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This information replaces the information contained in Capital allowances: copyright in a film and licence relating to a copyright in a film published on 12 January 2006.
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Amendments to the uniform capital allowance (UCA) rules allow the cost of copyright, and certain licences relating to copyright, in a film to be written-off over their effective life. This means that if you acquire copyright in a film, or an exclusive licence relating to copyright in a film, from 1 July 2004 you can choose to claim your capital allowance deductions under the UCA rules or, if the film is a qualifying Australian film, under the specific film provisions.
Following the amendments, the Commissioner made a determination of the effective life of copyright in a feature film (not including a licence relating to the copyright in a feature film) to be five years. The determination applies from 1 July 2004. The Commissioner has not made any effective life determinations for films other than feature films or for exclusive licences relating to copyright in any films.
The effective life of a depreciating asset is the period the asset can be used by anyone for income producing purposes and if relevant for the asset assuming:
- wear and tear on a reasonable basis, and
- maintenance in reasonably good order and condition and having regard to likely scrapping practices.
The cost of qualifying copyrights is written-off over their effective life using a choice of decline in value formulas contained in the UCA rules.
The effective life write-off applies to copyright in a film, and to an exclusive licence relating to copyright in a film, acquired on or after 1 July 2004. If the film is a qualifying Australian film, holders of copyright in the film may write-off their capital expenditure under the effective life regime rather than the specific film provisions.
Holders of copyright in a feature film (not including a licence relating to copyright in a feature film) can choose to:
- use the Commissioner's determined effective life of five years, or
- self-assess the effective life of the copyright themselves.
Holders of copyright in other films, and holders of an exclusive licence relating to copyright in any films, will need to self-assess the effective life themselves.
You can choose to use either the 'prime cost' or 'diminishing value' methods to calculate the decline in value of copyright in all types of films.
The effective life of a copyright in the film, and of an exclusive licence relating to copyright in a film, can be recalculated on a prospective basis if there is a change in circumstances relating to the nature of use of the asset. This might occur, for example, if there is an unexpected demand or lack of success for a film that is the subject of the copyright.
Example
On the release of a feature film, the holder of the copyright in the film chose to use the Commissioner's estimate of effective life of five years. It became evident within a very short time of release, however, that the film was unsuccessful in that it was unable to attract public patrons. It was, consequently, withdrawn from public viewing with no prospects of alternative viewings. The holder of the copyright would be able to recalculate the effective life of their copyright taking into account the unsuccessful nature of the film.
Last Modified: Thursday, 9 February 2012