Income Tax (Transitional Provisions) Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-10 - CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE  

Division 40 - Capital allowances  

Subdivision 40-B - Core provisions  

SECTION 40-35   Mining unrecouped expenditure  

40-35(1)    
This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001.

Note:

Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8).

40-35(2)    
Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset ) you hold on this basis:

(a) it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330-80 of the former Act for your income year ending on 30 June 2001; and

(b) it has a cost equal to the total amount of allowable capital expenditure under the former Act; and

(c) in applying the formula in section 40-75 of the new Act for the income year in which 1 July 2001 occurs - you use the adjustments in subsection 40-75(3) of the new Act; and

(d) it is taken to have been used for a taxable purpose at the start of 1 July 2001; and

(e) it has a remaining effective life worked out under subsection (3); and

(f) you must use the prime cost method.

Note:

There are special rules for entities that have substituted accounting periods: see section 40-65 .

40-35(3)    
The remaining effective life of the notional asset at the start of an income year ( present income year ) for which you are working out its decline in value is:

(a) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these:

(i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible;

(ii) the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or

(b) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these:

(i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible;

(ii) the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or

(c) for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these:

(i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and

(ii) the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year.

40-35(4)    
Sections 40-95 and 40-110 of the new Act do not apply to the unrecouped expenditure.

40-35(5)    
If either:

(a) both of these subparagraphs apply:

(i) any of the unrecouped expenditure referred to in subsection (1) relates to a depreciating asset (the real asset );

(ii) in an income year (the cessation year ) you stop holding the real asset, or stop using it for a taxable purpose; or

(b) both of these subparagraphs apply:

(i) any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property );

(ii) in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;

there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset ' s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.

40-35(6)    
If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:

(a) if the other property is sold for a price specific to that property - that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or

(b) if the other property is sold with additional property without a specific price being allocated to it - the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or

(c) if the other property is lost or destroyed - the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or

(d) if you own the other property and you stop using it for a taxable purpose - its market value at that time; or

(e) if you do not own the property and you stop using it for a taxable purpose - a reasonable amount.

However, the amount included is reduced to the extent (if any) that it is also included under subsection 40-830(6) of the new Act.

40-35(7)    

If section 40-115 of the new Act applies, or section 40-125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then:

(a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split - subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or

(b) if the real asset is merged into another depreciating asset - section 40-125 does not apply to the asset into which it is merged while you continue to hold it.

40-35(8)    

Subsection (6) also applies to a case where:

(a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and

(b) that expenditure relates to property that is not a depreciating asset (the other property ); and

(c) after that day, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose.