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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-B - Core provisions    View history reference

Operative provisions

SECTION 40-65  Choice of methods to work out the decline in value  

 View history reference ITAA 36

40-65(1)  

 [42-25(3); 44-15; 387-470]
You have a choice of 2 methods to work out the decline in value of a * depreciating asset. You must choose to use either the * diminishing value method or the * prime cost method.

Note 1:

Once you make the choice for an asset, you cannot change it: see section 40-130 .

Note 2:

For the diminishing value method, see sections 40-70 and 40-72 . For the prime cost method, see section 40-75 .

Note 3:

In some cases you do not have to make the choice because you can deduct the asset ' s cost: see section 40-80 .

Exception: asset acquired from associate

40-65(2)  

 [Proposed new 42-55(4)]
For a * depreciating asset that you acquire from an * associate of yours where the associate has deducted or can deduct an amount for the asset under this Division, you must use the same method that the associate was using.

Note:

You can require the associate to tell you which method the associate was using: see section 40-140 .

Exception: holder changes but user same or associate of former user

40-65(3)  

 [Proposed new 42-55(5)]
For a * depreciating asset that you acquire from a former * holder of the asset, you must use the same method that the former holder was using for the asset if:


(a) the former holder or another entity (each of which is the former user ) was using the asset at a time before you became the holder; and


(b) while you hold the asset, the former user or an * associate of the former user uses the asset.

40-65(4)  

 [Proposed new 42-55(6)]
However, you must use the * diminishing value method if:


(a) you do not know, and cannot readily find out, which method the former holder was using; or


(b) the former holder did not use a method.

Exception: low-value pools

40-65(5)  

 [No equivalent]
You work out the decline in value of a * depreciating asset in a low-value pool under Subdivision 40-E rather than under this Subdivision.

Exception: also notionally deductible under R & D provisions

40-65(6)  

 View history reference
If:


(a) only one of the following events has happened:


(i) you have deducted one or more amounts under this Division for an asset;

(ii) you have been entitled under section 355-100 (about R & D) to one or more *tax offsets because you can deduct one or more amounts under section 355-305 for an asset; but


(b) later, the other event happens for the asset;

then, for the purposes of working out the deduction for the later event, you must choose the same method that you chose for the first event.

Note 1:

Deductions under section 355-305 (about decline in value of tangible depreciating assets used for R & D activities) are worked out using a notional application of this Division.

Note 2:

This subsection applies with changes if you have or could have deducted an amount under former section 73BA of the Income Tax Assessment Act 1936 for the asset (see section 40-67 of the Income Tax (Transitional Provisions) Act 1997 ).

40-65(7)  

 View history reference
If:


(a) the events in paragraph (6)(a) could both arise for the same period for an asset; and


(b) neither event has already arisen for the asset;

then you must choose the same method for the purposes of working out the deduction for each event.


 



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