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

Commissioner ' s Remedial Power

Note: 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.

Subdivision 40-B - Core provisions

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Operative provisions

SECTION 40-30 What a depreciating asset is

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40-30(1)

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A depreciating asset is an asset that has a limited ^* effective life and can reasonably be expected to decline in value over the time it is used, except:

(a) land; or

(b) an item of ^* trading stock; or

(c) an intangible asset, unless it is mentioned in subsection (2) .

40-30(2)

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These intangible assets are depreciating assets if they are not ^* trading stock:

(a) ^* mining, quarrying or prospecting rights;

(b) ^* mining, quarrying or prospecting information;

(ba) (Repealed by No 96 of 2014)

(bb) (Repealed by No 96 of 2014)

(c) items of ^* intellectual property;

(d) ^* in-house software;

(e) ^* IRUs;

(f) ^* spectrum licences;

(g) (Repealed by No 151 of 2020)

(h)

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^* telecommunications site access rights.

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History

S 40-30(2) amended by No 151 of 2020, s 3 and Sch 9 item 101, by repealing para (g), applicable in relation to a datacasting transmitter licence that was in existence before 17 June 2021, as if those amendments had not been made. Para (g) formerly read:

(g) ^* datacasting transmitter licences;

S 40-30(2) amended by No 96 of 2014, s 3 and Sch 5 item 5, by repealing para (ba) and (bb), effective 30 September 2014. The amendments do not affect deductions or balancing adjustments for geothermal exploration rights or geothermal exploration information that started to be held before the income year in which this Schedule commences. Para (ba) and (bb) formerly read:

(ba) * geothermal exploration rights;

(bb) * geothermal exploration information;

S 40-30(2) amended by No 84 of 2013, s 3 and Sch 3 item 5, by inserting paras (ba) and (bb), applicable to depreciating assets whose start time is on or after 1 July 2012.

S 40-30(2) amended by No 78 of 2005, s 3 and Sch 3 item 8, by inserting para (h) at the end, effective 29 June 2005. No 78 of 2005, s 3 and Sch 3 item 12 contains the following application provision:

12 Application of amendments
(1)
The amendments apply in relation to expenditure incurred on or after 12 May 2004.

(2)
Those amendments do not apply to expenditure incurred by an entity to acquire a right if:

(a) the right was acquired by the entity before 12 May 2004; and

(b) the entity becomes a member of a consolidated group or MEC group on or after that day; and

(c) because of subsection 701-55(2) of the Income Tax Assessment Act 1997 , the right is taken to have been acquired on or after that day.

(3)
However, if:

(a) an entity incurs expenditure on or after 12 May 2004 relating to telecommunications site access rights (the new rights ) granted to the entity on or after that day in relation to a facility; and

(b) before that day, the entity had other telecommunications site access rights (the earlier rights ) of the same kind in relation to the same facility; and

(c) the earlier rights end before they would ordinarily have ended under the contract under which they were granted;
then, to the extent (if any) that the new rights provide the same ability to share the facility, install the facility or enter or cross the premises as the earlier rights, the amendments do not apply to so much of the expenditure as is reasonably attributable to the extent of that ability.

40-30(3)
This Division applies to an improvement to land, or a fixture on land, whether the improvement or fixture is removable or not, as if it were an asset separate from the land.

Note 1:

Whether such an asset is a depreciating asset depends on whether it falls within the definition in subsection (1) .

Note 2:

This Division does not apply to capital works for which you can deduct amounts under Division 43 : see subsection 40-45(2) .

40-30(4)
Whether a particular composite item is itself a depreciating asset or whether its components are separate depreciating assets is a question of fact and degree which can only be determined in the light of all the circumstances of the particular case.

Example 1:

A car is made up of many separate components, but usually the car is a depreciating asset rather than each component.

Example 2:

A floating restaurant consists of many separate components (like the ship itself, stoves, fridges, furniture, crockery and cutlery), but usually these components are treated as separate depreciating assets.

40-30(5)
This Division applies to a renewal or extension of a ^* depreciating asset that is a right as if the renewal or extension were a continuation of the original right.

40-30(6)

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This Division applies to a ^* mining, quarrying or prospecting right (the new right ) as if it were a continuation of another mining, quarrying or prospecting right you ^* held if:

(a) the other right ends; and

(b)

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any of the following conditions are satisfied:

(i) the new right and the other right relate to the same area, or any difference in area is not significant;

(ii) the new right relates to an area that is a part of the area that the other right relates to.

Note:

If the other right does not end, it may be taken to be split into 2 assets: see section 40-122 .

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40-30(7)

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For the purposes of subsection (6) , it does not matter whether the new right begins immediately after the other right ends or later (including in a later income year).

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