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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-B - Core provisions    View history reference

Operative provisions

SECTION 40-70  Diminishing value method  

 View history reference ITAA 36

40-70(1)  

 [42-160; 44-15; 330-100; 330-110; 330-395; 387-470]
You work out the decline in value of a *depreciating asset for an income year using the diminishing value method in this way:
 Base value×Days held
365
×              150%              
 Asset's *effective life 
 

where:

base value is:


(a) for the income year in which the asset's *start time occurs - its *cost; or


(b) for a later year - the sum of its *opening adjustable value for that year and any amount included in the second element of its cost for that year.

days held is the number of days you *held the asset in the income year from its *start time, ignoring any days in that year when you did not use the asset, or have it *installed ready for use, for any purpose.

Note 1:

If you recalculate the effective life of a depreciating asset, you use that recalculated life in working out your deduction.

You can choose to recalculate effective life because of changed circumstances: see section 40-110. That section also requires you to recalculate effective life in some cases.

Note 2:

The effective life of a vessel can change in some cases: see subsection 40-103(2).

Exception: intangibles

40-70(2)  

 [46-35; 373-20(1), (2); 380-15]
You cannot use the *diminishing value method to work out the decline in value of:


(a) *in-house software; or


(b) an item of *intellectual property (except copyright in a *film); or
 View history reference


(c) a *spectrum licence; or


(d) a *datacasting transmitter licence; or


(e) a *telecommunications site access right.
 View history reference

Limit on decline

40-70(3)  

 View history reference [42-20(2)]
The decline in value of a *depreciating asset under this section for an income year cannot be more than the amount that is the asset's *base value for that income year.


 



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