depreciating asset has never attracted deductions under Divisions 42 or 40 of the ITAA 1997, calculate the balancing adjustment under section 73BF. For section 73BA depreciating assets that have attracted such deductions, calculate the balancing adjustment under section 40-292 of the ITAA 1997.
Enter the amount of this balancing adjustment at item 10 for a loss or at item 11 for a profit (negative).
Before starting item 11 see the Guide to depreciating assets and the Guide to the R&D tax concession.
End of further informationIf the company is required by section 40-292 of the ITAA 1997 to include an amount in its assessable income following a balancing adjustment event (such as disposal), include at item 11 the part of the balancing adjustment amount that relates to the use of the asset for the purpose of the carrying on of Australian owned R&D. The part of the balancing adjustment amount assessable at the rate of 125% is worked out using the formula in subsection 40-292(4) of the ITAA 1997. The remaining part of the balancing adjustment amount that relates to the use of the asset for the purpose of carrying on Australian owned R&D is assessable at the rate of 100%. Any assessable amount relating to use of the asset for another taxable purpose is not shown on the Research and development tax concession schedule.
If the company is required by section 73BF of the ITAA 1936 to include an amount in its assessable income following a balancing adjustment event, include at item 11 the amount of the balancing adjustment. The part of the balancing adjustment amount assessable at the rate of 125% is worked out under the formula in subsection 73BF(3) of the ITAA 1936. The remaining part is assessable at the rate of 100%.
At P enter the amount of any balancing adjustment (assessable amount) (the base amount).
At Q enter the amount of any balancing adjustment (assessable amount) assessable at 100%.
At R enter the amount of any balancing adjustment (assessable income) amounts assessable at 125%.
The total of the amounts at Q and R must equal the base amount at P otherwise, a warning message 'Your claim does not balance' will display in the Excel spreadsheet.
End of attentionMore information
For more information, see:
- section 40-292 of the ITAA 1997
- section 73BF of the ITAA 1936
- Guide to the R&D tax concession
- Guide to depreciating assets.