Income Tax (Transitional Provisions) 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  

SECTION 40-10   Plant  

40-10(1)    
This section applies to you if:

(a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act ) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001 , or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and

(b) either:

(i) you hold the plant at 1 July 2001; or

(ii) subparagraph (i) does not apply and you were the owner or quasi-owner of the plant at the end of 30 June 2001.

40-10(2)    
Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001 (the new Act ) applies to the plant on this basis:

(a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant's opening adjustable value; and

(b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and

(c) if you excluded an amount from your assessable income under section 42-290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 - the cost of the plant, and its opening adjustable value, are reduced by that amount; and

(d) if subparagraph (1)(b)(ii) applies to you - you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi-owner of the plant under the former Act continue.

Note:

There are special rules for entities that have substituted accounting periods: see section 40-65.

40-10(3)    
If you were using a rate for the plant under subsection 42-160(1) or 42-165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis:

(a) for the diminishing value method - replace the component in the formula in subsection 40-70(1) of the new Act that includes the plant's effective life with the rate you were using; and

(b) for the prime cost method:

(i) replace the component in the formula in subsection 40-75(1) of the new Act that includes the plant's effective life with the rate you were using; and

(ii) increase the plant's cost under Division 42 of the former Act by any amounts included in the second element of the plant's cost after 30 June 2001.

Note 1:

Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced.

Note 2:

Small business entities can choose to work out the decline in value of their depreciating assets under Division 328.