Income Tax Assessment Act 1997
View history note
Hide history noteNote: A Commissioner ' s Remedial Power (CRP 2017/2) is relevant to this part of the tax law. Taxation Administration (Remedial Power - Small Business Restructure Roll-over) Determination 2017 (F2017L01687) modifies the operation of s 40-340 of the Income Tax Assessment Act 1997 and any other provisions of a taxation law whose operation is affected by the modified operation of s 40-340 in relation to an asset transferred under a small business restructure roll-over (item 8 of the table in s 40-340(1) ).
The operation of the relevant provisions is modified as follows:
If s 40-340 of ITAA 1997 provides for rollover relief in relation to a disposal of a depreciating asset because the condition in item 8 of the table in s 40-340(1) of ITAA 1997 is satisfied in relation to the asset, that section has effect as if it also provided that the disposal of the asset has no direct consequences under the income tax law (other than Div 40 of ITAA 1997).
The modification applies in respect of transfers on or after 8 May 2018.
An entity must treat a modification as not applying to it or any other entity if the modification would produce a less favourable result for it. The Commissioner is empowered by s 370-5 of Sch 1 to the Taxation Administration Act 1953 to make modifications, by legislative instrument, to ensure the law is administered to achieve its intended purpose or object.
SECTION 40-27 Further reduction of deduction for second-hand assets in residential property 40-27(1)
In addition to subsections 40-25(2) to (4) , you may have to further reduce your deduction for a *depreciating asset for the income year.
40-27(2)
Reduce your deduction by any part of the asset ' s decline in value that is attributable to your use of it, or your having it *installed ready for use, for the *purpose of producing assessable income:
(a) from the use of *residential premises to provide residential accommodation; but
(b) not in the course of carrying on a *business;
if:
(c) you did not *hold the asset when it was first used, or first installed ready for use, (other than as trading stock) by any entity; or
(d) at any time during the income year or an earlier income year, the asset was used, or installed ready for use, either:
(i) in residential premises that were one of your residences at that time; or
(ii) for a purpose that was not a *taxable purpose, and in a way that was not occasional.
Note:
Your deduction could be reduced to nil if the purpose to which paragraphs (a) and (b) relate is your only taxable purpose for using the asset or having the asset installed ready for use.
Exception - kind of entity
40-27(3)
Subsection (2) does not apply to you for the asset if, at any time during the income year, you are:
(a) a *corporate tax entity; or
(b) a *superannuation plan that is not a *self managed superannuation fund; or
(c) a *managed investment trust; or
(d) a public unit trust (within the meaning of section 102P of the Income Tax Assessment Act 1936 ); or
(e) a unit trust or partnership, if each *member of the trust or partnership is covered by a paragraph of this subsection at that time during the income year.
Exception - certain assets in new residential premises
40-27(4)
Paragraph (2)(c) does not apply to you for the asset if:
(a) the *residential premises referred to in paragraph (2)(a) (the current premises ) are supplied to you as new residential premises on a particular day (the current supply day ); and
(b) the asset is supplied to you as part of that supply of the current premises; and
(c) at the time you first *hold the asset as a result of that supply, the asset is used, or *installed ready for use, in:
(i) the current premises; or
(ii) any other real property in which an interest was supplied to you as part of that supply of the current premises; and
(d) at any earlier time, no entity was residing in any residential premises in which the asset was used, or installed ready for use, at that earlier time; and
(e) no amount can be deducted under this Division, or under Subdivision 328-D , for the asset for any income year by any previous holder of the asset.
Note:
An entity residing at an earlier time in other residential premises in the same complex will not cause paragraph (d) to prevent this subsection from applying.
40-27(5)
However, disregard paragraph (4)(d) for an earlier time if:
(a) the asset was used, or installed ready for use, in the current premises at that time; and
(b) both that time, and the current supply, happen during the 6-month period starting on the day the current premises became new residential premises.
Exception - low-value pools
40-27(6)
Subsection (2) does not apply to *depreciating assets allocated to a low-value pool.
Note:
See Subdivision 40-E for low-value pools.
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