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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-10 - CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE  

Division 40 - Capital allowances    View history reference

Commissioner ' s Remedial Power

Note: A Commissioner ' s Remedial Power (CRP 2017/2) is relevant to this part of the tax law. Taxation Administration (Remedial Power - Small Business Restructure Roll-over) Determination 2017 (F2017L01687) modifies the operation of s 40-340 of the Income Tax Assessment Act 1997 and any other provisions of a taxation law whose operation is affected by the modified operation of s 40-340 in relation to an asset transferred under a small business restructure roll-over (item 8 of the table in s 40-340(1) ).

The operation of the relevant provisions is modified as follows:

If s 40-340 of ITAA 1997 provides for rollover relief in relation to a disposal of a depreciating asset because the condition in item 8 of the table in s 40-340(1) of ITAA 1997 is satisfied in relation to the asset, that section has effect as if it also provided that the disposal of the asset has no direct consequences under the income tax law (other than Div 40 of ITAA 1997).

The modification applies in respect of transfers on or after 8 May 2018.

An entity must treat a modification as not applying to it or any other entity if the modification would produce a less favourable result for it. The Commissioner is empowered by s 370-5 of Sch 1 to the Taxation Administration Act 1953 to make modifications, by legislative instrument, to ensure the law is administered to achieve its intended purpose or object.

Subdivision 40-J - Capital expenditure for the establishment of trees in carbon sink forests    View history reference

Operative provisions

SECTION 40-1005  Deduction for expenditure for establishing trees in carbon sink forests  

 View history reference

40-1005(1)  

 View history reference
You can deduct an amount for an income year if:


(a) you or another entity incurred capital expenditure that is covered under section 40-1010 in relation to particular trees; and


(b) you satisfy a condition in subsection (5) for the trees for at least part of the income year; and


(c) you are carrying on a *business in the income year; and


(d) you use the land occupied by the trees for the primary and principal purpose of *carbon sequestration by the trees (see section 40-1015 ); and


(e) your purposes in using the land occupied by the trees do not include any of the following:


(i) felling the trees;

(ii) using the trees for *commercial horticulture; and


(f) you do not use the land in connection with:


(i) a *managed investment scheme; or

(ii) a *forestry managed investment scheme.

40-1005(2)  

 View history reference
The amount of the deduction is worked out under this formula:
Establishment
expenditure
×Write-off
days in income year
365
×Write-off
rate

where:

establishment expenditure is the amount of expenditure mentioned in subsection (1) .

write-off days in income year is the number of days in the income year:


(a) that occur within the period:


(i) starting on the first day of the income year in which the trees are established; and

(ii) ending 14 years and 105 days after that day; and


(b) on which you use the land occupied by the trees for the primary and principal purpose of *carbon sequestration by the trees; and


(c) on which you satisfy a condition in subsection (5) for the trees.

write-off rate is 7%.

40-1005(3)  

 View history reference
You cannot deduct more in total than the amount of capital expenditure incurred for establishing the trees up to the time at which they are established.

40-1005(4)  

(Repealed by No 38 of 2008 )

40-1005(5)  

The conditions are as follows:
Conditions for deduction for establishing trees in carbon sink forest
ItemCondition
1You own the trees and any holder of a lease, lesser interest or licence relating to the land occupied by the trees does not use the land for the primary and principal purpose of * carbon sequestration by the trees.
2The trees occupy land you hold under a lease, or a * quasi-ownership right granted by an * exempt Australian government agency or an * exempt foreign government agency, and:
(a) the lease or quasi-ownership right enables you to use the land for the primary and principal purpose of * carbon sequestration by the trees; and
(b) any holder of a lesser interest or licence relating to the land does not use the land for the primary and principal purpose of carbon sequestration by the trees.
3You:
(a) hold a licence relating to the land occupied by the trees; and
(b) use the land for the primary and principal purpose of *carbon sequestration by the trees, as a result of holding the licence.


 



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