INCOME TAX ASSESSMENT ACT 1997
|CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION
|PART 2-10 - CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE
Div 40 substituted for Divs 40, 41 and 42 by No 76 of 2001.
Subdiv 40-B substituted by No 76 of 2001.
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.
Once you make the choice for an asset, you cannot change it: see section 40-130.
For the diminishing value method, see sections 40-70 and 40-72. For the prime cost method, see section 40-75.
In some cases you do not have to make the choice because you can deduct the asset's cost: see section 40-80.
S 40-65(1) amended by No 55 of 2006, s 3 and Sch 5 item 8, by substituting "sections 40-70 and 40-72" for "section 40-70" in note 2, effective 19 June 2006.
Exception: asset acquired from associate
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.
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
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.
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
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
(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.
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.
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).
S 40-65(6) substituted by No 93 of 2011, s 3 and Sch 3 item 17, effective 8 September 2011. For application, savings and transitional provisions see note under Div 355 heading. S 40-65(6) formerly read:
Exception: expenditure deductible under research and development provisions
40-65(6) If you can deduct an amount under section 73BA of the Income Tax Assessment Act 1936 (or could if you had not chosen a tax offset under section 73I of that Act) for the asset:
(a) for a period before the first period for which you can deduct an amount for the asset under this Division; or
(b) for a period that starts at the same time as the first period for which you can deduct an amount for the asset under this Division;
you must, for the purposes of this Division, use the same method as you used, or use, for the asset for the purposes of working out the deduction under section 73BA.
S 40-65(6) inserted by No 170 of 2001.
(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.
S 40-65(7) inserted by No 93 of 2011, s 3 and Sch 3 item 17, effective 8 September 2011. For application, savings and transitional provisions see note under Div 355 heading.
S 40-65 inserted by No 76 of 2001.