Taxation Laws Amendment (Research and Development) Act 2001 (170 of 2001)

Schedule 2   Plant etc.

Part 3   Effective life basis for deduction

Division 1   Amendments commencing at 12 pm on 29 January 2001

Income Tax Assessment Act 1997

39   After section 42-220

Insert:

42-220A Plant for which there are deductions under section 73BH of Income Tax Assessment Act 1936 (research and development)

Section applies if deductions for depreciation under section 73BH

(1) This section applies if you have deducted or can deduct an amount for the *plant under section 73BH of the Income Tax Assessment Act 1936 for any income year.

Application of sections 42-190 to 42-197 to take into account section 73BH deductions

(2) If this section applies, you must, in applying sections 42-190 to 42-197 in relation to the *plant, assume that the changes set out in subsections (3) to (5) of this section were made.

First change

(3) The first change is that the references in any of sections 42-190 to 42-197, and in sections 42-175 and 42-200 and subsection 110-55(4) as applied for the purposes of those sections, to amounts you have deducted or can deduct for depreciation of the *plant include references to the notional Division 42 deductions taken into account under section 73BH of the Income Tax Assessment Act 1936 in working out:

(a) amounts you have deducted or can deduct for the plant under that section; and

(b) if section 73EB of that Act applied to the disposal to you of the plant - amounts the transferor, and any earlier successive transferor, have deducted or can deduct for the plant under section 73BH.

Second change

(4) The second change is that the reference in paragraph 42-175(1)(b) to any further amounts you could have deducted for depreciation of the plant for any period you were its owner or *quasi-owner and used it, assuming you used it wholly for the purpose of producing assessable income during that period, includes a reference to:

(a) any further amounts you could have deducted for the plant under section 73BH of the Income Tax Assessment Act 1936, for any period you were its owner or *quasi-owner and used it, assuming that you used it wholly for the purpose of the carrying on by or on behalf of you of research and development activities (within the meaning of section 73B of that Act); and

(b) if section 73EB of that Act applied to the disposal to you of the plant - any further amounts the transferor, and any earlier successive transferor, could have deducted for the plant under section 73BH of that Act for any period assuming that person was its owner or *quasi-owner and used it wholly for the purpose of the carrying on by or on behalf of that person of research and development activities.

Third change

(5) The third change is that the reference in section 42-195 to the extent to which you used the plant other than for the purpose of producing assessable income is instead a reference to the extent to which you used the plant other than for that purpose or the purpose of the carrying on by or on behalf of you of research and development activities.

Increase in amounts deductible or certain assessable amounts where 1.25 rate deductions under section 73BH

(6) If:

(a) this section applies; and

(b) the amount you have deducted or can deduct for the *plant under section 73BH of the Income Tax Assessment Act 1936, as mentioned in subsection (1) of this section, for at least one income year was worked out by multiplying a notional Division 42 deduction (within the meaning of section 73BJ) by 1.25;

then subsection (7) applies.

(7) Any amount (the eligible assessable/deductible amount ) included in your assessable income for the plant under section 42-190 (as applied in accordance with subsection (2) of this section), or any amount you can deduct for the *plant under section 42-195 or 42-197 (as applied in accordance with subsection (2) of this section), is increased by the amount worked out using the formula:

where:

sum of all 1.25 rate notional Division 42 deductions means the sum of all notional Division 42 deductions (see paragraph (6)(b)) that were multiplied by 1.25 in working out the amounts you have deducted or can deduct for the plant as mentioned in subsection (1).

total decline in value means the *cost of the plant, less its *undeducted cost, just before the balancing adjustment event (after applying subsection (2) of this section).

Note: The heading to section 42-220 is replaced by the following heading " Plant for which there are deductions under section 73B of Income Tax Assessment Act 1936 (research and development) ".