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Income Tax Assessment Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION

PART 2-10 - CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE

Division 40 - Capital allowances

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Subdivision 40-D - Balancing adjustments

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Commissioner ' s Remedial Power

Note: 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.

Operative provisions

SECTION 40-300 Meaning of termination value

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40-300(1)
The termination value of a ^* depreciating asset is worked out as at the time when the ^* balancing adjustment event occurs. It is:

(a) if an item in the table in subsection (2) applies - the amount specified in that item; or

(b) otherwise - the amount you are taken to have received under section 40-305 for the asset.

Note:

Section 230-505 provides special rules for working out the amount of consideration for an asset if the asset is a Division 230 financial arrangement or a Division 230 financial arrangement is involved in that consideration.

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40-300(2)

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If more than one item applies, use the value under the last applicable item.

Termination value table
Item	For this balancing adjustment event:	The termination value is:
1	You stop using a depreciating asset, or having it installed ready for use, for any purpose and you expect never to use it again even though you still *hold it	The market value of the asset when you stopped using it or having it installed ready for use
.
2	You decide never to use a depreciating asset that you have not used even though you still hold it	The *market value of the asset when you make the decision
.
3	You stop using in-house software for any purpose and you expect never to use it again even though you still hold it	Zero
.
4	You decide never to use in-house software that you have not used even though you still hold it	Zero
.
5	One or more partners stop holding a depreciating asset when it becomes a partnership asset or a balancing adjustment event referred to in subsection 40-295(2) occurs	The market value of the asset when the partnership started to hold it or when the balancing adjustment event occurred
.
6	You stop holding a depreciating asset under an *arrangement and:	The market value of the asset just before you stopped holding it
	(a)	there is at least one other party to the arrangement with whom you did not deal at *arm ' s length; and
	(b)	apart from this item, the termination value would be less than its market value
.
7	You stop holding a depreciating asset under an *arrangement that was private or domestic in nature to you (for example, a gift)	The market value of the asset just before you stopped holding it
.
8	A *depreciating asset is lost or destroyed	The amount or value received or receivable under an insurance policy or otherwise for the loss or destruction
.
9	You stop holding a depreciating asset because you die and the asset starts being held by the *legal personal representative	The asset ' s adjustable value on the day you died or, if the asset is allocated to a low-value pool, so much of the closing pool balance for the income year in which you died as is reasonably attributable to the asset
.
10	You stop holding a depreciating asset because it *passes directly to a beneficiary or joint tenant when you die	The *market value of the asset on the day you die
.
11	A depreciating asset for which the Finance Minister has determined an amount for you under section 52A of the Airports (Transitional) Act 1996	The amount so determined
.
12	(Repealed by No 96 of 2014)
13	The *balancing adjustment event occurs under subsection 40-295(1A)	Zero

14	The *balancing adjustment event occurs under subsection 40-295(1B)	What would, apart from subsection 40-285(3), be the asset ' s adjustable value on the day the balancing adjustment event occurs

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History

S 40-300(2) amended by No 96 of 2014, s 3 and Sch 5 item 9, by repealing table item 12, effective 30 September 2014. Table item 12 formerly read:

12 You stop *holding a *geothermal exploration right relating to an area because you *acquire a *geothermal energy extraction right relating to the same area or an area that is not significantly different Zero

S 40-300(2) amended by No 69 of 2014, s 3 and Sch 1 item 15, by inserting table items 13 and 14, effective 1 July 2014. No 69 of 2014, s 3 and Sch 1 item 16 contains the following application provision:

16 Application of amendments
(1)
The amendments made by this Schedule apply to any mining, quarrying or prospecting right, and any mining, quarrying or prospecting information, that an entity starts to hold after 7.30 pm Australian Eastern Standard Time on 14 May 2013.

(2)
However, the amendments made by this Schedule do not apply to a right or information referred to in subitem (1) if:

(a) the entity starts to hold the right or information through exercising a right (an acquisition right ) to acquire the right or information; and

(b) the entity has held the acquisition right continuously since immediately before the time referred to in that subitem; and

(c) the terms and conditions for exercising the acquisition right (including the consideration given or to be given for the acquisition right) were agreed before that time.

S 40-300(2) amended by No 84 of 2013, s 3 and Sch 3 item 9, by inserting table item 12, applicable to depreciating assets that started to be held on or after 1 July 2012.

S 40-300(2) amended by No 88 of 2009, s 3 and Sch 5 item 139, by substituting " *Finance Minister " for " Minister for Finance " in item 11 of the table, effective 18 September 2009.

S 40-300(2) amended by No 119 of 2002.

40-300(3)

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The termination value of a ^* depreciating asset does not include an amount that is included in assessable income as ^* ordinary income under section 6-5 or as ^* statutory income under section 6-10 (except an amount that is statutory income under this Division).