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Taxation Laws Amendment Act (No. 2) 1999 (93 of 1999)

Schedule 3 Depreciation of plant previously owned by an exempt entity

Part 1 Income Tax Assessment Act 1997

7 At the end of Part 2-15

Add:

Division 58 - Depreciation of plant previously owned by an exempt entity

Table of Subdivisions

Guide to Division 58

58-A Application and interpretation

58-B Plant of exempt entities that become taxable

58-C Plant acquired from exempt entities in connection with the acquisition of a business

Guide to Division 58

58-1 What this Division is about

This Division sets out special rules that apply in calculating depreciation deductions and balancing adjustments in respect of plant previously owned by an exempt entity if the plant:

· continues to be owned by that entity after the entity becomes taxable; or

· is acquired from that entity, in connection with the acquisition of a business, by a purchaser that is a taxable entity.

58-2 Diagram showing the operation of this Division

The following diagram shows the operation of this Division.

What this Division is about

Subdivision 58-A - Application and interpretation

Table of sections

58-5 Application of Division to quasi-owners of plant

58-10 Pre-existing audited book value of unit of plant

58-5 Application of Division to quasi-owners of plant

This Division applies in relation to a unit of*plant of which an entity has been or is, or becomes, a*quasi-owner in the same way as it applies in relation to a unit of plant that has been or is owned by, or is acquired by, an entity.

58-10 Pre-existing audited book value of unit of plant

(1) If:

(a) a balance sheet, as at the end of an annual accounting period (the balance date ), that was prepared as part of an*exempt entity's final accounts for that period showed a unit of*plant (the unit ) as an asset of the exempt entity and specified a value for the unit; and

(b) a qualified independent auditor who was engaged, or was required by law, to undertake an audit of those accounts had prepared and signed, before 4 August 1997, a final audit report on those accounts; and

(c) the report did not state that the auditor was not satisfied that the specified value fairly represented the value of the unit;

the unit is taken to have had a pre-existing audited book value at the balance date of an amount equal to the specified value.

(2) If a balance sheet did not specify a value for the unit but specified a total value for 2 or more units of plant including the unit, the balance sheet is taken to have specified as the value of the unit so much of that total value as is reasonably attributable to the unit.

(3) The latest time at which a unit of*plant is taken to have had a*pre-existing audited book value is the test time in relation to the unit.

Subdivision 58-B - Plant of exempt entities that become taxable

Table of sections

58-15 Transition entities etc.

58-20 Choice by entity

Provisions applying where depreciation of the unit is calculated by reference to notional written down value

58-25 Exclusion of certain provisions

58-30 Undeducted cost of unit

58-35 Ownership of unit

58-40 Cost of unit to transition entity

58-45 Effective life of unit

58-50 Choice or election to calculate assumed effective life

58-55 Use of unit for producing assessable income

58-60 Method of depreciation

58-65 Application of certain provisions in calculating depreciation rates

58-70 Choice of rate

58-75 Nomination or election of depreciation percentage

58-80 Notional written down value

58-85 Calculation of depreciation deductions and balancing adjustments

Provisions applying where depreciation of the unit is calculated by reference to undeducted pre-existing audited book value

58-90 Exclusion of certain provisions

58-95 Cost of unit to transition entity

58-100 Ownership of unit

58-105 Assumed cost of unit to transition entity for purpose of calculating undeducted pre-existing audited book value

58-110 Effective life of unit

58-115 Election to calculate assumed effective life

58-120 Use of unit for producing assessable income

58-125 Method of depreciation

58-130 Application of certain provisions in calculating depreciation rates

58-135 Nomination or election of depreciation percentage

58-140 Undeducted pre-existing audited book value

58-145 Calculation of depreciation deductions and balancing adjustments

58-15 Transition entities etc.

If:

(a) at a particular time on or after 4 August 1997, an entity is an*exempt entity; and

(b) immediately after that time, the entity's*ordinary income or*statutory income becomes to any extent assessable income;

then:

(d) the time when the entity's ordinary income or statutory income becomes to that extent assessable is the transition time ; and

(e) the income year in which the*transition time occurs is the transition year for the entity.

58-20 Choice by entity

(1) A*transition entity must, in relation to every unit of*plant (the unit ) that was owned by it at the*transition time, do either of the following:

(a) choose that depreciation deductions and balancing adjustments for periods after the transition time are to be calculated by reference to the*notional written down value of the unit;

(b) choose that depreciation deductions and balancing adjustments for periods after the transition time are to be calculated by reference to the*undeducted pre-existing audited book value (if any) of the unit.

(2) A choice under subsection (1) must be made:

(a) by the day on which the*transition entity lodges its*income tax return for the*transition year; or

(b) within a further period allowed by the Commissioner.

(3) A choice, once made, applies to*the transition year and all later income years.

(4) If the*transition entity makes a choice under paragraph (1)(a), sections 58-25 to 58-85 have effect in relation to the unit.

(5) If the*transition entity makes a choice under paragraph (1)(b), sections 58-90 to 58-145 have effect in relation to the unit.

Provisions applying where depreciation of the unit is calculated by reference to notional written down value

58-25 Exclusion of certain provisions

The following provisions do not apply in respect of the unit in relation to the*transition entity:

(a) Subdivision 57-I of theIncome Tax Assessment Act 1936;

(b) Subdivision 57-K of that Act in so far as that Subdivision deals with depreciation balancing adjustments.

58-30 Undeducted cost of unit

(1) Section 42-175 has effect in relation to the unit as if that section provided that the*undeducted cost of the unit were the*notional written down value of the unit.

(2) Sections 58-35 to 58-75 have effect for the purpose of the calculation of that value under section 58-80.

58-35 Ownership of unit

(1) If the*transition entity was an*exempt Australian government agency immediately before the*transition time and had acquired the unit from another exempt Australian government agency:

(a) assume that the transition entity acquired it at the time when it was acquired or constructed by the other exempt Australian government agency; or

(b) if it had, before its acquisition by the transition entity, been successively owned by 2 or more exempt Australian government agencies - assume that the transition entity acquired it at the time when it was acquired or constructed by the first of those exempt Australian government agencies that owned it.

(2) To avoid doubt, if subsection (1) does not apply, the*transition entity is taken to have acquired the unit at the time when the transition entity acquired or constructed it.

58-40 Cost of unit to transition entity

(1) To avoid doubt, Subdivision 42-B applies for the purpose of determining the cost of the unit to the*transition entity.

(2) However, if the*transition entity was an*exempt Australian government agency immediately before the*transition time and had acquired the unit from another exempt Australian government agency:

(a) assume that its cost to the transition entity is the amount that was its cost to the other exempt Australian government agency; or

(b) if it had, before its acquisition by the transition entity, been successively owned by 2 or more exempt Australian government agencies, assume that its cost to the transition entity is the amount that was its cost to the first of those exempt Australian government agencies that owned it.

58-45 Effective life of unit

Assume that the*effective life of the unit is the period that would have been calculated to be its effective life:

(a) if subsection 58-35(1) applies - at the time when it is assumed under that subsection to have been acquired by the*transition entity; or

(b) if subsection 58-35(2) applies - at the time when it was acquired or constructed by the transition entity.

58-50 Choice or election to calculate assumed effective life

For the purpose of calculating the assumed*effective life of the unit under section 58-45:

(a) if the*transition entity would have been required to make a choice under subsection 42-100(1) at a particular time during the period for which the transition entity owned, or is assumed to have owned, it - assume that the transition entity made a choice at that time under paragraph 42-100(1)(b) to adopt the effective life specified by the Commissioner; or

(b) if the transition entity could have made an election under subsection 54A(1) of theIncome Tax Assessment Act 1936 at a particular time during the period for which the transition entity owned, or is assumed to have owned, it - assume that the transition entity made the election at that time.

58-55 Use of unit for producing assessable income

Assume that the unit had, at all times during the period beginning when it was acquired or constructed, or is assumed to have been acquired, by the*transition entity and ending immediately before the*transition time, been used wholly for the purpose of producing assessable income by the transition entity, and assume that deductions for depreciation in respect of it had been allowed to the transition entity during that period.

58-60 Method of depreciation

Assume that the*method of depreciation selected by the*transition entity in relation to the unit for:

(a) the*transition year; or

(b) if the transition entity does not claim depreciation for the transition year - the first income year after the transition year in which the transition entity claims depreciation;

was also used by the transition entity in each income year before the transition year.

58-65 Application of certain provisions in calculating depreciation rates

In calculating the rate of depreciation in relation to the unit in each income year before the*transition year:

(a) if section 57AG of theIncome Tax Assessment Act 1936 as in force at any time before its repeal had applied in respect of that income year - that section is to be taken into account; and

(b) if subsection 55(6) of theIncome Tax Assessment Act 1936 as in force immediately before the commencement of section 7 of theTaxation Laws Amendment Act (No. 2) 1992 had applied in respect of that income year - that subsection is to be taken into account; and

(c) if section 57AL of theIncome Tax Assessment Act 1936 as in force at any time before its repeal had applied in respect of that income year - that section is to be disregarded.

58-70 Choice of rate

(1) If the*transition entity could have made a choice under subsection 42-120(1) at a particular time (the relevant time ) during the period for which the transition entity owned, or is assumed to have owned, the unit, the transition entity may make the choice and, if the choice is made, it is taken to have been made at the relevant time.

(2) A*diminishing value rate chosen must not be less than the percentage worked out by using the formula:

(1.5 / Number of years in effective life) * 100

where:

number of years in effective life means the number of years in the assumed*effective life of the unit under section 58-45.

(3) A*prime cost rate chosen must not be less than two-thirds of the percentage that would be worked out under subsection (2) if a*diminishing value rate had been chosen.

58-75 Nomination or election of depreciation percentage

(1) If the*transition entity could have made a nomination or election under subsection 55(8) of theIncome Tax Assessment Act 1936 as in force at a particular time (the relevant time ) during the period for which the transition entity owned, or is assumed to have owned, the unit, the transition entity may make the nomination or election, as the case may be, and, if the nomination or election is made, it is taken to have been made at the relevant time.

(2) If the*transition entity makes a nomination under subsection 55(8) of theIncome Tax Assessment Act 1936 as in force immediately before the commencement of section 23 of theTaxation Laws Amendment Act 1993, the following paragraphs apply:

(a) the nomination applies to the income year for which it is taken to have been made and all later income years;

(b) a*diminishing value rate nominated must not be less than the percentage worked out by using the formula:

(1.5 / Number of years in effective life) * 100

where:

number of years in effective life means the number of years in the assumed*effective life of the unit under section 58-45;

(c) a*prime cost rate nominated must not be less than two-thirds of the percentage that would be worked out under paragraph (b) if a diminishing value rate had been nominated.

(3) If the*transition entity makes an election under subsection 55(8) of theIncome Tax Assessment Act 1936 as in force immediately before the commencement of section 7 of theTaxation Laws Amendment Act (No. 2) 1992, the election applies to the income year in which it is taken to have been made and all later income years.

58-80 Notional written down value

The notional written down value of the unit in relation to the*transition entity is the amount of its cost or assumed cost to the transition entity under section 58-40 less the sum of:

(a) the amounts in respect of which deductions for depreciation are assumed under section 58-55 to have been allowed to the transition entity in respect of it; and

Note: Sections 58-35 to 58-50, and sections 58-60 to 58-75, have effect for the purpose of determining the amounts referred to in paragraph (a).

(b) the amounts the transition entity has deducted or can deduct for depreciation of it; and

(c) any further amounts the transition entity could have deducted for depreciation of it for any period after the*transition time during which the transition entity was its owner and used it, or had it*installed ready for use, assuming that:

(i) the transition entity used it wholly for the purpose of producing assessable income during that period; and

(ii) the transition entity used the same rate of depreciation and the same method of depreciation during that period as the transition entity used for the income year in which a depreciation deduction was first allowable to the transition entity for it.

58-85 Calculation of depreciation deductions and balancing adjustments

(1) The rules otherwise applying in calculating depreciation deductions and balancing adjustments in respect of the unit have effect in relation to the*transition entity subject to this section and section 58-30.

(2) Sections 58-35 to 58-50 and sections 58-65 to 58-75 apply in the same way as they apply in calculating the deductions for depreciation assumed under section 58-55 to have been allowed to the*transition entity.

(3) The rate of depreciation is to be the same as the rate that was used in calculating the deduction for depreciation assumed under section 58-55 to have been allowed to the*transition entity in respect of the latest income year in the period referred to in that section.

(4) Subdivision 42-L, and sections 62AAB to 62AAV of theIncome Tax Assessment Act 1936, do not apply in respect of the unit.

(5) Subsection 42-195(3) does not apply to any period in which the unit was used, or*installed ready for use, before the*transition time.

(6) For the purposes of section 42-200, the cost of the unit is taken to be its*notional written down value at the*transition time plus the amounts of any capital expenditure on improving it incurred after that time.

(7) If a*balancing adjustment event occurred before the 1998-99 income year, subsection 42-190(2) has effect in relation to the unit as if paragraph (a) of that subsection were omitted and replaced by the following paragraph:

(a) the amount by which the higher of:

(i) the cost base of the*plant for the purposes of Part IIIA of theIncome Tax Assessment Act 1936, less any amounts included in that cost base as a result of expenditure incurred after the*transition time that were not, immediately before the balancing adjustment event occurred, included in the cost of the plant to you for the purposes of Division 42; or

(ii) the*notional written down value of the plant at the transition time plus the amounts of any capital expenditure on improving it incurred after that time;

exceeds its*written down value; and

(8) If a*balancing adjustment event occurred in a later income year, subsection 42-190(2) has effect in relation to the unit as if paragraph (a) of that subsection were omitted and replaced by the following paragraph:

(a) the amount by which the higher of:

(i) the cost base (without indexation) of the*plant for the purposes of Parts 3-1 and 3-3, less any amounts included in that cost base as a result of expenditure incurred after the*transition time that were not, immediately before the balancing adjustment event occurred, included in the cost of the plant to you for the purposes of Division 42; or

(ii) the*notional written down value of the plant at the transition time plus the amounts of any capital expenditure on improving it incurred after that time;

exceeds its*written down value; and

Provisions applying where depreciation of the unit is calculated by reference to undeducted pre-existing audited book value

58-90 Exclusion of certain provisions

The following provisions do not apply in respect of the unit in relation to the*transition entity:

(a) Subdivision 57-I of theIncome Tax Assessment Act 1936;

(b) Subdivision 57-K of that Act in so far as that Subdivision deals with depreciation balancing adjustments.

58-95 Cost of unit to transition entity

(1) The cost of the unit to the*transition entity is taken to be the*undeducted pre-existing audited book value of the unit.

(2) Sections 58-100 to 58-135 have effect for the purpose of the calculation of that value under section 58-140.

58-100 Ownership of unit

(1) If the*transition entity was an*exempt Australian government agency immediately before the*transition time and had acquired the unit from another exempt Australian government agency:

(a) assume that the transition entity acquired it at the time when it was acquired or constructed by the other exempt Australian government agency; or

(2) To avoid doubt, if subsection (1) does not apply, the*transition entity is taken to have acquired the unit at the time when the transition entity acquired or constructed it.

58-105 Assumed cost of unit to transition entity for purpose of calculating undeducted pre-existing audited book value

Assume that the cost of the unit to the*transition entity is the sum of:

(a) its*pre-existing audited book value at the test time; and

(b) the amounts of any capital expenditure on improving it incurred by the transition entity, or by an earlier owner that was an*exempt Australian government agency, during the period beginning immediately after the test time and ending immediately before the*transition time.

58-110 Effective life of unit

Assume that the*effective life of the unit is the period that would have been calculated to be its effective life:

(a) if subsection 58-100(1) applies - at the time when it is assumed under that subsection to have been acquired by the*transition entity; or

(b) if subsection 58-100(2) applies - at the time when it was acquired or constructed by the transition entity.

58-115 Election to calculate assumed effective life

For the purpose of calculating the assumed*effective life of the unit under section 58-110, if the*transition entity could have made an election under subsection 54A(1) of theIncome Tax Assessment Act 1936 at a particular time during the period for which the transition entity owned, or is assumed to have owned, it, assume that the transition entity made the election at that time.

58-120 Use of unit for producing assessable income

Assume that the unit had, at all times during the period beginning at the test time and ending immediately before the*transition time, been used wholly for the purpose of producing assessable income by the*transition entity, and assume that deductions for depreciation in respect of it had been allowed to the transition entity during that period.

58-125 Method of depreciation

Assume that the*method of depreciation selected by the*transition entity in relation to the unit for:

(a) the*transition year; or

(b) if the transition entity does not claim depreciation for the transition year - the first income year after the transition year in which the transition entity claims depreciation;

was also used by the transition entity for each income year in the period referred to in section 58-120.

58-130 Application of certain provisions in calculating depreciation rates

In calculating the rate of depreciation in relation to the unit in each income year in the period referred to in section 58-120:

(a) if section 57AG of theIncome Tax Assessment Act 1936 as in force at any time before its repeal had applied in respect of that income year - that section is to be taken into account; and

(c) if section 57AL of theIncome Tax Assessment Act 1936 as in force at any time before its repeal had applied in respect of that income year - that section is to be disregarded.

58-135 Nomination or election of depreciation percentage

(1) If the*transition entity could have made a nomination or election under subsection 55(8) of theIncome Tax Assessment Act 1936 as in force at a particular time (the relevant time ) during the period referred to in section 58-120, the transition entity may make the nomination or election, as the case may be, and, if the nomination or election is made, it is taken to have been made at the relevant time.

(a) the nomination applies to the income year in which it is taken to have been made and all later income years;

(b) a*diminishing value rate nominated must not be less than the percentage worked out by using the formula:

(1.5 / Number of years in effective life) * 100

where:

number of years in effective life means the number of years in the assumed*effective life of the unit under section 58-110;

(c) a*prime cost rate nominated must not be less than two-thirds of the percentage that would be worked out under paragraph (b) if a diminishing value rate had been nominated.

58-140 Undeducted pre-existing audited book value

The undeducted pre-existing audited book value of the unit in relation to the*transition entity is:

(a) if the test time in relation to the unit is less than one year before the*transition time - the amount of its assumed cost under section 58-105; or

(b) if the test time in relation to the unit is one year or more before the transition time - the amount of its assumed cost under section 58-105 less any amounts in respect of which deductions for depreciation are assumed under section 58-120 to have been allowed to the transition entity in respect of it.

Note: Sections 58-100 to 58-135 have effect for the purpose of determining the amounts referred to in paragraph (b).

58-145 Calculation of depreciation deductions and balancing adjustments

(2) Sections 58-100, 58-110 and 58-115 apply in the same way as they apply in calculating the*undeducted pre-existing audited book value of the unit.

(3) Subdivision 42-L, and sections 62AAB to 62AAV of theIncome Tax Assessment Act 1936, do not apply in respect of the unit.

(4) Subsection 42-195(3) does not apply to any period in which the unit was used, or*installed ready for use, before the*transition time.

(5) Section 42-175 has effect in relation to the unit as if that section provided that the*undeducted cost of the unit were the*undeducted pre-existing audited book value of the unit less the sum of:

(a) the amounts the*transition entity has deducted or can deduct for depreciation of it; and

(b) any further amounts the transition entity could have deducted for depreciation of it for any period after the*transition time during which the transition entity was its owner and used it, or had it*installed ready for use, assuming that:

(i) the transition entity used it wholly for the purpose of producing assessable income during that period; and

(ii) the transition entity used the same rate of depreciation and method of depreciation during that period as the transition entity used for the income year in which a depreciation deduction was first allowable to the transition entity for it.

(6) If the test time in relation to the unit is one year or more before the*transition time, the rate of depreciation is to be the same as the rate that was used in calculating the deduction for depreciation assumed under section 58-120 to have been allowed to the*transition entity in respect of the latest income year in the period referred to in that section.

(a) the amount by which the higher of:

(ii) the cost of the plant to you;

exceeds its*written down value; and

(a) the amount by which the higher of:

(ii) the cost of the plant to you;

exceeds its*written down value; and

Subdivision 58-C - Plant acquired from exempt entities in connection with the acquisition of a business

Table of sections

58-150 Purchase of unit of plant from tax exempt vendor in connection with acquisition of a business

58-155 Choice by purchaser

Provisions applying where depreciation of the unit is calculated by reference to notional written down value

58-160 Cost of unit to purchaser

58-165 Ownership of unit

58-170 Cost of unit to tax exempt vendor

58-175 Effective life of unit

58-180 Choice or election to calculate assumed effective life

58-185 Use of unit for producing assessable income

58-190 Method of depreciation

58-195 Application of certain provisions in calculating depreciation rates

58-200 Choice of rate

58-205 Nomination or election of depreciation percentage

58-210 Notional written down value

58-215 Calculation of depreciation deductions and balancing adjustments

Provisions applying where depreciation of the unit is calculated by reference to undeducted pre-existing audited book value

58-220 Cost of unit to purchaser

58-225 Ownership of unit

58-230 Assumed cost of unit to tax exempt vendor for purpose of calculating undeducted pre-existing audited book value

58-235 Effective life of unit

58-240 Election to calculate assumed effective life

58-245 Use of unit for producing assessable income

58-250 Method of depreciation

58-255 Application of certain provisions in calculating depreciation rates

58-260 Nomination or election of depreciation percentage

58-265 Undeducted pre-existing audited book value

58-270 Calculation of depreciation deductions and balancing adjustments

58-150 Purchase of unit of plant from tax exempt vendor in connection with acquisition of business

(1) If:

(a) at a particular time on or after 4 August 1997, an entity whose*ordinary income or*statutory income is to any extent assessable acquires a unit of*plant from an*exempt entity; and

(b) the unit of plant is acquired in connection with the acquisition of a*business from the exempt entity;

then:

(d) the time when the unit of plant is acquired is the acquisition time ; and

(e) the income year in which the*acquisition time occurs is the acquisition year ; and

(f) the entity that acquired the unit of plant is the purchaser ; and

(g) the unit of plant is the unit .

(2) The unit is taken to be acquired in connection with the acquisition of a*business from the*exempt entity if:

(a) the unit was used by the exempt entity in carrying on a business and the purchaser or another person uses the unit in carrying on the business; or

(b) both of the following subparagraphs apply:

(i) the unit was used by the exempt entity in performing functions, or engaging in activities, that did not constitute the carrying on of a business by the exempt entity;

(ii) the unit is used by the purchaser or another person in performing those functions or engaging in those activities as part of carrying on a business; or

(i) the acquisition by the purchaser of the unit was connected with the acquisition of another asset by the purchaser or another person from the exempt entity or from an*associate of the exempt entity;

(ii) ownership of the other asset gives the purchaser or other person a right, or imposes on the purchaser or other person an obligation, to perform functions or engage in activities as part of the carrying on of a business or confers on the purchaser or other person a commercial advantage or opportunity in connection with performing functions or engaging in activities as part of the carrying on of a business;

(iii) the unit is used by the purchaser or other person in performing those functions or engaging in those activities pursuant to the right or obligation or in taking the benefit of the advantage or opportunity, as the case may be; or

(d) the unit was acquired by the purchaser under an arrangement under which the purchaser or another person acquired another asset from the exempt entity or from an associate of the exempt entity and:

(i) the other asset is taken by paragraph (a), (b) or (c); or

(ii) where the other asset is not a unit of plant, it would, if it were a unit of plant, be taken by paragraph (a), (b) or (c);

to be acquired in connection with the acquisition of a business from the exempt entity.

(3) Paragraphs (2)(b), (c) and (d) do not apply if the unit is used by the purchaser solely to derive assessable income from the provision of office or residential accommodation.

58-155 Choice by purchaser

(1) The purchaser must, in relation to the unit, do either of the following:

(a) choose that depreciation deductions and balancing adjustments are to be calculated by reference to the*notional written down value of the unit;

(b) choose that depreciation deductions and balancing adjustments are to be calculated by reference to the*undeducted pre-existing audited book value (if any) of the unit.

(2) A choice under subsection (1) must be made:

(a) by the day on which the purchaser lodges the purchaser's*income tax return for the*acquisition year; or

(b) within a further period allowed by the Commissioner.

(3) A choice, once made, applies to the*acquisition year and all later income years.

(4) If the purchaser makes a choice under paragraph (1)(a), sections 58-160 to 58-215 have effect in relation to the unit.

(5) If the purchaser makes a choice under paragraph (1)(b), sections 58-220 to 58-270 have effect in relation to the unit.

Provisions applying where depreciation of the unit is calculated by reference to notional written down value

58-160 Cost of unit to purchaser

(1) The cost of the unit to the purchaser is taken to be the amount that is the sum of:

(a) the*notional written down value of the unit in relation to the*tax exempt vendor; and

(b) the amount of any incidental costs to the purchaser in respect of the acquisition of the unit.

(2) Sections 58-165 to 58-205 have effect for the purpose of the calculation under section 58-210 of the*notional written down value referred to in paragraph (1)(a).

58-165 Ownership of unit

(1) If the*tax exempt vendor was an*exempt Australian government agency immediately before the*acquisition time and had acquired the unit from another exempt Australian government agency:

(a) assume that the tax exempt vendor acquired it at the time when it was acquired or constructed by the other exempt Australian government agency; or

(b) if it had, before its acquisition by the tax exempt vendor, been successively owned by 2 or more exempt Australian government agencies - assume that the tax exempt vendor acquired it at the time when it was acquired or constructed by the first of those exempt Australian government agencies that owned it.

(2) To avoid doubt, if subsection (1) does not apply, the*tax exempt vendor is taken to have acquired the unit at the time when the tax exempt vendor acquired or constructed it.

58-170 Cost of unit to tax exempt vendor

(1) To avoid doubt, Subdivision 42-B applies for the purpose of determining the cost of the unit to the*tax exempt vendor.

(2) However, if the*tax exempt vendor was an*exempt Australian government agency immediately before the*acquisition time and had acquired the unit from another exempt Australian government agency:

(a) assume that its cost to the tax exempt vendor is the amount that was its cost to the other exempt Australian government agency; or

(b) if the unit had, before its acquisition by the tax exempt vendor, been successively owned by 2 or more exempt Australian government agencies, assume that its cost to the tax exempt vendor is the amount that was its cost to the first of those exempt Australian government agencies that owned it.

58-175 Effective life of unit

Assume that the*effective life of the unit is the period that would have been calculated to be its*effective life:

(a) if subsection 58-165(1) applies - at the time when it is assumed under that subsection to have been acquired by the*tax exempt vendor; or

(b) if subsection 58-165(2) applies - at the time when it was acquired or constructed by the tax exempt vendor.

58-180 Choice or election to calculate assumed effective life

For the purpose of calculating the assumed*effective life of the unit under section 58-175:

(a) if the*tax exempt vendor would have been required to make a choice under subsection 42-100(1) at a particular time during the period for which the tax exempt vendor owned, or is assumed to have owned, it - assume that the tax exempt vendor made a choice at that time under paragraph 42-100(1)(b) to adopt the effective life specified by the Commissioner; or

(b) if the tax exempt vendor could have made an election under subsection 54A(1) of theIncome Tax Assessment Act 1936 at a particular time during the period for which the tax exempt vendor owned, or is assumed to have owned, it - assume that the tax exempt vendor made the election at that time.

58-185 Use of unit for producing assessable income

Assume that the unit had, at all times during the period beginning when it was acquired or constructed, or is assumed to have been acquired, by the*tax exempt vendor and ending immediately before the*acquisition time, been used wholly for the purpose of producing assessable income by the tax exempt vendor, and assume that deductions for depreciation in respect of it had been allowed to the tax exempt vendor during that period.

58-190 Method of depreciation

(1) Assume that the*tax exempt vendor could have selected a*method of depreciation to use in relation to the unit for the income years included in the period referred to in section 58-185.

(2) The purchaser must make the selection that the*tax exempt vendor could have made.

(3) Assume that the*method of depreciation selected was used by the*tax exempt vendor for each of the income years referred to in subsection (1).

58-195 Application of certain provisions in calculating depreciation rates

In calculating the rate of depreciation in relation to the unit in each income year included in the period referred to in section 58-185:

(a) if section 57AG of theIncome Tax Assessment Act 1936 as in force at any time before its repeal had applied in respect of that income year - that section is to be taken into account; and

(c) if section 57AL of theIncome Tax Assessment Act 1936 as in force at any time before its repeal had applied in respect of that income year - that section is to be disregarded.

58-200 Choice of rate

(1) If the*tax exempt vendor could have made a choice under subsection 42-120(1) at a particular time (the relevant time ) during the period referred to in section 58-185, the purchaser may make the choice and, if the choice is made, it is taken to have been made by the tax exempt vendor at the relevant time.

(2) A*diminishing value rate chosen must not be less than the percentage worked out by using the formula:

(1.5 / Number of years in effective life) * 100

where:

number of years in effective life means the number of years in the assumed*effective life of the unit under section 58-175.

(3) A*prime cost rate chosen must not be less than two-thirds of the percentage that would be worked out under subsection (2) if a*diminishing value rate had been chosen.

58-205 Nomination or election of depreciation percentage

(1) If the*tax exempt vendor could have made a nomination or election under subsection 55(8) of theIncome Tax Assessment Act 1936 as in force at a particular time (the relevant time ) during the period referred to in section 58-185, the purchaser may make the nomination or election, as the case may be, and, if the nomination or election is made, it is taken to have been made by the tax exempt vendor at the relevant time.

(2) If the purchaser makes a nomination under subsection 55(8) of theIncome Tax Assessment Act 1936 as in force immediately before the commencement of section 23 of theTaxation Laws Amendment Act 1993, the following paragraphs apply:

(a) the nomination applies to the income year in which it is taken to have been made and all later income years in the period referred to in section 58-185;

(b) a*diminishing value rate nominated must not be less than the percentage worked out by using the formula:

(1.5 / Number of years in effective life) * 100

where:

number of years in effective life means the number of years in the assumed*effective life of the unit under section 58-175;

(c) a*prime cost rate nominated must not be less than two-thirds of the percentage that would be worked out under paragraph (b) if a diminishing value rate had been nominated.

(3) If the purchaser makes an election under subsection 55(8) of theIncome Tax Assessment Act 1936 as in force immediately before the commencement of section 7 of theTaxation Laws Amendment Act (No. 2) 1992, the election applies to the income year in which it is taken to have been made and all later income years in the period referred to in section 58-185.

58-210 Notional written down value

The notional written down value of the unit in relation to the*tax exempt vendor is the amount of its cost or assumed cost to the tax exempt vendor under section 58-170 less the sum of the amounts in respect of which deductions for depreciation are assumed under section 58-185 to have been allowed to the tax exempt vendor in respect of it.

Note: Sections 58-165 to 58-180, and sections 58-190 to 58-205, have effect for the purpose of determining the amounts referred to in this section.

58-215 Calculation of depreciation deductions and balancing adjustments

(1) The rules otherwise applying to the purchaser in the calculation of depreciation deductions and balancing adjustments in respect of the unit have effect in relation to the purchaser subject to this section and section 58-160.

(2) If a*balancing adjustment event occurred before the 1998-99 income year, subsection 42-190(2) has effect in relation to the unit as if paragraph (a) of that subsection were omitted and replaced by the following paragraph:

(a) the amount by which the higher of:

(i) the cost base of the*plant for the purposes of Part IIIA of theIncome Tax Assessment Act 1936, less any amounts included in that cost base as a result of expenditure incurred after the*acquisition time that were not, immediately before the balancing adjustment event occurred, included in the cost of the plant to you for the purposes of Division 42; or

(ii) the cost of the plant to you;

exceeds its*written down value; and

(3) If a*balancing adjustment event occurred in a later income year, subsection 42-190(2) has effect in relation to the unit as if paragraph (a) of that subsection were omitted and replaced by the following paragraph:

(a) the amount by which the higher of:

(i) the cost base (without indexation) of the*plant for the purposes of Parts 3-1 and 3-3, less any amounts included in that cost base as a result of expenditure incurred after the*acquisition time that were not, immediately before the balancing adjustment event occurred, included in the cost of the plant to you for the purposes of Division 42; or

(ii) the cost of the plant to you;

exceeds its*written down value; and

Provisions applying where depreciation of the unit is calculated by reference to undeducted pre-existing audited book value

58-220 Cost of unit to purchaser

(1) The cost of the unit to the purchaser is taken to be the amount that is the sum of:

(a) the*undeducted pre-existing audited book value of the unit in relation to the*tax exempt vendor; and

(b) the amount of any incidental costs to the purchaser in respect of the acquisition of the unit.

(2) Sections 58-225 to 58-260 have effect for the purpose of the calculation under section 58-265 of the*undeducted pre-existing audited book value referred to in paragraph (1)(a).

58-225 Ownership of unit

(1) If the*tax exempt vendor was an*exempt Australian government agency immediately before the*acquisition time and had acquired the unit from another exempt Australian government agency:

(a) assume that the tax exempt vendor acquired it at the time when it was acquired or constructed by the other exempt Australian government agency; or

(2) To avoid doubt, if subsection (1) does not apply, the*tax exempt vendor is taken to have acquired the unit at the time when the tax exempt vendor acquired or constructed it.

58-230 Assumed cost of unit to tax exempt vendor for purpose of calculating undeducted pre-existing audited book value

Assume that the cost of the unit to the*tax exempt vendor is the sum of:

(a) its*pre-existing audited book value at the test time; and

(b) the amounts of any capital expenditure on improving it incurred by the tax exempt vendor, or by an earlier owner that was an*exempt Australian government agency, during the period beginning immediately after the test time and ending immediately before the*acquisition time.

58-235 Effective life of unit

Assume that the*effective life of the unit is the period that would have been calculated to be its effective life:

(a) if subsection 58-225(1) applies - at the time when it is assumed under that subsection to have been acquired by the*tax exempt vendor; or

(b) if subsection 58-225(2) applies - at the time when it was acquired or constructed by the tax exempt vendor.

58-240 Election to calculate assumed effective life

For the purpose of calculating the assumed*effective life of the unit under section 58-235, if the*tax exempt vendor could have made an election under subsection 54A(1) of theIncome Tax Assessment Act 1936 at a particular time during the period for which the tax exempt vendor owned, or is assumed to have owned, it, assume that the tax exempt vendor made the election at that time.

58-245 Use of unit for producing assessable income

Assume that the unit had, at all times during the period beginning at the test time and ending immediately before the*acquisition time, been used wholly for the purpose of producing assessable income by the*tax exempt vendor, and assume that deductions for depreciation in respect of it had been allowed to the tax exempt vendor during that period.

58-250 Method of depreciation

(1) Assume that the*tax exempt vendor could have selected a*method of depreciation to use in relation to the unit for the income years included in the period referred to in section 58-245.

(2) The purchaser must make the selection that the*tax exempt vendor could have made.

(3) Assume that the*method of depreciation selected was used by the*tax exempt vendor for each of the income years referred to in subsection (1).

58-255 Application of certain provisions in calculating depreciation rates

In calculating the rate of depreciation in relation to the unit in each income year included in the period referred to in section 58-245:

(a) if section 57AG of theIncome Tax Assessment Act 1936 as in force at any time before its repeal had applied in respect of that income year - that section is to be taken into account; and

(c) if section 57AL of theIncome Tax Assessment Act 1936 as in force at any time before its repeal had applied in respect of that income year - that section is to be disregarded.

58-260 Nomination or election of depreciation percentage

(1) If the*tax exempt vendor could have made a nomination or election under subsection 55(8) of theIncome Tax Assessment Act 1936 as in force at a particular time (the relevant time ) during the period referred to in section 58-245, the purchaser may make the nomination or election, as the case may be, and, if the nomination or election is made, it is taken to have been made by the tax exempt vendor at the relevant time.

(a) the nomination applies to the income year in which it is taken to have been made and all later income years in the period referred to in section 58-245;

(b) a*diminishing value rate nominated must not be less than the percentage worked out by using the formula:

(1.5 / Number of years in effective life) * 100

where:

number of years in effective life means the number of years in the assumed*effective life of the unit under section 58-235;

(c) a*prime cost rate nominated must not be less than two-thirds of the percentage that would be worked out under paragraph (b) if a diminishing value rate had been nominated.

58-265 Undeducted pre-existing audited book value

The undeducted pre-existing audited book value of the unit in relation to the*tax exempt vendor is:

(a) if the test time in relation to the unit is less than one year before the*acquisition time - the amount of its assumed cost to the tax exempt vendor under section 58-230; or

(b) if the test time in relation to the unit is one year or more before the acquisition time - the amount of its assumed cost to the tax exempt vendor under section 58-230 less any amounts in respect of which deductions for depreciation are assumed under section 58-245 to have been allowed to the tax exempt vendor in respect of it.

Note: Sections 58-225 to 58-260 have effect for the purpose of determining the amounts referred to in paragraph (b).

58-270 Calculation of depreciation deductions and balancing adjustments

(2) If a*balancing adjustment event occurred in the 1998-99 income year, subsection 42-190(2) has effect in relation to the unit as if paragraph (a) of that subsection were omitted and replaced by the following paragraph:

(a) the amount by which the higher of:

(i) the cost base of the*plant for the purposes of Part IIIA of theIncome Tax Assessment Act 1936, less any amounts included in that cost base as a result of expenditure incurred after the*acquisition time that were not, immediately before the balancing adjustment event occurred, included in the cost of the plant to you for the purposes of Division 42; or

(ii) the cost of the plant to you;

exceeds its*written down value; and

(a) the amount by which the higher of:

(i) the cost base (without indexation) of the*plant for the purposes of Parts 3-1 and 3-3, less any amounts included in that cost base as a result of expenditure incurred after the*acquisition time that were not, immediately before the balancing adjustment event occurred, included in the cost of the plant to you for the purposes of Division 42; or

(ii) the cost of the plant to you;

exceeds its*written down value; and

[The next Part is Part 2-20.]

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