Income Tax Assessment Act 1997
View history note
Hide history noteNote: A Commissioner ' s Remedial Power (CRP 2017/2) is relevant to this part of the tax law. Taxation Administration (Remedial Power - Small Business Restructure Roll-over) Determination 2017 (F2017L01687) modifies the operation of s 40-340 of the Income Tax Assessment Act 1997 and any other provisions of a taxation law whose operation is affected by the modified operation of s 40-340 in relation to an asset transferred under a small business restructure roll-over (item 8 of the table in s 40-340(1) ).
The operation of the relevant provisions is modified as follows:
If s 40-340 of ITAA 1997 provides for rollover relief in relation to a disposal of a depreciating asset because the condition in item 8 of the table in s 40-340(1) of ITAA 1997 is satisfied in relation to the asset, that section has effect as if it also provided that the disposal of the asset has no direct consequences under the income tax law (other than Div 40 of ITAA 1997).
The modification applies in respect of transfers on or after 8 May 2018.
An entity must treat a modification as not applying to it or any other entity if the modification would produce a less favourable result for it. The Commissioner is empowered by s 370-5 of Sch 1 to the Taxation Administration Act 1953 to make modifications, by legislative instrument, to ensure the law is administered to achieve its intended purpose or object.
The key concepts about depreciating assets and certain other capital expenditure are outlined below (in bold italics ).
| Simplified outline of this Division | |||
| Item |
Major topic
Subordinate topics Rules |
Provisions | |
| 1 | Rules about depreciating assets | ||
| 1.1 | Core provisions | Subdivision 40-B | |
| Depreciating assets are assets with a limited effective life that are reasonably expected to decline in value. | |||
| Broadly, the effective life of a depreciating asset is the period it can be used to produce income. | |||
| The decline in value is based on the cost and effective life of the depreciating asset, not its actual change in value. It begins at start time , when you begin to use the asset (or when you have it installed ready for use). It continues while you use the asset (or have it installed). | |||
| Usually, the owner of a depreciating asset holds the asset and can therefore claim deductions for its decline in value. Sometimes the economic owner will be different to the legal owner and the economic owner will be the holder. | |||
| . | |||
| 1.2 | Cost | Subdivision 40-C | |
| The cost of a depreciating asset includes both: | |||
| • | expenses you incur to start holding the asset; and | ||
| • | additional expenses that contribute to its present condition and location (eg. improvements). | ||
| . | |||
| 1.3 | Balancing adjustments | Subdivision 40-D | |
| When you stop holding a depreciating asset you may have to include an amount in your assessable income, or deduct an amount under a balancing adjustment . The adjustment reconciles the decline with the actual change in value. | |||
| . | |||
| 1.4 | Low-value and software development pools | Subdivision 40-E | |
| Low-cost assets and assets depreciated to a low value may be placed in a low value pool , which is treated as a single depreciating asset. You can also pool in-house software expenditure in a software development pool . | |||
| . | |||
| 1.5 | Primary production depreciating assets | Subdivision 40-F | |
| You can deduct amounts for capital expenditure on: | |||
| • | water facilities immediately; or | ||
| • | horticultural plants over a period that relates to the effective life of the plant; or | ||
| • | fodder storage assets immediately; or | ||
| • | fencing assets immediately. | ||
| 2 | Rules about other capital expenditure | ||
| 2.1 | Capital expenditure of primary producers and other landholders | Subdivision 40-G | |
| You can deduct amounts for capital expenditure on: | |||
| • | landcare operations immediately; or | ||
| • | electricity and telephone lines over 10 income years. | ||
| . | |||
| 2.2 | Capital expenditure that is immediately deductible | Subdivision 40-H | |
| You can get an immediate deduction for certain capital expenditure on: | |||
| • | exploration or prospecting ; and | ||
| • | rehabilitation of mine and quarry sites ; and | ||
| • | paying petroleum taxes ; and | ||
| • | environmental protection activities . | ||
| . | |||
| 2.3 | Capital expenditure that is deductible over time | Subdivision 40-I | |
| You can deduct amounts for certain capital expenditure associated with projects you carry on. You deduct the amount over the life of the project using a project pool . | |||
| You can also deduct amounts for certain business related costs over 5 years where the amounts are not otherwise taken into account and are not denied a deduction. | |||
| . | |||
| 2.4 | Capital expenditure for establishing trees in carbon sink forests | Subdivision 40-J | |
| You can deduct amounts for capital expenditure for the establishment of trees in carbon sink forests. |
This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.