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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-D - Balancing adjustments    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.

Operative provisions

SECTION 40-295  Meaning of balancing adjustment event  

 View history reference [40-25; 42-30(3); 42-330; 42-335; 46-50; 46-70; 373-60(2); 380-80(3); 387-485]

40-295(1)  

A balancing adjustment event occurs for a * depreciating asset if:


(a) you stop * holding the asset; or


(b) you stop using it, or having it * installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again; or


(c) you have not used it and:


(i) if you have had it installed ready for use - you stop having it so installed; and

(ii) you decide never to use it.

Note:

A balancing adjustment event occurs under paragraph 40-295(1)(a) when you start holding a depreciating asset as trading stock.

40-295(1A)  

 View history reference
A balancing adjustment event occurs for a *depreciating asset you *hold that is a *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, if:


(a) the only reason that subsection 40-80(1) does not apply to the right or information is that the right or information does not meet the requirements of paragraph 40-80(1)(d) or (e) ; and


(b) you have neither budgeted nor planned for further expenditure that:


(i) will relate to the tenement to which the right or information relates; and

(ii) will exceed the minimum expenditure required to maintain the tenement; and


(c) you choose to apply this subsection to the right or information.

40-295(1B)  

 View history reference
A balancing adjustment event occurs for a *depreciating asset you *hold that is a *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, if:


(a) since the last time you commenced to hold the right or information, a *balancing adjustment event occurred, because of subsection (1A), to the right or information; and


(b) paragraph (1A)(b) no longer applies.

40-295(2)  

A balancing adjustment event occurs for a * depreciating asset if:


(a) for any reason, a change occurs in the * holding of, or in the interests of entities in, the asset; and


(b) the entity or one of the entities that had an interest in the asset before the change has an interest in it after the change; and
 View history reference


(c) the asset was a partnership asset before the change or becomes one as a result of the change.

40-295(3)  

However, a balancing adjustment event does not occur for a * depreciating asset merely because you split it into 2 or more depreciating assets or you merge it with one or more other depreciating assets.

Note:

A balancing adjustment event will occur if you stop holding part of a depreciating asset.


 



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