Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS  

Division 328 - Small business entities  

Subdivision 328-D - Capital allowances for small business entities  

Operative provisions

SECTION 328-225   Change in business use  

328-225(1)    
You must, for each income year (the present year ) after the year in which a ^* depreciating asset is allocated to a pool, make a reasonable estimate of the proportion you use the asset, or have it ^* installed ready for use, for a ^* taxable purpose in that year.

Note:

This section is modified in its application to a transferee for certain assets if roll-over relief under section 40-340 is chosen: see sections 328-243 and 328-257 .

328-225(1A)    
You must make an adjustment for the present year if your estimate for that year under subsection (1) is different by more than 10 percentage points from:

(a) your original estimate (see section 328-205 ); or

(b) if you have made an adjustment under this section - the most recent estimate you made under subsection (1) that resulted in an adjustment under this section.

328-225(2)    

The adjustment is made to the ^* opening pool balance of the ^* general small business pool to which the asset was allocated, and it must be made before you calculate your deduction under this Subdivision for the present year.

Note:

The opening pool balance will be reduced if the adjustment worked out under subsection (3) is a negative amount. It will be increased if the adjustment is positive.

328-225(3)    

The adjustment is:

where:

asset value
is:

(a) for a ^* depreciating asset you started to use, or have ^* installed ready for use, for a ^* taxable purpose during an income year for which you were a *small business entity and chose to use this Subdivision - the asset ' s ^* adjustable value at that time; or

(b) for an asset you started to use, or have installed ready for use, for a taxable purpose during an income year for which you were not a *small business entity or did not choose to use this Subdivision - its adjustable value at the start of the income year for which it was allocated to a ^* general small business pool;

increased by any amounts included in the second element of the asset ' s ^* cost from the time mentioned in paragraph (a) or (b) until the beginning of the income year for which you are making the adjustment.

last estimate
is:

(a) your original estimate of the proportion you use, or have ^* installed ready for use, a ^* depreciating asset for a ^* taxable purpose (see section 328-205 ); or

(b) if you have made an adjustment under this section - the latest estimate taken into account under this section.

present year estimate
is your reasonable estimate of the proportion you use the asset, or have it ^* installed ready for use, for a ^* taxable purpose during the present year.

reduction factor
is the number worked out under subsection (4).

328-225(4)    
The reduction factor in the formula in subsection (3) is:

(a) for a ^* depreciating asset you started to use, or have ^* installed ready for use, for a ^* taxable purpose during an income year for which you were a *small business entity and chose to use this Subdivision:

(b) for an asset you started to use, or have ^* installed ready for use, for a taxable purpose during an income year for which you were not a *small business entity or did not choose to use this Subdivision:

where:

n
is the number of income years (counting part of an income year as a whole year) before the present year for which you have deducted or can deduct an amount for the ^* depreciating asset under this Subdivision.

rate
is the rate applicable to the pool to which the asset is allocated.

Note:

The reduction factor for a depreciating asset in your general small business pool which you started to use, or have installed ready for use, for a taxable purpose during an income year for which you were not a small business entity or did not choose to use this Subdivision is:

• 0.7 for the income year after it is allocated to the pool; and

• 0.49 for the income year after that; and

• 0.343 for the income year after that.

The reduction factor for a depreciating asset in your general small business pool which you started to use, or have installed ready for use, for a taxable purpose during an income year for which you were a small business entity and chose to use this Subdivision is:

• 0.85 for the income year after it is allocated to the pool; and

• 0.595 for the income year after that; and

• 0.417 for the income year after that.

Exceptions

328-225(5)    
However:

(a) you do not need to make an estimate or an adjustment under this section for a *depreciating asset for an income year that is at least 3 income years after the income year in which the asset was allocated; and

(b) you cannot make an adjustment for a depreciating asset if your reasonable estimate of the proportion you use a depreciating asset, or have it ^* installed ready for use, for a ^* taxable purpose changes in a later income year by the 10 percentage points mentioned in subsection (1) or less.