Taxation Laws Amendment Act (No. 1) 1999 (16 of 1999)
Schedule 10 Depreciation
Income Tax Assessment Act 1936
2 After section 61
Insert:
61A Tax exempt entities that become taxable
Entities to which section applies
(1) If:
(a) at a particular time, all of the income of a taxpayer is wholly exempt from income tax; and
(b) immediately after that time, the taxpayer's income becomes to any extent assessable income;
then:
(c) the taxpayer is a transition taxpayer ; and
(d) the time when the taxpayer's income becomes to that extent assessable is the transition time ; and
(e) the year of income in which the transition time occurs is the transition year for the taxpayer.
Deduction for depreciation
(2) A deduction allowable to the transition taxpayer for any period after the transition time for depreciation under this Subdivision in respect of a unit of property that was owned by the transition taxpayer at the transition time is to be worked out in accordance with subsections (3) to (9).
Ownership of unit
(3) If the unit was acquired by the transition taxpayer from an exempt government entity:
(a) assume that the transition taxpayer acquired the unit at the time when it was acquired or constructed by the entity; or
(b) where the unit had, before its acquisition by the transition taxpayer, been successively owned by 2 or more exempt government entities - assume that the transition taxpayer acquired the unit at the time when it was acquired or constructed by the first of those entities that owned the unit.
Cost of the unit
(4) If the unit was acquired by the transition taxpayer from an exempt government entity, assume that the cost of the unit to the transition taxpayer is:
(a) subject to paragraph (b) - the amount that was the cost of the unit to the other entity; or
(b) where the unit had, before its acquisition by the transition taxpayer, been successively owned by 2 or more exempt government entities - the amount that was the cost of the unit to the first of those entities that owned the unit.
Effective life of unit
(5) Assume that the effective life of the unit is the period that would have been calculated to be its effective life at the time:
(a) if subsection (3) does not apply - when the unit was acquired or constructed by the transition taxpayer; or
(b) if subsection (3) applies - when the unit is assumed under that subsection to have been acquired by the transition taxpayer.
Elections under section 54A
(6) For the purpose of calculating the assumed effective life of the unit under subsection (5), if the transition taxpayer could have made an election under subsection 54A(1) at a particular time during the period for which the transition taxpayer owned, or is to be assumed to have owned, the unit, assume that the transition taxpayer made the election at that time.
Use of unit for producing assessable income
(7) Assume that the unit had, at all times during the period beginning when it was acquired or constructed, or is assumed to have been acquired, by the transition taxpayer and ending immediately before the transition time, been used wholly for the purpose of producing assessable income by the transition taxpayer, and assume that deductions for depreciation in respect of the unit had been allowed to the transition taxpayer during that period.
Method of depreciation
(8) Assume that the method of depreciation selected by the transition taxpayer in relation to the unit in:
(a) the transition year; or
(b) if the transition taxpayer does not claim depreciation for the transition year - the first year of income after the transition year in which the transition taxpayer claims depreciation;
was also used in each year of income before the transition year by the transition taxpayer.
Application of other sections in calculating depreciation rates
(9) In calculating the rate of depreciation in relation to the unit in each year of income before the transition year:
(a) if section 57AG of this Act as in force at any time before its repeal had applied in respect of that year of income - that section is to be taken into account; and
(b) if section 57AL of this Act as in force at any time before its repeal had applied in respect of that year of income - that section is to be disregarded.
Balancing adjustments on disposal
(10) If the transition taxpayer disposes of a unit of property that was owned by the transition taxpayer at the transition time, subsections (11) and (12) apply but subsections 59(1) and (2) do not apply.
Including an amount in assessable income
(11) If the consideration receivable in respect of the disposal exceeds the unit's depreciated value, the transition taxpayer's assessable income is to include the lesser of:
(a) the sum of the amounts that have been allowed or are allowable as deductions for depreciation of the unit; and
(b) the amount by which that consideration exceeds the unit's depreciated value.
Deducting an amount
(12) If the consideration receivable in respect of the disposal is less than the unit's notional depreciated value, an amount worked out by using the following formula is an allowable deduction to the transition taxpayer:
Difference * [Actual deductions/(Actual deductions + Notional deductions)]
where:
actual deductions means the sum of the amounts that have been allowed or are allowable to the transition taxpayer as deductions for depreciation of the unit.
difference means the difference between the consideration receivable in respect of the disposal of the unit and the unit's notional depreciated value.
notional deductions means the sum of:
(a) the amounts in respect of which deductions for depreciation are assumed under subsection (7) to have been allowed to the transition taxpayer in respect of the unit; and
Note: Subsections (3) to (6), (8) and (9) have effect for the purpose of determining the amounts referred to in paragraph (a) (for example, section 57AG as previously in force at any time is to be taken into account in calculating the rate of depreciation at that time).
(b) if there was any period after the transition time in which the unit was used, or installed ready for use, but was not used wholly for the purpose of producing assessable income - the further amounts in respect of which deductions for depreciation could have been allowed to the transition taxpayer in respect of the unit if it had been used wholly for the purpose of producing assessable income during that period.
Note: If neither subsection (11) nor (12) applies in respect of the unit, no amount is to be included in the transition taxpayer's assessable income, and no deduction is allowable to the transition taxpayer, as a result of the disposal.
Definitions
(13) In this section:
consideration receivable in respect of the disposal of a unit of property has the same meaning as in section 59.
depreciated value of a unit of property is:
(a) if the unit was acquired by the transition taxpayer from a person other than an exempt government entity or was constructed by the transition taxpayer - its cost to the transition taxpayer; or
(b) if the unit was acquired by the transition taxpayer from an exempt government entity - the amount assumed under subsection (4) to be its cost to the transition taxpayer;
less the sum of the amounts in respect of which deductions for depreciation have been allowed or are allowable to the transition taxpayer in respect of the unit.
exempt government entity means:
(a) the Commonwealth, a State or a Territory; or
(b) an STB, within the meaning of Division 1AB, that is exempt from tax under that Division; or
(c) any municipal corporation or other local governing body, or any public authority, to which paragraph 23(d) applies.
method of depreciation means the way of working out the depreciation allowable under this Act in respect of a unit of property set out in paragraph 56(1)(a) or (b).
notional depreciated value of a unit of property is:
(a) if the unit was acquired by the transition taxpayer from a person other than an exempt government entity or was constructed by the transition taxpayer - its cost to the transition taxpayer; or
(b) if the unit was acquired by the transition taxpayer from an exempt government entity - the amount assumed under subsection (4) to be its cost to the transition taxpayer;
less the sum of:
(c) the amounts in respect of which deductions for depreciation are assumed under subsection (7) to have been allowed to the transition taxpayer in respect of the unit; and
Note: Subsections (3) to (6), (8) and (9) have effect for the purpose of determining the amounts referred to in paragraph (c) (for example, section 57AG as previously in force at any time is to be taken into account in calculating the rate of depreciation at that time).
(d) the amounts in respect of which deductions for depreciation have been allowed or are allowable to the transition taxpayer in respect of the unit; and
(e) if there was any period after the transition time in which the unit was used, or installed ready for use, but was not used wholly for the purpose of producing assessable income - the further amounts in respect of which deductions for depreciation could have been allowed to the transition taxpayer in respect of the unit if it had been used wholly for the purpose of producing assessable income during that period.