Tax Laws Amendment (Research and Development) Act 2011 (93 of 2011)

Schedule 3   Other amendments relating to new R&D incentive

Part 3   Capital allowances

Income Tax Assessment Act 1997

20   Subsections 40-105(1), (2) and (3)

Repeal the subsections, substitute:

(1) You work out the effective life of a *depreciating asset yourself in accordance with this section.

(1A) Firstly, estimate the period (in years, including fractions of years) the asset can be used by any entity for one or more of the following purposes:

(a) a *taxable purpose;

(b) the purpose of producing *exempt income or *non-assessable non-exempt income;

(c) the purpose of conducting *R&D activities, assuming that this is reasonably likely.

(1B) Secondly, if relevant for the asset:

(a) have regard to the wear and tear you reasonably expect from your expected circumstances of use; and

(b) assume that the asset will be maintained in reasonably good order and condition.

(2) If, in working out that period, you decide that the asset would be likely to be:

(a) scrapped; or

(b) sold for no more than scrap value or abandoned;

before the end of that period, its effective life ends at the earlier time. However, when making your decision, disregard reasons attributable to the technical risk in conducting *R&D activities if it is reasonably likely that the asset will be used for such activities.

(3) You work out the period mentioned in subsection (1A) or (2) beginning at the *start time of the *depreciating asset.