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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS

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History Pt 3-1 inserted by No 46 of 1998.

Division 104 - CGT events

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History Div 104 inserted by No 46 of 1998.

Subdivision 104-K - Other CGT events

SECTION 104-235  Balancing adjustment events for depreciating assets and certain assets used for R&D: CGT event K7

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104-235(1)

CGT event K7 happens if:

(a) a *balancing adjustment event occurs for a *depreciating asset you *held; and

(b) at some time when you held the asset, you used it, or had it *installed ready for use, for: (i) a purpose other than a *taxable purpose; or (ii) the purpose to which paragraphs 40-27(2)(a) and (b) relate (about second-hand assets in residential property).

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History S 104-235(1) amended by No 126 of 2017, s 3 and Sch 2 item 8, by substituting para (b), effective 1 January 2018. For application provisions, see note under s 40-27. Para (b) formerly read: (b) at some time when you held the asset, you used it, or had it *installed ready for use, for a purpose other than a *taxable purpose.

104-235(1A)

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However, subsection (1) does not apply if:

(a) you are an *R&D entity and you could deduct an amount under section 40-25 for the *depreciating asset if the following assumptions were made: (i) despite paragraph 40-30(1)(c) and subsection 40-30(2), all intangible assets were excluded from the definition of depreciating asset in section 40-30; (ii) subsection 40-45(2) did not, except in the case of buildings, prevent Division 40 from applying to capital works to which Division 43 applies, or to which Division 43 would apply but for expenditure being incurred, or capital works being started, before a particular day; (iii) you satisfied any relevant requirement for deductibility under Division 40; or

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(b) there is roll-over relief for the *balancing adjustment event under section 40-340 of this Act; or

(c) the asset is one for which you or another entity has deducted or can deduct amounts under Subdivision 40-F or 40-G.

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History S 104-235(1A) amended by No 93 of 2011, s 3 and Sch 3 item 74, by substituting para (a), effective 8 September 2011. For application, savings and transitional provisions see note under Div 355 heading. Para (a) formerly read: (a) you are an eligible company (within the meaning of section 73B of the Income Tax Assessment Act 1936) and the *depreciating asset is a section 73BA depreciating asset (within the meaning of section 73BB of that Act); or S 104-235(1A) substituted by No 119 of 2002 and inserted by No 170 of 2001.

104-235(1AA)

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Without limiting subsection (1A), if the asset is a vessel for which:

(a) you have a *shipping exempt income certificate; or

(b) you have at any time had such a certificate;

subsection (1) does not apply in relation to the asset to the extent that you are using, or at any time have used, it to produce income that is exempt under section 51-100.

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History S 104-235(1AA) inserted by No 57 of 2012, s 3 and Sch 2 item 13, effective 21 June 2012.

104-235(1B)

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CGT event K7 also happens if:

(a) you are an *R&D entity; and

(b) a *balancing adjustment event occurs for a *depreciating asset you *held; and

(c) when you held the asset, you could deduct an amount under section 40-25 for the asset if the assumptions set out in paragraph (1A)(a) were made; and

(d) at some time when you held the asset:

(i) you used it other than for a taxable purpose or for the purpose of conducting *R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; or

(ii) you had it installed ready for use other than for a taxable purpose.

Note:

For subparagraph (d)(i), disregard any use of the asset for the purpose of carrying on research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936): see section 104-235 of the Income Tax (Transitional Provisions) Act 1997.

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History S 104-235(1B) amended by No 93 of 2011, s 3 and Sch 3 item 76, by inserting the note at the end, effective 8 September 2011. For application, savings and transitional provisions see note under Div 355 heading. S 104-235(1B) substituted by No 93 of 2011, s 3 and Sch 3 item 75, effective 8 September 2011. For application, savings and transitional provisions see note under Div 355 heading. S 104-235(1B) formerly read: 104-235(1B) CGT event K7 also happens if: (a) you are an eligible company; and (b) a *balancing adjustment event occurs for a section 73BA depreciating asset you *held; and (c) at some time when you held the asset: (i) you used it other than for a taxable purpose or the purpose of the carrying on by or on behalf of you of research and development activities (within the meaning of section 73B of the Income Tax Assessment Act 1936); or (ii) you had it installed ready for use other than for a taxable purpose. S 104-235(1B) inserted by No 170 of 2001.

104-235(2)

The time of *CGT event K7 is when the *balancing adjustment event occurs.

104-235(3)

Any *capital gain or *capital loss is worked out:

(a) under section 104-240; or

(b) under section 104-245 if the *depreciating asset was allocated to a low-value pool.

104-235(4)

A *capital gain or *capital loss you make is disregarded if:

(a) the *depreciating asset covered by subsection (1) or (1B) is a *pre-CGT asset; or

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(b) you can deduct an amount for the asset under Division 328 (about the small business entities) for the income year in which the *balancing adjustment event occurred.

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History S 104-235(4) amended by No 93 of 2011, s 3 and Sch 3 item 77, by substituting para (a), effective 8 September 2011. For application, savings and transitional provisions see note under Div 355 heading. Para (a) formerly read: (a) the *depreciating asset or the section 73BA depreciating asset is a *pre-CGT asset; or S 104-235(4) amended by No 80 of 2007, s 3 and Sch 3 item 153, by substituting "small business entities" for "STS taxpayers" in para (b), applicable in relation to the 2007-08 income year and later income years. S 104-235(4) amended by No 119 of 2002 and No 170 of 2001. S 104-235 inserted by No 77 of 2001.