Income Tax Assessment 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-B - Core provisions  

Operative provisions

SECTION 40-110   Recalculating effective life  

40-110(1)    
You may choose to recalculate the ^* effective life of a ^* depreciating asset from a later income year if the effective life you have been using is no longer accurate because of changed circumstances relating to the nature of the use of the asset.

Example:

Some examples of changes in circumstances that may result in your recalculating the effective life of a depreciating asset are:

• your use of the asset turns out to be more or less rigorous than you expected (or was anticipated by the Commissioner ' s determination);

• there is a downturn in demand for the goods or services the asset is used to produce that will result in the asset being scrapped;

• legislation prevents the asset ' s continued use;

• changes in technology make the asset redundant;

• there is an unexpected demand, or lack of success, for a film.

40-110(2)    
You must recalculate a ^* depreciating asset ' s ^* effective life from a later income year if:

(a) you:

(i) self-assessed its effective life; or

(ii) are using an effective life worked out under section 40-100 (about the Commissioner ' s determination), or 40-102 (about the capped life of certain depreciating assets), and the ^* prime cost method; or

(iii) are using an effective life because of subsection 40-95(4), (4B), (4C), (5), (5B) or (5C) ; and

(b) its ^* cost is increased in that year by at least 10%.

Note 1:

You may conclude that the effective life is the same.

Note 2:

For the elements of the cost of a depreciating asset, see Subdivision 40-C .

Example 1:

Paul purchases a photocopier and self-assesses its effective life at 6 years. In a later year he incurs expenditure to increase the quality of the reproductions it makes. He recalculates its effective life, but concludes that it remains the same.

Example 2:

Fiona also purchases a photocopier and self-assesses its effective life at 6 years. In a later year she incurs expenditure to incorporate a more robust paper handling system. She recalculates its effective life, and concludes that it is increased to 7 years.

40-110(3)    
You must recalculate a ^* depreciating asset ' s ^* effective life for the income year in which you started to ^* hold it if:

(a) you are using an effective life because of subsection 40-95(4) , (4B), (4C), (5), (5B) or (5C); and

(b) the asset ' s ^* cost is increased after you started to hold it in that year by at least 10%.

40-110(3A)    

Subsections (1), (2) and (3) do not apply to a *depreciating asset that is a *mining, quarrying or prospecting right or *mining, quarrying or prospecting information.

40-110(3B)    

You may choose to recalculate the *effective life of a *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, from a later income year if the effective life you have been using is no longer accurate:

(a) because of changed circumstances relating to an existing or proposed mine, petroleum field or quarry to which that right or information relates; or

(b) because that right or information now relates to an existing or proposed mine, petroleum field or quarry; or

(c) because that right or information no longer relates to an existing or proposed mine, petroleum field or quarry.

40-110(4)    

A recalculation under this section must be done using:

(a) if paragraph (b) does not apply - section 40-105 (about self-assessing effective life); or

(b) if the *depreciating asset is a *mining, quarrying or prospecting right or *mining, quarrying or prospecting information:

(i) subsections 40-95(10) and (11) (if the right or information relates to an existing or proposed mine, petroleum field or quarry); or

(ii) subsection 40-95(12) (if the right or information no longer relates to an existing or proposed mine, petroleum field or quarry).

Exception: intangibles

40-110(5)    

This section does not apply to an intangible ^* depreciating asset to which an item in the table in subsection 40-95(7) applies.