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

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Subdivision 40-D - Balancing adjustments

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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.

Operative provisions

SECTION 40-370 Balancing adjustments where there has been use of different car expense methods

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40-370(1)
An amount is included in your assessable income or you can deduct an amount under this section instead of section 40-285 if:

(a) a *balancing adjustment event occurs for a *car you *held; and

(b) you have deducted or can deduct an amount for the decline in value of the car for an income year under this Division; and

(c) you chose the " cents per kilometre " method in Subdivision 28-C for deducting your car expenses for the car for one or more other income years.

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Note 1:

This means if you have only used the " log book " method since you began using the car, you calculate the assessable amount or deductible amount under section 40-285 .

Note 2:

Also, if you have only used the " cents per kilometre " method since you began using the car, no amount is assessable or deductible under this section or section 40-285 .

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History

S 40-370(1) amended by No 162 of 2015, s 3 and Sch 1 items 33 - 35, by substituting para (c), omitting " or the " one-third of actual expenses " method " after " the " log book " method " from note 1 and " or the " 12% of original value " method " after " the " cents per kilometre " method " from note 2, effective 30 November 2015. No 162 of 2015, s 3 and Sch 1 item 45 contains the following application provision:

45 Application of amendments
45(1)
Subject to subitems (2) and (3), the amendments made by this Schedule apply in relation to the 2015-16 income year and later income years.

…

45(3)
Despite the amendments of section 40-370 of the Income Tax Assessment Act 1997 made by this Schedule, that section continues to apply, in relation to a balancing adjustment event, as if those amendments had not been made if:

(a) that balancing adjustment event occurs at or after the start of the 2015-16 income year for a car you held; and

(b) you chose the " 12% of original value " method in former Subdivision 28-D of that Act for deducting your car expenses for the car for one or more earlier income years.

Para (c) formerly read:

(c) you chose:

(i) the " cents per kilometre " method in Subdivision 28-C ; or

(ii) the " 12% of original value " method in Subdivision 28-D ;
for deducting your car expenses for the car for one or more other income years.

40-370(2)
Work out the amount you include in your assessable income or the amount you can deduct in this way: Method statement

Step 1.

Subtract the *car ' s *adjustable value just before the *balancing adjustment event occurred from the car ' s *termination value.

Step 2.

Reduce the step 1 amount by the part of the *car ' s decline in value that is attributable to your using the car, or having it *installed ready for use, for purposes other than *taxable purposes. You do this by applying the formula in subsection 40-290(2) .

Step 3.

Multiply the step 2 amount by the total number of days for which you deducted the decline in value of the *car under this Division.

Step 4.

Divide the step 3 amount by the total number of days you *held the *car.

Step 5.

The step 4 amount is a deduction if it is negative or it is included in your assessable income if it is positive.

40-370(3)

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In working out the *adjustable value for the income years for which you chose the " cents per kilometre method " , assume the decline in value was calculated under this Division on the same basis as those income years when that method did not apply.

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40-370(4)

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In working out the reduction in step 2 for the income years for which you chose the " cents per kilometre method " , assume that:

(a) you had not chosen that method for the *car; and

(b) Division 28 (about car expenses) had not applied to the car; and

(c) 20% was the extent of your use of the car for *taxable purposes.

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