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 40-95   Choice of determining effective life  

40-95(1)    
You must choose either:

(a)    to use an ^* effective life determined by the Commissioner for a ^* depreciating asset under section 40-100 ; or

(b)    to work out the effective life of the asset yourself under section 40-105 .

Note:

If you choose to use an effective life determined by the Commissioner for a depreciating asset, a capped life may apply to the asset under section 40-102 .

40-95(2)    
Your choice of an ^* effective life determined by the Commissioner for a ^* depreciating asset is limited to one in force as at:

(a)    the time when you entered into a contract to acquire the asset, you otherwise acquired it or you started to construct it if its ^* start time occurs within 5 years of that time; or

(b)    for ^* plant that you entered into a contract to acquire, you otherwise acquired or you started to construct before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 - the time when you entered into the contract to acquire it, otherwise acquired it or started to construct it; or

(c)    otherwise - its ^* start time.

40-95(3)    
You must make the choice for the income year in which the asset ' s ^* start time occurs.

Note:

For rules about choices: see section 40-130 .

Exception: asset acquired from associate

40-95(4)    
For a ^* depreciating asset that you start to ^* hold where the former holder is an ^* associate of yours and the associate has deducted or can deduct an amount for the asset under this Division, you must use:

(a)    if the associate was using the ^* diminishing value method for the asset - the same ^* effective life that the associate was using; or

(b)    if the associate was using the ^* prime cost method - an effective life equal to any period of the asset ' s effective life the associate was using that is yet to elapse at the time you started to hold it.

Note:

You can require the associate to tell you which effective life the associate was using: see section 40-140 .

40-95(4A)    

Subsection (4) does not apply to a ^* depreciating asset if subsection (4B) or (4C) applies to the asset.

40-95(4B)    

For a ^* depreciating asset that you start to ^* hold if:

(a)    the former holder is an ^* associate of yours; and

(b)    the associate has deducted or can deduct an amount for the asset under this Division; and

(c)    section 40-102 applied to the asset immediately before you started to hold it because an item in the tables in subsections 40-102(4) and (5) applied to it at the relevant time (the relevant time for the associate ) that applied to the associate under subsection 40-102(3) ; and

(d)    a different item in the tables in subsections 40-102(4) and (5) applies to the asset when you start to hold it; and

(e)    the item referred to in paragraph (d) would have applied to the asset at the relevant time for the associate if the use to which the asset were put at that time were the use (the new use ) to which it is put when you start to hold it;

you must use:

(f)    if the associate was using the ^* diminishing value method for the asset - an ^* effective life equal to the ^* capped life that would have applied to the asset under subsection 40-102(4) or (5) at the relevant time for the associate if the use to which the asset were put at that time were the new use; or

(g)    if the associate was using the ^* prime cost method - an effective life equal to the capped life that:

(i) would have applied to the asset under subsection 40-102(4) or (5) at the relevant time for the associate if the use to which the asset were put at that time were the new use; and

(ii) is yet to elapse at the time you start to hold it.

Note 1:

If paragraph (e) is not satisfied, subsection (4C) may apply to the depreciating asset.

Note 2:

You can require the associate to tell you the relevant time that applied to the associate under subsection 40-102(3) : see section 40-140 .

40-95(4C)    

For a ^* depreciating asset that you start to ^* hold if:

(a)    the former holder is an ^* associate of yours; and

(b)    the associate has deducted or can deduct an amount for the asset under this Division; and

(c)    section 40-102 applied to the asset immediately before you started to hold it; and

(d)    one of the following applies:

(i) no item in the tables in subsections 40-102(4) and (5) applies to the asset when you start to hold it;

(ii) subsection (4B) would apply to the asset but for paragraph (e) of that subsection not being satisfied;

you must use:

(e)    if the associate was using the ^* diminishing value method for the asset - the ^* effective life determined by the Commissioner for the asset under section 40-100 that the associate would have used if section 40-102 had not applied to the asset; or

(f)    if the associate was using the ^* prime cost method - an effective life equal to any period of the effective life determined by the Commissioner for the asset under section 40-100 that:

(i) the associate would have used if section 40-102 had not applied to the asset; and

(ii) is yet to elapse at the time you start to hold it.

Note:

You can require the associate to tell you which effective life the associate would have used if section 40-102 had not applied to the asset: see section 40-140 .

Exception: holder changes but user same or associate of former user

40-95(5)    
For a ^* depreciating asset that you start to ^* hold where:

(a)    the former holder or another entity (each of which is the former user ) was using the asset at a time before you became the holder; and

(b)    while you hold the asset, the former user or an ^* associate of the former user uses the asset;

you must use:

(c)    if the former holder was using the ^* diminishing value method for the asset - the same ^* effective life that the former holder was using; or

(d)    if the former holder was using the ^* prime cost method - an effective life equal to any period of the asset ' s effective life the former holder was using that is yet to elapse at the time you started to hold it.

40-95(5A)    

Subsection (5) does not apply to a ^* depreciating asset if subsection (5B) or (5C) applies to the asset.

40-95(5B)    

For a ^* depreciating asset that you start to ^* hold if:

(a)    paragraphs (5)(a) and (b) apply; and

(b)    section 40-102 applied to the asset immediately before you started to hold it because an item in the tables in subsections 40-102(4) and (5) applied to it at the relevant time (the relevant time for the former holder ) that applied to the former holder under subsection 40-102(3) ; and

(c)    a different item in the tables in subsections 40-102(4) and (5) applies to the asset when you start to hold it; and

(d)    the item referred to in paragraph (c) would have applied to the asset at the relevant time for the former holder if the use to which the asset were put at that time were the use (the new use ) to which it is put when you start to hold it;

you must use:

(e)    if the former holder was using the ^* diminishing value method for the asset - an ^* effective life equal to the ^* capped life that would have applied to the asset under subsection 40-102(4) or (5) at the relevant time for the former holder if the use to which the asset were put at that time were the new use; or

(f)    if the former holder was using the ^* prime cost method - an effective life equal to the capped life that:

(i) would have applied to the asset under subsection 40-102(4) or (5) at the relevant time for the former holder if the use to which the asset were put at that time were the new use; and

(ii) is yet to elapse at the time you start to hold it.

Note:

If paragraph (d) is not satisfied, subsection (5C) may apply to the depreciating asset.

40-95(5C)    

For a ^* depreciating asset that you start to ^* hold if:

(a)    paragraphs (5)(a) and (b) apply; and

(b)    section 40-102 applied to the asset immediately before you started to hold it; and

(c)    one of the following applies:

(i) no item in the tables in subsections 40-102(4) and (5) applies to the asset when you start to hold it;

(ii) subsection (5B) would apply to the asset but for paragraph (d) of that subsection not being satisfied;

you must use:

(d)    if the former holder was using the ^* diminishing value method for the asset - the ^* effective life determined by the Commissioner for the asset under section 40-100 that the former holder would have used if section 40-102 had not applied to the asset; or

(e)    if the former holder was using the ^* prime cost method - an effective life equal to any period of the effective life determined by the Commissioner for the asset under section 40-100 that:

(i) the former holder would have used if section 40-102 had not applied to the asset; and

(ii) is yet to elapse at the time you start to hold it.

40-95(6)    
However, you must use an ^* effective life determined by the Commissioner if:

(a)    

you do not know, and cannot readily find out, which effective life the former holder was using and, if subsection (5B) or (5C) applied to the asset, either of the following matters:

(i) the effective life the former holder would have used if section 40-102 had not applied to the asset;

(ii) the relevant time that applied to the former holder under subsection 40-102(3) ; or

(b)    the former holder did not use an effective life.

Exception: intangible depreciating assets

40-95(7)    

The effective life of an intangible ^* depreciating asset mentioned in this table is the period applicable to that asset under the table.

Effective life of certain intangible depreciating assets
Item	For this asset:	The effective life is:
1	Standard patent	20 years
.
2	Innovation patent	8 years
.
3	Petty patent	6 years
.
4	Registered design	15 years
.
5	Copyright (except copyright in a *film)	The shorter of: (a) 25 years from when you acquire the copyright; or (b) the period until the copyright ends
.
6	A licence (except one relating to a copyright or *in-house software)	The term of the licence
.
7	A licence relating to a copyright (except copyright in a *film)	The shorter of: (a) 25 years from when you become the licensee; or (b) the period until the licence ends
.
8	*In-house software	5 years
.
9	*Spectrum licence	The term of the licence
.
10	(Repealed by No 151 of 2020)
.
11	(Repealed by No 78 of 2007 )
.
12	(Repealed by No 78 of 2007 )
.
13	(Repealed by No 78 of 2007 )
.
14	*Telecommunications site access right	The term of the right

40-95(8)    

The effective life of an intangible ^* depreciating asset that is not mentioned in the table in subsection (7) and is not an ^* IRU or a *mining, quarrying or prospecting right cannot be longer than the term of the asset as extended by any reasonably assured extension or renewal of that term.

40-95(9)    

The effective life of an ^* IRU is the ^* effective life of the telecommunications cable over which the IRU is granted.

Exceptions: mining, quarrying or prospecting rights and mining, quarrying or prospecting information

40-95(10)    

Subject to subsection (12) , the effective life of:

(a)    a *mining, quarrying or prospecting right; or

(b)    *mining, quarrying or prospecting information;

is the period you work out yourself by estimating the period (in years, including fractions of years) set out in column 2 of this table:

Effective life of certain mining, quarrying or prospecting rights and mining, quarrying or prospecting information
Item	Column 1 For this asset:	Column 2 Estimate the period until the end of:
1	A *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, relating to *mining and quarrying operations (except obtaining *petroleum or quarry materials)	The life of the mine or proposed mine to which the right or information relates or, if there is more than one, the life of the mine that has the longest estimated life
2	A *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, relating to *mining and quarrying operations to obtain *petroleum	The life of the petroleum field or proposed petroleum field to which the right or information relates or, if there is more than one, the life of the petroleum field that has the longest estimated life
3	A *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, relating to *mining and quarrying operations to obtain quarry materials	The life of the quarry or proposed quarry to which the right or information relates or, if there is more than one, the life of the quarry that has the longest estimated life

40-95(10A)    

However, if the only reason that subsection 40-80(1) does not apply to the *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, is that the right or information does not meet the requirements of paragraph 40-80(1)(d) or (e) , the effective life of the right or information is the shorter of:

(a)    the period that would, apart from this subsection, be the effective life of the information or right under subsection (10); and

(b)    15 years.

40-95(11)    
You work out the period in subsection (10):

(a)    

as from the *start time of the *mining, quarrying or prospecting right or *mining, quarrying or prospecting information; and

(b)    

by reference only to the period of time over which the reserves, reasonably estimated using an appropriate accepted industry practice, are expected to be extracted from the mine, *petroleum field or quarry.

40-95(12)    

The effective life of a *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, is 15 years if the right or information does not relate to:

(a)    a mine or proposed mine; or

(b)    a petroleum field or proposed petroleum field; or

(c)    a quarry or proposed quarry.