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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 43 - Deductions for capital works  

Subdivision 43-B - Establishing the deduction base  

Operative provisions

SECTION 43-75  Construction expenditure area  

43-75(1)  

 ITAA 36
The construction expenditure area of capital works begun after 30 June 1997 is the part of the capital works on which the *construction expenditure was incurred that, at the time when it was incurred by an entity, was to be owned or leased by the entity or held by the entity under a *quasi-ownership right over land granted by an *exempt Australian government agency or an *exempt foreign government agency.

Note:

Section 43-80 explains when capital works begin.

43-75(2)  

 ITAA 36
The construction expenditure area of capital works begun before 1 July 1997 is the part of the capital works on which the *construction expenditure was incurred that:


(a) at the time when it was incurred by an entity, was to be owned or leased by the entity or held by the entity under a *quasi-ownership right over land granted by an *exempt Australian government agency or an *exempt foreign government agency; and


(b) at the time of completion of construction, was to be used in the way described in Column 3 of Table 43-90 (intended use at completion) for the time period when the capital works began as set out in Column 1.

43-75(3)  

 [No equivalent]
There is taken to be a construction expenditure area for capital works purchased by an entity from another entity if:


(a) the capital works would have had a construction expenditure area but for the fact that the other entity did not incur capital expenditure in constructing the capital works; and


(b) the other entity is not an *associate of the entity; and


(c) the other entity constructed the capital works on land that it owned or leased in the course of a business that included the construction and sale of capital works of that kind.

Note:

Subsection (3) makes capital works purchased from a speculative builder eligible for deduction in the hands of the first and subsequent purchasers.

[CCH Note: S 43-75(3) does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997.]

43-75(4)  

 ITAA 36
The construction of the capital works must be complete before the *construction expenditure area is determined.

43-75(5)  

 [No equivalent]
Only one *construction expenditure area is created each time an entity constructs capital works.

Example:

An entity undertakes the construction of a building. During the course of construction, the entity makes 3 progress payments to the builder. There is still only one construction expenditure area.

43-75(6)  

 [No equivalent]
A separate *construction expenditure area will be created each time an entity undertakes the construction of capital works.

Example:

In the diagram below, area 1 relates to the original construction of a building which gives rise to one construction expenditure area. Area 2 is a subsequent extension of the same building which gives rise to another, while area 3 is a later renovation of the entire building which gives rise to another.

graphic



 



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