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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-C - Cost    View history reference

Operative provisions

SECTION 40-190  Second element of cost  

 View history reference ITAA 36

40-190(1)  

The second element is worked out after you start to * hold the * depreciating asset.

40-190(2)  

 View history reference
The second element is:


(a) the amount you are taken to have paid under section 40-185 for each economic benefit that has contributed to bringing the asset to its present condition and location from time to time since you started to * hold the asset; and


(b) expenditure you incur that is reasonably attributable to a * balancing adjustment event occurring for the asset.

Example 1:

Andrew adds a new tray and canopy to his ute. The materials and labour that go into the addition are economic benefits that Andrew received and that contribute to the ute ' s present condition.

The payments he makes for those economic benefits are included in the second element of the ute ' s cost.

Example 2:

Leonie needed to replace one of her old depreciating assets that was fixed to her land with a new, more efficient one. Leonie paid a contractor a fee to demolish and remove the old asset. This resulted in a balancing adjustment event occurring for the old asset, and the fee forms part of the second element of the cost of the old asset that was demolished.

Note:

The second element of the cost may be modified by a later provision in this Subdivision.

40-190(2A)  

 View history reference
Paragraph (2)(b) does not apply to a * balancing adjustment event referred to in item 6 or 11 of the table in subsection 40-300(2) .

40-190(3)  

However, the second element is worked out using this table if an item in it applies. Use the last applicable item.
Second element of the cost of a depreciating asset
ItemIn this case:The second element of cost is:
1You received the benefit under an *arrangement and:The market value of the benefit when you received it
 (a)there is at least one other party to the arrangement with whom you did not deal at *arm ' s length; and 
 (b)apart from this item, the second element of cost for the benefit would exceed its *market value 
.......... .
2You received the benefit under an *arrangement that was private or domestic in nature to youThe *market value of the benefit when you received it


 



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