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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

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History Div 40 substituted for Divs 40, 41 and 42 by No 76 of 2001.

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-B - Core provisions

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History Subdiv 40-B substituted by No 76 of 2001.

Operative provisions

SECTION 40-35  Jointly held depreciating assets

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40-35(1)

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This Division and Divisions 41 , 328 and 775 apply to a ^* depreciating asset (the underlying asset ) that you ^* hold, and that is also held by one or more other entities, as if your interest in the underlying asset were itself the underlying asset.

Note:

Partners do not hold partnership assets: see section 40-40 .

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History S 40-35(1) amended by No 31 of 2009 , s 3 and Sch 1 item 2, by inserting " 41, " after " Divisions " , effective 22 May 2009. S 40-35(1) amended by No 133 of 2003.

40-35(2)

As a result, the decline in value of the underlying asset is not itself taken into account.

Example:

Buford Corp owns an office block that it leases to 2 companies, Smokey Pty Ltd and Bandit Pty Ltd. Smokey and Bandit decide to install a fountain in front of the building.

They discuss it with Buford who agrees to pay half the cost (because the fountain won't be removable at the end of the lease). Smokey and Bandit split the rest of the cost between them.

Smokey and Bandit would each hold the asset under item 3 of the table in section 40-40 and Buford would hold it under item 10. They would be joint holders, so each would write-off its interest in the fountain.

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History S 40-35 inserted by No 76 of 2001.