48 Capital allowances

Small business entities

Broadly, a small business entity is a business with an aggregated turnover of less than $2 million.

Do not include information about depreciating assets that are subject to the small business entity simplified depreciation rules at item 48. Small business entities using the small business entity simplified depreciation rules should include relevant amounts at item 49 Small business entity simplified depreciation. See Concessions for small business entities (NAT 71874) for information about these rules.

Depreciating assets first deducted in this income year

Intangible depreciating assets first deducted

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

• certain items of intellectual property, such as patents, registered designs, copyrights and certain types of licences
• computer software, or a right to use computer software, that the partnership acquires, develops or has someone else develop for its own use (that is, in-house software)
• mining, quarrying or prospecting rights and information
• spectrum licences
• datacasting transmitter licences
• certain indefeasible rights to use telecommunications cable systems (IRUs)
• some access rights to telecommunications sites.

A depreciating asset that the trust holds starts to decline in value from the time the trust uses it (or installs it ready for use) for any purpose, including a private purpose. However, the trust 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.

Show at A the cost of all intangible depreciating assets for which the trust is claiming a deduction for decline in value for the first time. If the trust has allocated any intangible depreciating assets with a cost of less than $1,000 to a low-value pool for the income year, include the cost of those assets at A. Do not reduce the cost for estimated non-taxable use.

Do not include expenditure on in-house software which has been allocated to a software development pool at A.

Other depreciating assets first deducted

A depreciating asset the trust holds starts to decline in value from the time the trust uses it (or installs it ready for use) for any purpose. However, the trust 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.

Show at B the cost of all depreciating assets (other than intangible depreciating assets) for which the trust is claiming a deduction for the decline in value for the first time. If any assets (other than intangible depreciating assets) costing less than $1,000 have been allocated to a low-value pool for the income year, also include the cost of those assets at B. Do not reduce the cost for any estimated non-taxable use.

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 C.

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

For all depreciating assets

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 D.

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

Total adjustable values at end of income year

At E, write the total of the adjustable values of your depreciating assets as at the end of the income year.

If the trust has allocated any assets with a cost of less than $1,000 to a low-value pool, do not include the adjustable values of those assets at E Total adjustable values at end of income year.

Assessable balancing adjustments on the disposal of intangible depreciating assets

At F, write the total assessable income you have from balancing adjustment events on the disposal of intangible depreciating assets that occurred 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 do not have any assessable balancing adjustment amounts for intangible assets this year, leave this label blank.

If the trust has allocated any assets with a cost of less than $1,000 to a low-value pool, do not include the assessable balancing adjustments for these assets at F Assessable balancing adjustments on the disposal of intangible depreciating assets.

Deductible balancing adjustments on the disposal of intangible depreciating assets

At G, write the total deductible amount you have from balancing adjustment events on the disposal of intangible depreciating assets that occurred 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 do not have any deductible balancing adjustment amounts for intangible assets this year, leave this label blank.

If the trust has allocated any assets with a cost of less than $1,000 to a low-value pool, do not include the assessable balancing adjustments for these assets at G Deductible balancing adjustments on the disposal of intangible depreciating assets.

Termination value of intangible depreciating assets

Show at H the termination value of each balancing adjustment event occurring for intangible depreciating assets to which the uniform capital allowances rules applied, including assets allocated to a low-value pool.

Do not show at H any consideration received during the income year for in-house software for which the trust has allocated expenditure to a software- development pool.

A balancing adjustment event occurs if the trust stops holding or using a depreciating asset or decides not to use it in the future, for example, assets sold, lost or destroyed. Generally, the termination value is the amount the trust receives or is deemed to receive for the balancing adjustment event. It includes the market value of any non-cash benefits, such as goods and services the trust receives for the asset.

Termination value of other depreciating assets

Show at I the termination value of each balancing adjustment event occurring for depreciating assets, including assets allocated to a low-value pool.

Do not show at I any consideration received during the income year for:

• depreciating assets allocated in a prior year to the general small business pool
• intangible depreciating assets
• buildings or structures for which a deduction is available under the capital works provisions
• assets used in research and development (R&D) activities, or
• assets falling within the provisions relating to investments in Australian films.

A balancing adjustment event occurs if the trust stops holding or using a depreciating asset or decides not to use it in the future, for example, assets sold, lost or destroyed. Generally, the termination value is the amount the trust receives or is deemed to receive for the balancing adjustment event. It includes the market value of any non-cash benefits, such as goods and services the trust receives for the asset.

Deduction for project pools

Show at J the trust’s deductions for project pools. For more information, see appendix 6.

Section 40-880 deduction

Show at K the total of the trust’s deductions allowable under section 40-880 of the ITAA 1997. For more information, see Appendix 6.

Landcare operations and deduction for decline in value of water facility

Show at L the deduction available to the trust for landcare operations and for the decline in value of water facilities, for more information see appendix 6.