INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 56   CALCULATION OF DEPRECIATION  

56(1AAA)   [Commercial debt forgiveness]  

This section has effect subject to Division 245 of Schedule 2C .

56(1)   [Depreciation allowable]  

Subject to this section, the depreciation allowable under this Act in respect of a unit of property in relation to a year of income is:

(a) the annual depreciation percentage fixed under section 55 of the depreciated value of that unit at the beginning of the year of income; or

(b) if the taxpayer has elected under subsection (1AA) that this paragraph be applied to the unit of property:

(i) if the annual depreciation percentage fixed under section 55 is less than 100% - the percentage worked out using the following formula (rounded to the nearest whole percentage, with 0.5% rounded up) of the cost of the unit:

Annual   depreciation percentage

×

2 3

where:

``Annual depreciation percentage'' is the annual depreciation percentage fixed under section 55 ; or

(ii) if the annual depreciation percentage fixed under section 55 is 100% - 100% of the cost of the unit.

56(1AA)   [Taxpayer's election]  

A taxpayer may elect that paragraph (1)(b) be applied to all the units of property in respect of which depreciation is first allowable to the taxpayer in a particular year of income.

56(1AB)   [Time and effect of election]  

An election under subsection (1AA):

(a) must be made on or before the date of lodgment of the return of income of the taxpayer for the year of income in which depreciation is first allowable to the taxpayer in respect of those units, or within such further time as the Commissioner allows; and

(b) has effect for the purposes of determining the depreciation allowable to the taxpayer in respect of each of those units for the year of income referred to in paragraph (a) and for all subsequent years of income.

56(1A)   [Pro rata depreciation]  

Where the annual depreciation percentage fixed under section 55 for a unit of property is less than 100% and the unit of property is dealt with by the taxpayer in the prescribed manner during part only of the year of income, the depreciation allowable to the taxpayer in accordance with subsection (1) in respect of the property in relation to the year of income shall be reduced by so much of the amount of the depreciation applicable in accordance with subsection (1) as bears to that amount the same proportion as the number of days during the year of income during which the property was not dealt with by the taxpayer in the prescribed manner bears to the number of days in the year of income.

56(1B)   [Depreciated value]  

For the purposes of the application of subsections (1) and (1A) in a case where the unit of property is not dealt with by the taxpayer in the prescribed manner on the first day of the year of income, the reference in paragraph (1)(a) to the depreciated value of the unit of property at the beginning of the year of income shall be read as a reference to the depreciated value of the unit of property at the time during the year of income when it is first dealt with by the taxpayer in the prescribed manner.

56(1C)   [Circumstances where property dealt with in prescribed manner]  

For the purposes of subsections (1A) and (1B), a unit of property shall be taken to be dealt with by a taxpayer in the prescribed manner at a particular time if:

(a) the property is used by the taxpayer at that time for the purpose of producing assessable income; or

(b) the property is, at that time, installed ready for use for the purpose of producing assessable income and held in reserve by the taxpayer.

56(2)   [Deduction not to exceed depreciated value]  

The deduction allowable in respect of any unit of property shall not exceed the depreciated value of that unit.

56(3)   [No double deductions]  

Where, in respect of any unit of property, any amount which would, but for this subsection, be part of the cost of the unit has been allowed or is allowable under this Act or the previous Act as a deduction (otherwise than on account of depreciation or under section 70 , section 73B , Subdivision B or BA of Division 3 or Part XII ) from the assessable income of the taxpayer of any year of income, the cost of the unit shall be deemed to be the amount remaining after deducting from the cost of the unit to that taxpayer, as ascertained apart from this subsection, the sum of any amounts so allowed or allowable.

56(4)   [Cost where parties not at arm's length]  

For the purposes of the application of paragraph (1)(b) in calculating the depreciation allowable to a taxpayer in respect of a unit of property in a case where -

(a) section 60 does not apply in relation to the unit of property in relation to the taxpayer;

(b) the amount that, but for this subsection and section 57AF , would be the cost of the unit for the purposes of that paragraph is attributable, in whole or in part, to a transaction to which the taxpayer was a party;

(c) the Commissioner is satisfied that, having regard to any connection between any 2 or more of the parties to the transaction and to any other relevant circumstances, those parties were not dealing with each other at arm's length in relation to the transaction; and

(d) the Commissioner is satisfied that the amount that, but for this subsection and section 57AF , would be the cost of the unit for the purposes of paragraph (1)(b) is greater than the amount (in this subsection referred to as the ``arm's length amount'' ) that would have been the cost of the unit if the parties to the transaction had dealt with each other at arm's length in relation to the transaction,

the arm's length amount shall, subject to section 57AF , be deemed to be the cost of that unit for the purposes of paragraph (1)(b).