Income Tax (Transitional Provisions) Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS  

Division 328 - Small business entities  

SECTION 328-470   What expenditure qualifies for the energy incentive  

Expenditure included in the first element of cost of a depreciating asset

328-470(1)    
This subsection applies to an amount of expenditure in relation to an income year if:

(a)    the expenditure is included in the first element of cost of a depreciating asset; and

(b)    you can deduct the expenditure under a provision of a taxation law (other than section 328-465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and

(c)    you start to use the asset, or have it installed ready for use, for any purpose after 30 June 2023 but before 1 July 2024; and

(d)    you start to use the asset, or have it installed ready for use, for a taxable purpose at a time (the start time ) that is:

(i) in the income year; and

(ii) after 30 June 2023 but before 1 July 2024; and

(e)    you are a small business entity, or an entity covered by subsection (4) , for the income year that includes the start time; and

(f)    subsection (2) (about eligible energy assets) applies to the asset; and

(g)    neither the expenditure nor the asset is excluded under subsection (6) ; and

(h)    the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40-365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997 .

328-470(2)    
This subsection applies to an asset if:

(a)    the asset uses electricity and one or more of the following apply:

(i) a new reasonably comparable depreciating asset that uses a fossil fuel (other than a use of which that is merely incidental) is available in the market at the start time;

(ii) if the asset is being acquired by way of replacement of or substitution for another depreciating asset - the asset is more energy efficient than the other asset;

(iii) if the asset is not being acquired by way of replacement of or substitution for another depreciating asset - the asset is more energy efficient than a new reasonably comparable depreciating asset that is available in the market at the start time; or

(b)    the asset enables one or more of the following:

(i) a depreciating asset (other than an asset excluded under subsection (6) ) that uses electricity, or energy that is generated from a renewable source, to be more energy efficient;

(ii) electricity, or energy that is generated from a renewable source, to be stored;

(iii) electricity, or energy that is generated from a renewable source, to be used at a different time;

(iv) the use of electricity, or energy that is generated from a renewable source, by another depreciating asset to be monitored.

Certain expenditure that is included in the second element of cost of a depreciating asset

328-470(3)    
This subsection applies to an amount of expenditure in relation to an income year if:

(a)    the amount is included in the second element of a depreciating asset ' s cost under paragraph 40-190(2)(a) of the Income Tax Assessment Act 1997 ; and

(b)    you can deduct the expenditure under a provision of a taxation law (other than section 328-465 of this Act) whether or not in, or wholly in, the income year in which the expenditure is incurred; and

(c)    the expenditure is incurred:

(i) in the income year; and

(ii) after 30 June 2023 but before 1 July 2024; and

(d)    you are a small business entity, or an entity covered by subsection (4) , for the income year in which the expenditure is incurred; and

(e)    the expenditure enables one or more of the following:

(i) if the asset could use a fossil fuel (other than a use of which that is merely incidental) - the asset to only use electricity, or energy that is generated from a renewable source;

(ii) if the asset uses electricity, or energy that is generated from a renewable source - the asset to be more energy efficient;

(iii) the asset to store electricity, or energy that is generated from a renewable source;

(iv) the asset to use electricity, or energy that is generated from a renewable source, at a different time;

(v) the asset to monitor its use of electricity, or energy that is generated from a renewable source; and

(f)    neither the expenditure nor the asset is excluded under subsection (6) ; and

(g)    the only balancing adjustment events that occur for the asset at a time during the period starting on 1 July 2023 and ending on 30 June 2024 occur because you stop holding the asset because of an event or circumstance referred to in subsection 40-365(2) (about involuntary disposals) of the Income Tax Assessment Act 1997 .

Businesses with turnover under $50 million

328-470(4)    
An entity is covered by this subsection for an income year if:

(a)    the entity is not a small business entity for the income year; and

(b)    the entity would be a small business entity for the income year if:

(i) each reference in Subdivision 328-C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $50 million; and

(ii) the reference in paragraph 328-110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection.

Working out whether you can deduct expenditure

328-470(5)    
For the purposes of paragraph (1)(b) or (3)(b) , in working out whether you can deduct an amount of expenditure assume that:

(a)    you will continue to hold the asset throughout its effective life; and

(b)    throughout that effective life, you will use it for a taxable purpose:

(i) for the purposes of paragraph (1)(b) - to the same extent as you use it, or have it installed ready for use, for a taxable purpose in the income year in which you start to use it, or have it installed ready for use, for a taxable purpose; or

(ii) for the purposes of paragraph (3)(b) - to the same extent as you use it for a taxable purpose in the income year in which the expenditure is incurred.

Excluded assets and expenditure

328-470(6)    
The following kinds of assets and expenditure are excluded by this subsection:

(a)    an asset that can use a fossil fuel (other than a use of which that is merely incidental);

(b)    expenditure (other than expenditure referred to in subparagraph (3)(e)(i) ) on an asset that can use a fossil fuel (other than a use of which that is merely incidental);

(c)    an asset that solely or predominantly generates electricity from a renewable source (for example, photovoltaic cells) or expenditure on such an asset;

(d)    an asset, or expenditure, being capital works for which you can deduct an amount under Division 43 of the Income Tax Assessment Act 1997 ;

(e)    a motor vehicle or expenditure on a motor vehicle;

(f)    an asset, or expenditure on an asset, where expenditure on the asset is allocated to a software development pool;

(g)    financing costs, including interest, payments in the nature of interest and expenses of borrowing.

Note:

Subsections (1) and (3) also do not apply to an item of trading stock because such an asset is not a depreciating asset: see section 40-30 of the Income Tax Assessment Act 1997 .