INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 59   DISPOSAL, LOSS OR DESTRUCTION OF DEPRECIATED PROPERTY  

59(1A)   [Commercial debt forgiveness]  

This section has effect subject to Division 245 of Schedule 2C .

59(1)   [Depreciated value exceeds consideration]  

Where any property of a taxpayer, in respect of which depreciation has been allowed or is allowable under this or the previous Act, is disposed of, lost or destroyed at any time in the year of income, the depreciated value of the property at that time, less the amount of any consideration receivable in respect of the disposal, loss or destruction, shall be an allowable deduction.

59(2)   [Consideration exceeds depreciated value]  

If that consideration exceeds that depreciated value, the excess, to the extent of the sum of the amounts allowed and allowable in assessments for income tax under this Act and any previous law of the Commonwealth in respect of depreciation, shall, subject to the succeeding provisions of this section, be included in his assessable income of that year.

59(2AAA)   [Firearms surrender]  

For the purposes of the application of subsection (2), any amount by which consideration receivable under firearms surrender arrangements exceeds the depreciated value of a surrendered item of property is not assessable income and not exempt income of the taxpayer.

Note:

Firearms surrender arrangements has the meaning given by subsection 6(1) .

59(2AA)   [Deduction allowed for research and development]  

Subject to subsection (2AB), for the purposes of the application of subsection (2) to property of a taxpayer in respect of which a deduction or deductions has or have been allowed to the taxpayer under section 73B :

(a) except in a case to which paragraph (b) applies - the difference between the cost of that property for the purposes of that section and the written-down value of that property for the purposes of that section shall be deemed to be an amount allowed under this Act in respect of depreciation; or

(b) in a case where subsection 73B(6) applied to the property - the difference between the amount that would, apart from that subsection, have been the cost of the property for the purposes of that section and the written-down value of the property for the purposes of that section shall be deemed to be an amount allowed under this Act in respect of depreciation,

but the amount of that difference shall not be taken into account in determining the depreciated value of the property.

59(2AB)   [Amount allowed for depreciation]  

If:

(a) property of a taxpayer was acquired as the result of a disposal to which section 58 or 73E applied; and

(b) either:

(i) a deduction or deductions has or have been allowed or allowable to the transferor concerned under section 73B in relation to the property; or

(ii) if the disposal of the property to the taxpayer was the last of a series of 2 or more successive transfers of the property to which either one of section 58 or 73E has applied (whether alternately or otherwise) - a deduction or deductions has or have been allowed or allowable to any of the prior successive transferors under section 73B in relation to the property;

then, for the purposes of the application of subsection (2) of this section to the property, the amount worked out using the following formula is taken to have been an amount allowed to the taxpayer in respect of depreciation in relation to the property:

Transferor's original cost

−

Modified written-   down value

where:

``Transferor's original cost'' means:

(a) the cost of the property to the transferor for the purposes of section 73B (worked out as if subsection 73B(6) had not been enacted); or

(b) if the disposal of the property to the taxpayer was the last of a series of 2 or more successive transfers to which either one of section 58 or 73E has applied (whether alternately or otherwise) - the cost of the property to the earliest prior successive transferor for the purposes of section 73B (worked out as if subsection 73B(6) had not been enacted);

``Modified written-down value'' means the amount that would have been the written-down value of the property to the taxpayer for the purposes of section 73B if:

(a) whichever of the following is applicable:

(i) the deductions allowed or allowable under section 73B to the transferor in respect of one or more years of income in relation to the property;

(ii) if the disposal of the property to the taxpayer was the last of a series of 2 or more successive transfers to which either one of section 58 or 73E has applied (whether alternately or otherwise) - the deductions allowed or allowable under section 73B to the prior successive transferors in respect of one or more years of income in relation to the property;

 

had been deductions allowed or allowable to the taxpayer under section 73B in respect of the years of income in relation to the property; and

(b) whichever of the following is applicable:

(i) the cost of the property to the transferor for the purposes of section 73B (worked out as if subsection 73B(6) had not been enacted);

(ii) if the disposal of the property to the taxpayer was the last of a series of 2 or more successive transfers to which either one of section 58 or 73E has applied (whether alternately or otherwise) - the cost of the property to the earliest prior successive transferor for the purposes of section 73B (worked out as if subsection 73B(6) had not been enacted);

 

had been the cost of the property to the taxpayer.

59(2A)   [Election for successive reductions]  

Where an amount, being the whole or a part of the consideration receivable in respect of the disposal, loss or destruction of a unit of property in the year of income (in this subsection referred to as ``the balancing charge'' ) would, but for this subsection, be included in the assessable income of the taxpayer under subsection (2), the taxpayer may elect, on or before the date of lodgment of the return of income of the year of income, or within such further time as the Commissioner allows, in lieu of including the balancing charge in the assessable income, successively to reduce -

(a) the cost, for the purpose of calculating depreciation allowable under this Act, of any unit of property acquired by the taxpayer during the year of income to replace the unit of property so disposed of, lost or destroyed;

(b) the cost, for the purpose of calculating depreciation allowable under this Act, of any other unit of property acquired by the taxpayer during the year of income; and

(c) the depreciated values, at the beginning of the year of income, of other units of property,

by such amounts as do not exceed, in the aggregate, the balancing charge.

59(2B)   [Conditions for successive reductions]  

The cost or depreciated value of a unit of property shall not be reduced under subsection (2A) unless -

(a) at the end of the year of income the unit is used wholly for the purpose of producing assessable income or has been installed ready for use wholly for that purpose and is held in reserve; and

(b) depreciation under this Act is allowable to the taxpayer in respect of the unit.

59(2C)   [Consideration exceeding reductions]  

Where an amount which would, but for subsection (2A), be included in the assessable income of the taxpayer of the year of income under subsection (2) exceeds the sum of reductions made under subsection (2A), the amount of that excess shall be included in his assessable income of the year of income.

59(2D)   [Replacement property]  

Where, during a year of income not later than the second year of income after the year of income in which a unit of property is disposed of, lost or destroyed, a taxpayer acquires, to replace that unit, a unit of property which, at the end of the year of income, is used wholly for the purpose of producing assessable income, or has been installed ready for use wholly for that purpose and is held in reserve, and the taxpayer has not made a request under subsection (2A) in relation to that disposal, loss or destruction, the taxpayer may elect not later than the date of lodgment of the return of income of the first-mentioned year or within such further time as the Commissioner allows, to:

(a) exclude from the assessable income of the year of income in which the property was disposed of, lost or destroyed so much of the amount that would otherwise be included in that assessable income under subsection (2) by reason of the disposal, loss or destruction as does not exceed the cost of the unit of property so acquired; and

(b) reduce by an amount equal to the amount so excluded the cost, for the purpose of calculating depreciation allowable under this Act, of the unit of property so acquired.

59(2E)   [Reduced amount deemed depreciation]  

An amount by which the cost or depreciated value of a unit of property has been reduced in pursuance of subsection (2A) or (2D) shall, for all purposes of this Act, be deemed to be depreciation which has been allowed in respect of that unit in the assessment in which the reduction was made.

59(3)   [``Consideration receivable'' defined]  

Subject to subsections (4) and (6), the consideration receivable in respect of the disposal, loss or destruction means:

(a) in the case of a sale of the property - the sale price less the expenses of the sale of the property;

(b) in the case of loss or destruction of the property - the amount or value received or receivable under a policy of insurance or otherwise in respect of the loss or destruction;

(c) in the case where the property is sold with other assets and no separate value is allocated to the property - the amount determined by the Commissioner;

(d) in the case where property is disposed of otherwise than by sale - the value, if any, of the property at the date of disposal.

59(4)   [Disposal between parties not at arm's length]  

Where, in a case where the property is disposed of by the taxpayer by sale to another person:

(a) it would be concluded that, having regard to any connection between the taxpayer and that other person and to any other relevant circumstances, the taxpayer and that other person were not dealing with each other at arm's length in relation to the disposal; and

(b) the amount receivable by the taxpayer in respect of the disposal was less than the market value of the property immediately before the time of disposal;

the consideration receivable by the taxpayer in respect of the disposal of the property shall be deemed to be the market value of the property immediately before the time of disposal.

59(4A)    

59(5)   [Consideration receivable for purposes of subsec (4)]  

For the purposes of the application of subsection (4) in relation to property disposed of by a taxpayer:

(a) the reference in that subsection to the amount receivable by the taxpayer in respect of the disposal shall be read as a reference to:

(i) in the case of a sale of the property to which subparagraph (ii) does not apply - the sale price less the expenses of the sale of the property; or

(ii) in the case where the property is sold with other assets and no separate value is allocated to the property - the amount determined by the Commissioner; and

(b) a reference to the market value of the property at a particular time shall, if there is insufficient evidence of the market value at that time, be read as a reference to such amount as, in the opinion of the Commissioner, is fair and reasonable.

59(6)   [Consideration receivable where s 57AF applies]  

Where section 57AF has applied for the purpose of calculating the depreciation allowable in respect of a unit of property owned by a taxpayer that is disposed of, lost or destroyed, the consideration receivable in respect of the disposal, loss or destruction of the unit of property for the purposes of this section shall be deemed to be the amount calculated in accordance with the formula

AB   , C

where:

A is the consideration receivable, as ascertained in accordance with subsection (3) of this section (as affected by subsection 57AF(10) ) or subsection (4) of this section or in accordance with section 59AA , as the case requires, in respect of that disposal, loss or destruction;

B is the motor vehicle depreciation limit applicable in relation to the property in accordance with section 57AF ;

C is:

(a) in a case to which paragraph (b) does not apply - the amount that would have been the cost of the property for the purpose of calculating the depreciation allowable under this Act if section 57AF had not applied in relation to the property increased, except in a case to which section 60 applies, by any amount by which the cost to the taxpayer of acquiring ownership of the property has been increased in accordance with subsection 57AF(10) ; and

(b) in a case where, if section 57AF had not applied in relation to the property, the cost of the property for the purpose of calculating the depreciation allowable under this Act would have been determined in accordance with subsection 56(4) or subsection 62(3) - the cost of the property determined in accordance with whichever of those subsections would have been applicable.