Income Tax (Transitional Provisions) Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

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

Division 40 - Capital allowances  

Subdivision 40-BA - Backing business investment  

SECTION 40-125   Backing business investment - when an asset of yours qualifies  

40-125(1)    
For the purposes of paragraph 40-120(1)(c) and section 328-182 , you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you:

(a)    start to hold the asset; and

(b)    start to use it, or have it installed ready for use, for a taxable purpose.

Note:

Section 328-182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328-D of the Income Tax Assessment Act 1997 .

Exception - commitments already entered into

40-125(2)    
Despite subsection (1), you are not covered by this section for the asset if, before 12 March 2020, you:

(a)    entered into a contract under which you would hold the asset; or

(b)    started to construct the asset; or

(c)    started to hold the asset in some other way.

40-125(3)    
Despite subsection (1), you are not covered by this section for an asset (the post-12 March 2020 asset ) if:

(a)    on a day before 12 March 2020, you:

(i) enter into a contract under which you hold an asset on that day, or will hold the asset on a later day; or

(ii) start to construct an asset; or

(iii) start to hold an asset in some other way; and

(b)    on a day on or after 12 March 2020 (the conduct day ), you engage in conduct that results in you:

(i) entering into a contract under which you hold the post-12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or

(ii) starting to construct the post-12 March 2020 asset; or

(iii) starting to hold the post-12 March 2020 asset in some other way; and

(c)    the post-12 March 2020 asset is the asset mentioned in paragraph (a), or an identical or substantially similar asset; and

(d)    you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post-12 March 2020 asset.

40-125(4)    
For the purposes of subsections (2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time.

40-125(5)    
To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract.

40-125(6)    
For the purposes of subsections (2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing:

(a)    entering into a contract under which the partnership would hold the asset;

(b)    starting to construct the asset;

(c)    acquiring an option to enter into such a contract.

Exception - second hand assets

40-125(7)    
Despite subsection (1), you are not covered by this section for the asset if:

(a)    another entity held the asset when it was first used, or first installed ready for use, other than:

(i) as trading stock; or

(ii) merely for the purposes of reasonable testing or trialling; or

(b)    you started holding the asset under section 40-115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40-125 of that Act (about merging depreciating assets); or

(c)    you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member.

40-125(7A)    

The exception in subsection (7) also applies in relation to an asset if:

(a)    the asset is a licence (including a sub-licence) relating to an intangible asset; and

(b)    the exception in that subsection applies in relation to the intangible asset.

40-125(8)    
However, paragraph (7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you.

Exception - assets to which Division 40 does not apply

40-125(9)    
Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40-45 of that Act.

Exception - assets not located in Australia

40-125(10)    
Despite subsection (1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose:

(a)    it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or

(b)    it is reasonable to conclude that the asset will never be located in Australia.