Consolidation Reference Manual

The Consolidation reference manual was last updated on 15 July 2011. It does not contain any changes to consolidation legislation that has occurred since that time and will not be updated in future. It cannot be relied on for currency of content. For any future consolidation changes, you will be able to access information from our consolidation home page or by visiting our 'New legislation' page.
You can still refer to the Consolidation reference manual for consolidation information that has not been impacted by changes in the legislation.

C2 Assets

C2-3 Worksheets

C2-3-210 Over-depreciation worksheet

After testing depreciating assets for reduction of the tax cost setting amount because they are revenue-like assets ( → 'Reduction for revenue-like assets (step C)', C2-4-530) , consider whether a reduction (or further reduction) to the amount is required for each over-depreciated asset → 'Reduction for over-depreciated assets (step D)', C2-4-610 ; section 705-50, Income Tax Assessment Act 1997 (ITAA 1997), Explanatory Memorandum to New Business Tax System (Consolidation) Bill (No.1) 2002, paragraph 5.44.

The first step is to ascertain whether each item of plant is over-depreciated.

Is an asset over-depreciated?

The tax cost setting amount for an over-depreciated asset is reduced by the least of the over-depreciation amount (calculated above), the excess of the tax cost setting amount over its terminating value, and the tax deferral amount.

→ calculation following page

Over-depreciation reduction

Note
Changes to the over-depreciation provisions
The over-depreciation provisions in the tax cost setting rules have been modified for an entity that becomes a member of a consolidated group between 9 May 2007 and 30 June 2009. In this case a head company will only need to look at five years of dividend history immediately before the joining time to determine whether an over-depreciation adjustment is required in relation to the joining entity's asset. Effective from 1 July 2009, the over-depreciation adjustment in section 705-50 has been repealed, so it will no longer apply to over-depreciated assets of entities that become subsidiary members of a consolidated group on or after that date. → Tax Laws Amendment (2010 Measures No. 1) Act 2010 (No. 56 of 2010)

References

Legislation

Income Tax Assessment Act 1997 , section 705-50 and subsection 995-1(1) as amended by Tax Laws Amendment (2010 Measures No. 1) Act 2010 (No. 56 of 2010), Schedule 5, Part 6

Explanatory Memorandum to the Tax Laws Amendment (2010 Measures No. 1) Bill 2010, Chapter 5

History

Revision History

Section C2-3-210 first published 2 December 2002.

Further revisions are described below.

Date Amendment Reason
6.5.11 Minor changes to reflect the repeal of section 705-50, effective 1 July 2009. Legislative amendment.

Current at 6 May 2011

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