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.
SECTION 40-25 Deducting amounts for depreciating assets
You deduct the decline in value
40-25(1)
You can deduct an amount equal to the decline in value for an income year (as worked out under this Division) of a *depreciating asset that you *held for any time during the year.
Note 1:
Sections 40-70 , 40-72 and 40-75 show you how to work out the decline for most depreciating assets. There is a limit on the decline: see subsections 40-70(3) , 40-72(3) and 40-75(7) .
Note 2:
Small business entities can choose to both deduct and work out the amount they can deduct under Division 328 .
Note 3:
Generally, only one taxpayer can deduct amounts for a depreciating asset. However, if you and another taxpayer jointly hold the asset, each of you deduct amounts for it: see section 40-35 .
Reduction of deduction
40-25(2)
You must reduce your deduction by the part of the asset ' s decline in value that is attributable to your use of the asset, or your having it *installed ready for use, for a purpose other than a *taxable purpose.
Example:
Ben holds a depreciating asset that he uses for private purposes for 30% of his total use in the income year.
If the asset declines by $1,000 for the year, Ben would have to reduce his deduction by $300 (30% of $1,000).
Note:
You may have to make a further reduction under subsections (3) and (4) or section 40-27 .
Further reduction: leisure facilities
40-25(3)
You may have to make a further reduction for a *depreciating asset that is a *leisure facility attributable to your use of it, or your having it *installed ready for use, for a *taxable purpose.
40-25(4)
That reduction is the part of the *leisure facility ' s decline in value that is attributable to your use of it, or your having it *installed ready for use, at a time when:
(a) its use did not constitute a *fringe benefit; or
(b) you did not use it or *hold it for use as mentioned in paragraph 26-50(3)(b) (about using it in the course of your business or for your employees).
Exception: low-value pools
40-25(5)
Subsections (2), (3) and (4) do not apply to *depreciating assets allocated to a low-value pool.
Despite subsection (1), you can continue to deduct an amount equal to the decline in value for an income year (as worked out under this Division) of such an asset even though you do not continue to *hold that asset.
Note:
See Subdivision 40-E for low-value pools.
40-25(6)
(Repealed by No 162 of 2015)
Meaning of taxable purpose
40-25(7)
Subject to subsection (8), a taxable purpose is:
(a) the *purpose of producing assessable income; or
(b) the purpose of *exploration or prospecting; or
(c) the purpose of *mining site rehabilitation; or
(d) *environmental protection activities.
Note 1:
Where you have had a deduction under this Division an amount may be included in your assessable income if the expenditure was financed by limited recourse debt that has terminated: see Division 243 .
Note 2:
When this Division notionally applies under section 355-310 (about depreciating assets used for R & D activities), the taxable purpose is sometimes only the purpose of conducting R & D activities.
40-25(8)
If Division 250 applies to you and an asset that is a *depreciating asset:
(a) if section 250-150 applies - you are taken not to be using the asset for a *taxable purpose to the extent of the *disallowed capital allowance percentage; or
(b) otherwise - you are taken not to be using the asset for such a purpose.
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