Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS

Division 328 - Small business entities

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Subdivision 328-D - Capital allowances for small business entities

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Operative provisions

SECTION 328-205 Estimate of taxable use

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328-205(1)

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You must, for the first income year for which you are, or last were, a *small business entity, make a reasonable estimate for that year of the proportion you will use, or have ^* installed ready for use, each ^* depreciating asset that you ^* held just before, and at the start of, that year for a ^* taxable purpose if:

(a) the asset has not previously been allocated to your ^* general small business pool; and

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(b) you have started to use it, or have it installed ready for use, for a taxable purpose; and

(c) you have chosen to calculate your deductions for it under this Subdivision.

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Note 1:

That proportion will be 100% for an asset that you expect to use, or have installed ready for use, solely for a taxable purpose.

Note 2:

Your estimate will be zero for an income year if another provision of this Act denies a deduction for that year: see section 328-230 .

Note 3:

This subsection does not apply to a transferee for certain assets if roll-over relief under section 40-340 is chosen: see sections 328-243 and 328-257 .

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328-205(2)

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You must also make this estimate for each ^* depreciating asset that you ^* hold and start to use, or have ^* installed ready for use, for a ^* taxable purpose during an income year for which you are a *small business entity and you choose to use this Subdivision. You must make the estimate for the income year in which you start to use it, or have it installed ready for use, for such a purpose.

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328-205(3)
The taxable purpose proportion of a ^* depreciating asset ' s ^* adjustable value, or of an amount included in the second element of its ^* cost, is that part of that amount that represents:

(a) the proportion you estimated under subsection (1) or (2); or

(b) if you have had to make an adjustment under section 328-225 for the asset - the proportion most recently applicable to the asset under that section.

Note:

An amount included in the second element of the cost of a depreciating asset is referred to in this Division as a cost addition amount: see subsection 328-190(3) .

328-205(4)

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The taxable purpose proportion of a ^* depreciating asset ' s ^* termination value is that part of that amount that represents:

(a) if you have not had to make an adjustment under section 328-225 for the asset - the proportion you estimated under subsection (1) or (2); or

(b) if you have had to make at least one such adjustment - the average of:

(i) the proportion you estimated under subsection (1) or (2); and

(ii) the proportion applicable to the asset for each of the 3 income years you ^* held the asset after the one in which the asset was allocated to the pool.

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(c) (Repealed by No 23 of 2012)

Example:

When Bria ' s computer was allocated to her general small business pool for the 2012-13 income year, she estimated that it would be used 50% for her florist business. Due to increasing business, Bria estimates the computer ' s use to be 70% for the 2013-14 year, and 90% for the 2014-15 year. She makes an adjustment under section 328-225 for both those years.

Bria sells the computer for $1,000 at the start of the 2016-17 income year. She must now average the business use estimates for the computer for the year it was allocated to the pool and the next 3 years to work out the taxable purpose proportion of its termination value. The average is worked out as follows:

• 50% (original estimate); plus

• 70% (2013-14 estimate); plus

• 90% (2014-15 estimate); plus

• 90% (no change on previous year);

= 300% ÷ 4 = 75%

The taxable purpose proportion of the computer ' s termination value is, therefore:

75% of $1,000 = $750

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History

S 328-205(4) amended by No 23 of 2012, s 3 and Sch 2 items 36 - 39, by omitting " and the asset is allocated to a *general small business pool " after " at least one such adjustment " in para (b), substituting " pool. " for " pool; or " in para (b)(ii), repealing para (c), and substituting the example at the end, applicable in relation to the 2012-13 income year and later income years. Para (c) and the example formerly read:

(c) if you have had to make at least one such adjustment and the asset is allocated to a long life small business pool - the average of:

(i) the proportion you estimated under subsection (1) or (2); and

(ii) the proportion applicable to the asset for each of the 20 income years you ^* held the asset after the one in which the asset was allocated to the pool.

Example:

When Bria ' s van was allocated to her general small business pool for the 2007-08 income year, she estimated that it would be used 50% for deliveries in her florist business. Due to increasing deliveries, Bria estimates the van ' s business use to be 70% for the 2008-09 year, and 90% for the 2009-10 year. She makes an adjustment under section 328-225 for both those years.

Bria sells the van for $3,000 at the start of the 2011-12 income year. She must now average the business use estimates for the van for the year it was allocated to the pool and the next 3 years to work out the taxable purpose proportion of its termination value. The average is worked out as follows:

• 50% (original estimate); plus

• 70% (2008-09 estimate); plus

• 90% (2009-10 estimate); plus

• 90% (no change on previous year);

= 300% ÷ 4 = 75%

The taxable purpose proportion of the van ' s termination value is, therefore:

75% of $3,000 = $2,250

S 328-205(4) amended by No 80 of 2007 , s 3 and Sch 3 items 43 to 45, by substituting " small business pool " for " STS pool " in paras (b) and (c) and substituting the example, applicable in relation to the 2007-08 income year and later income years. The example formerly read:

Example:

When Bria ' s van was allocated to her general STS pool for the 2001-02 income year, she estimated that it would be used 50% for deliveries in her florist business. Due to increasing deliveries, Bria estimates the van ' s business use to be 70% for the 2002-03 year, and 90% for the 2003-04 year. She makes an adjustment under section 328-225 for both those years.

Bria sells the van for $3,000 at the start of the 2005-06 income year. She must now average the business use estimates for the van for the year it was allocated to the pool and the next 3 years to work out the taxable purpose proportion of its termination value. The average is worked out as follows:

• 50% (original estimate); plus

• 70% (2002-03 estimate); plus

• 90% (2003-04 estimate); plus

• 90% (no change on previous year);

= 300% ÷ 4 = 75%

The taxable purpose proportion of the van ' s termination value is, therefore:

75% of $3,000 = $2,250

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