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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

Subdivision 40-B - Core provisions    View history reference

Operative provisions

SECTION 40-110  Recalculating effective life  

 View history reference [No equivalent]

40-110(1)  

 [42-112]
You may choose to recalculate the *effective life of a *depreciating asset from a later income year if the effective life you have been using is no longer accurate because of changed circumstances relating to the nature of the use of the asset.

Example:

Some examples of changes in circumstances that may result in your recalculating the effective life of a depreciating asset are:

· your use of the asset turns out to be more or less rigorous than you expected (or was anticipated by the Commissioner's determination);
· there is a downturn in demand for the goods or services the asset is used to produce that will result in the asset being scrapped;
· legislation prevents the asset's continued use;
· changes in technology make the asset redundant;
· there is an unexpected demand, or lack of success, for a film.

40-110(2)  

 [No equivalent]
You must recalculate a *depreciating asset's *effective life from a later income year if:


(a) you:

(i) self-assessed its effective life; or

(ii) are using an effective life worked out under section 40-100 (about the Commissioner's determination), or 40-102 (about the capped life of certain depreciating assets), and the *prime cost method; or

(iii) are using an effective life because of subsection 40-95(4), (4B), (4C), (5), (5B) or (5C); and
 View history reference


(b) its *cost is increased in that year by at least 10%.

Note 1:

You may conclude that the effective life is the same.

Note 2:

For the elements of the cost of a depreciating asset, see Subdivision 40-C.

Example 1:

Paul purchases a photocopier and self-assesses its effective life at 6 years. In a later year he incurs expenditure to increase the quality of the reproductions it makes. He recalculates its effective life, but concludes that it remains the same.

Example 2:

Fiona also purchases a photocopier and self-assesses its effective life at 6 years. In a later year she incurs expenditure to incorporate a more robust paper handling system. She recalculates its effective life, and concludes that it is increased to 7 years.

40-110(3)  

 [No equivalent]
You must recalculate a *depreciating asset's *effective life for the income year in which you started to *hold it if:


(a) you are using an effective life because of subsection 40-95(4), (4B), (4C), (5), (5B) or (5C); and
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(b) the asset's *cost is increased after you started to hold it in that year by at least 10%.

40-110(3A)  

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Subsections (1), (2) and (3) do not apply to a *depreciating asset that is a *mining, quarrying or prospecting right or *mining, quarrying or prospecting information.

40-110(3B)  

 View history reference
You may choose to recalculate the *effective life of a *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, from a later income year if the effective life you have been using is no longer accurate:


(a) because of changed circumstances relating to an existing or proposed mine, petroleum field or quarry to which that right or information relates; or


(b) because that right or information now relates to an existing or proposed mine, petroleum field or quarry; or


(c) because that right or information no longer relates to an existing or proposed mine, petroleum field or quarry.

40-110(4)  

 View history reference [No equivalent]
A recalculation under this section must be done using:


(a) if paragraph (b) does not apply - section 40-105 (about self-assessing effective life); or


(b) if the *depreciating asset is a *mining, quarrying or prospecting right or *mining, quarrying or prospecting information:

(i) subsections 40-95(10) and (11) (if the right or information relates to an existing or proposed mine, petroleum field or quarry); or

(ii) subsection 40-95(12) (if the right or information no longer relates to an existing or proposed mine, petroleum field or quarry).
 View history reference

Exception: intangibles

40-110(5)  

 View history reference [No equivalent]
This section does not apply to an intangible *depreciating asset to which an item in the table in subsection 40-95(7) applies.


 



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