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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-D - Balancing adjustments    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.

Operative provisions

SECTION 40-335  Deduction for in-house software where you will never use it  

 View history reference [46-50]

40-335(1)  

You can deduct expenditure you incurred on * in-house software if:


(a) you incurred the expenditure with the intention of using the software for a * taxable purpose; and


(b) the expenditure relates to a unit of software that you have not used or had * installed ready for use; and


(c) the expenditure is not allocated to a software development pool (see Subdivision 40-E ); and


(d) in the * current year, you have decided that you will never use the software, or have it installed ready for use.

40-335(2)  

The amount that you can deduct in the * current year is:


(a) the total of your expenditure on the * in-house software in the current year and any previous income year; less


(b) any amount of consideration you *derive in relation to the software or any part of it (but no more than the total in paragraph (a));
 View history reference

but only to the extent that, when you incurred the expenditure, you intended to use the software, or have it * installed ready for use, for a * taxable purpose.

Example:

Shannon has abandoned a software project that she was working on. She could not deduct expenditure on the project for the current year or any previous income year under any other provision. Shannon can deduct it under this section, to the extent that she intended to use it, or have it installed ready for use, for a taxable purpose.

Note:

If an amount of the expenditure is recouped, the amount may be included in her assessable income: see Subdivision 20-A .


 



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