New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001 (77 of 2001)

Schedule 2   General consequential amendments

Income Tax Assessment Act 1997

259   At the end of Division 104

Add:

104-235 Balancing adjustment events for depreciating assets: CGT event K7

(1) CGT event K7 happens if:

(a) a *balancing adjustment event occurs for a *depreciating asset you *held; and

(b) at some time when you held the asset, you used it, or had it *installed ready for use, for a purpose other than a *taxable purpose.

(2) The time of *CGT event K7 is when the *balancing adjustment event occurs.

(3) Any *capital gain or *capital loss is worked out:

(a) under section 104-240; or

(b) under section 104-245 if the *depreciating asset was allocated to a low-value pool.

(4) A *capital gain or *capital loss you make is disregarded if:

(a) the *depreciating asset is a *pre-CGT asset; or

(b) you can deduct an amount for the asset's decline in value under Division 328 (about STS taxpayers) for the income year in which the *balancing adjustment event occurred.

104-240 Working out capital gain or loss for CGT event K7: general case

(1) You make a capital gain if the *depreciating asset's *termination value is more than its *cost. The amount of the *capital gain is:

where:

sum of reductions is the sum of the reductions in your deductions for the asset under section 40-25.

total decline is the decline in value of the *depreciating asset since you started to *hold it.

Note: The CGT concepts of cost base and capital proceeds are not relevant for this event.

(2) You make a capital loss if the *depreciating asset's *cost is more than its *termination value. The amount of the *capital loss is:

where:

sum of reductions and total decline have the same meanings as in subsection (1).

104-245 Working out capital gain or loss for CGT event K7: pooled assets

(1) You make a capital gain if the *depreciating asset's *termination value is more than its *cost. The amount of the *capital gain is:

where:

taxable use fraction is the taxable use percentage (expressed as a fraction) that you estimated for the asset when you allocated it to the pool.

Note: The CGT concepts of cost base and capital proceeds are not relevant for this event.

(2) You make a capital loss if the *depreciating asset's *cost is more than its *termination value. The amount of the *capital loss is:

where:

taxable use fraction has the same meaning as in subsection (1).