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 40-65   Substituted accounting periods  

40-65(1)    
This section sets out special rules for the application of Division 40 of the new Act to an entity that:

(a) has a substituted accounting period; and

(b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset.

40-65(2)    
The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year ) in this way:

(a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and

(b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section.

40-65(3)    
The asset's opening adjustable value for the purposes of Division 40 of the new Act is:

(a) for a unit of plant (including IRUs and expenditure on software that is not pooled) - its undeducted cost at the end of 30 June 2001; or

(b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence - the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or

(c) for transport capital expenditure - the entity's amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or

(d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine - the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or

(e) for expenditure on evaluating the impact on the environment of a project - the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or

(f) for assets that were pooled under Subdivision 42-M or 42-L of the former Act - the closing balance of the pool at the end of 30 June 2001.

40-65(4)    
The asset's base value for applying the formula in section 40-70 of the new Act for the diminishing value method is that opening adjustable value.

40-65(5)    
The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40-75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way:

(a) for an item of plant for which you were using the prime cost method - using the rules in section 40-10 of this Act; and

(b) for an IRU for which you were using the prime cost method - using the rules in section 40-20 of this Act; and

(c) for a unit of software for which the entity was deducting amounts under Subdivision 46-B of the former Act - using the rules in subsection 40-25(2) of this Act; and

(d) for a spectrum licence - using the rules in section 40-30 of this Act; and

(e) for an item of intellectual property - using the rules in section 40-45 of this Act; and

(f) for an amount of expenditure on evaluating the impact on the environment of a project - using the rules in section 40-55 of this Act.

40-65(6)    
The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40-75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way:

(a) for an amount of unrecouped expenditure under Division 330 of the former Act - using the rules in section 40-35 of this Act; and

(b) for an amount of transport capital expenditure under Division 330 of the former Act - using the rules in section 40-40 of this Act; and

(c) for a forestry road or timber mill building - using the rules in section 40-50 of this Act.

40-65(7)    
The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act.

40-65(8)    
The entity must, in working out its deductions under this section for the calculation year for:

(a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330-C of the former Act; or

(b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330-H of the former Act; or

(c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387-B of the former Act; or

(d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387-E of the former Act; or

(e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387-E of the former Act;

reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365.

40-65(9)    
The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001.

40-65(10)    
You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount ) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount ).

40-65(11)    
You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount.