INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 10D - Deductions for capital expenditure on certain buildings and structural improvements  

SECTION 124ZH   DEDUCTIONS IN RESPECT OF QUALIFYING EXPENDITURE  

124ZH(1)   [Amount of deduction - building owned full year]  

Subject to this section and section 124ZJ , where:

(a) there is an amount of pre-27 February 1992 qualifying expenditure in respect of a building; and

(b) during the whole of a year of income, a taxpayer:

(i) was the owner of the prescribed part and dealt with the prescribed part in the prescribed manner; or

(ii) was the owner of a part of the prescribed part and dealt with that part of the prescribed part in the prescribed manner,

the taxpayer is entitled to a deduction, in his assessment in respect of income of that year of income, of an amount equal to:

(c) in a case to which subparagraph (b)(i) applies:

(i) where the building, or the extension, alteration or improvement, in respect of the construction of which the qualifying expenditure was incurred:

(A) commenced to be constructed after 21 August 1984 and on or before 15 September 1987; or

(B) commenced to be constructed after 15 September 1987 under a qualifying previous commitment;

4% of the qualifying expenditure; and

(ii) in any other case - 2 ½ % of the qualifying expenditure; and

(d) in a case to which subparagraph (b)(ii) applies - so much of the amount calculated in accordance with paragraph (c) as the Commissioner determines, having regard to the extent to which the amount of qualifying expenditure is attributable to the part of the prescribed part referred to in that subparagraph.

124ZH(2)   [Amount of deduction - building owned part year]  

Subject to this section and section 124ZJ , where:

(a) there is an amount of pre-27 February 1992 qualifying expenditure in respect of a building; and

(b) during a part only of a year of income, a taxpayer:

(i) was the owner of the prescribed part and dealt with the prescribed part in the prescribed manner; or

(ii) was the owner of a part of the prescribed part and dealt with that part of the prescribed part in the prescribed manner,

the taxpayer is entitled to a deduction, in his assessment in respect of income of that year of income, of an amount equal to:

(c) in a case to which subparagraph (b)(i) applies:

(i) where the building, or the extension, alteration or improvement, in respect of the construction of which the qualifying expenditure was incurred:

(A) commenced to be constructed after 21 August 1984 and on or before 15 September 1987; or

(B) commenced to be constructed after 15 September 1987 under a qualifying previous commitment;

4%; and

(ii) in any other case - 2 ½ %;

of so much of that amount of qualifying expenditure as bears to that amount the same proportion as the number of whole days in that part of the year of income bears to the number of days in the year of income; and

(d) in a case to which subparagraph (b)(ii) applies - so much of the amount calculated in accordance with paragraph (c) as the Commissioner determines, having regard to the extent to which the amount of qualifying expenditure is attributable to the part of the prescribed part referred to in that subparagraph.

124ZH(2A)   [Post-26 February 1992 qualifying expenditure]  

Subject to this section and section 124ZJ , if:

(a) there is an amount of post-26 February 1992 qualifying expenditure in respect of a building; and

(b) during a period in a year of income, a taxpayer:

(i) was the owner of the prescribed part and dealt with any part of the prescribed part in the prescribed manner; or

(ii) was the owner of a part of the prescribed part and dealt with any part of that part of the prescribed part in the prescribed manner;

a deduction is allowable to the taxpayer for the year of income equal to the amount worked out by:

(c) calculating, for each day (if any) in that period during the whole of which any part ( 4% part ) of the prescribed part owned by the taxpayer was dealt with by the taxpayer in an eligible industrial manner, the amount worked out using the formula:

Portion of qualifying expenditure Days in year

×

0.04

where:

Portion of qualifying expenditure means so much of the qualifying expenditure as is attributable to the 4% part;

Days in year means the number of days in the year of income; and

(d) calculating, for each day (if any) in that period during any part of which any part ( 2.5% part ) of the prescribed part owned by the taxpayer was not dealt with by the taxpayer in an eligible industrial manner but was dealt with by the taxpayer in the prescribed manner, the amount worked out using the formula:

Portion of qualifying expenditure Days in year

×

0.025

where:

Portion of qualifying expenditure means so much of the qualifying expenditure as is attributable to the 2.5% part;

Days in year means the number of days in the year of income; and

(e) adding the amounts calculated under paragraphs (c) and (d).

124ZH(3)   [Time limits for deductions]  

For the purposes of determining the amount of a deduction allowable to a taxpayer under subsection (1) or (2) in respect of an amount of qualifying expenditure in respect of an eligible building, the taxpayer shall be taken not to have dealt with any part of the prescribed part in the prescribed manner at any time after the expiration of the period of:

(a) where the building, or the extension, alteration or improvement, in respect of the construction of which the qualifying expenditure was incurred:

(i) commenced to be constructed after 21 August 1984 and on or before 15 September 1987; or

(ii) commenced to be constructed after 15 September 1987 under a qualifying previous commitment;

25 years; and

(b) in any other case - 40 years;

commencing on the day on which the prescribed part was first used by any person for any purpose after completion of the relevant construction.

124ZH(3A)   [Limit on deductions]  

A deduction allowable to a taxpayer under subsection (2A) in relation to a year of income in respect of so much of an amount of qualifying expenditure as is attributable to the prescribed part, or the part of the prescribed part, mentioned in paragraph (2A)(b), must not exceed so much of the residual capital expenditure at whichever of the following times is applicable:

(a) if the taxpayer's ownership of the prescribed part, or the part of the prescribed part, as the case may be, commenced during the year of income - immediately after the time when that ownership commenced; or

(b) in any other case - the beginning of the year of income;

in relation to the amount of the qualifying expenditure as is attributable to the prescribed part, or the part of the prescribed part, as the case requires.

124ZH(4)   [Qualifying previous commitment]  

For the purposes of this section, the construction of a building, or of an extension, alteration or improvement to a building, shall be taken to be under a qualifying previous commitment if:

(a) the construction was under a contract that was entered into on or before 15 September 1987 or was under 2 or more contracts any of which was entered into on or before 15 September 1987; or

(b) the following conditions are satisfied:

(i) money was borrowed and used to finance the construction;

(ii) all the money that was borrowed and used to finance the construction was borrowed under a contract that was entered into, or under contracts each of which was entered into:

(A) on or before 15 September 1987; and

(B) for the purpose, or for purposes that included the purpose, of financing the construction;

(iii) each person who borrowed and used money to finance the construction is a qualifying investor in relation to the construction.

124ZH(5)   [Qualifying investor]  

For the purposes of subsection (4), a person is a qualifying investor in relation to the construction of a building, or the construction of an extension, alteration or improvement to a building, if:

(a) in the case of the construction of a building:

(i) at the end of 15 September 1987, the person was the owner or lessee of the land on which the building was constructed; or

(ii) after 15 September 1987, the person became the owner or lessee of that land under a contract entered into on or before 15 September 1987; or

(b) in the case of the construction of an extension, alteration or improvement to a building:

(i) at the end of 15 September 1987, the person was the owner or lessee of:

(A) if the extension, alteration or improvement was made to only part of the building - that part; or

(B) in any other case - the building; or

(ii) after 15 September 1987, the person became the owner or lessee of:

(A) if the extension, alteration or improvement was made to only part of the building - that part; or

(B) in any other case - the building;

under a contract entered into on or before 15 September 1987.

124ZH(6)   [Eligible companies]  

Where a taxpayer that is an eligible company for the purposes of section 73B would, but for this subsection, be entitled to a deduction under this section by virtue of its using the whole or a part of the prescribed part, or of a part of the prescribed part, of a building for the purpose of carrying on research and development activities during the whole or a part of a year of income, the company is not entitled to that deduction unless the company was, during the whole or that part, as the case may be, of that year of income, registered under section 39J or 39P of the Industry Research and Development Act 1986 in relation to that year of income.