CHAPTER 2
-
LIABILITY RULES OF GENERAL APPLICATION
PART 2-10
-
CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE
Division 40
-
Capital allowances
History
Div 40 substituted for Divs 40, 41 and 42 by No 76 of 2001.
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.
Subdivision 40-H
-
Capital expenditure that is immediately deductible
History
Subdiv 40-H inserted by No 76 of 2001.
Operative provisions
SECTION 40-730
Deduction for expenditure on exploration or prospecting
40-730(1)
You can deduct expenditure you incur in an income year on
*
exploration or prospecting for
*
minerals, or quarry materials, obtainable by
*
mining and quarrying operations if, for that expenditure, you satisfy one or more of these paragraphs:
(a)
you carried on mining and quarrying operations;
(b)
it would be reasonable to conclude you proposed to carry on such operations;
(c)
you carried on a
*
business of, or a business that included, exploration or prospecting for minerals or quarry materials obtainable by such operations, and the expenditure was necessarily incurred in carrying on that business.
Note:
If Division
250
applies to you and an asset that is land:
(a) if section
250-150
applies
-
you cannot deduct expenditure you incur in relation to the land to the extent specified under subsection
250-150(3)
; or
(b) otherwise
-
you cannot deduct such expenditure.
History
S 40-730(1) amended by No 15 of 2017, s 3 and Sch 4 item 43, by substituting para (a) of the note, effective 1 April 2017. Para (a) of the note formerly read:
(a) if section 250-150 applies
-
you can deduct expenditure you incur in relation to the land to the extent specified in a determination made under subsection 250-150(3); or
S 40-730(1) amended by No 14 of 2012, s 3 and Sch 3 items 24 and 25, by inserting
"
and quarrying
"
after
"
*mining
"
and in para (a), effective 1 July 2012. For application and transitional provisions see note under s
15-85
.
S 40-730(1) amended by
No 164 of 2007
, s 3 and Sch 1 item 49, by inserting the note at the end, effective 25 September 2007.
40-730(2)
However, you cannot deduct expenditure under subsection (1) if it is expenditure on:
(a)
development drilling for
*
petroleum; or
(b)
operations in the course of working a mining property, quarrying property or petroleum field.
40-730(2A)
(Repealed by No 96 of 2014)
History
S 40-730(2A) repealed by No 96 of 2014, s 3 and Sch 5 item 16, effective 30 September 2014 and applicable to expenditure incurred during the income year in which this Schedule commences or a later income year. S 40-730(2A) formerly read:
40-730(2A)
You can deduct expenditure you incur in an income year on
*
exploration or prospecting for
*
geothermal energy resources from which energy can be extracted by
*
geothermal energy extraction if:
(a)
you carried on geothermal energy extraction; or
(b)
it would be reasonable to conclude you proposed to carry on geothermal energy extraction; or
(c)
you carried on a
*
business of, or a business that included, exploration or prospecting for geothermal energy resources from which energy can be extracted by geothermal energy extraction, and the expenditure was necessarily incurred in carrying on that business.
S 40-730(2A) inserted by No 84 of 2013, s 3 and Sch 3 item 16, applicable to expenditure incurred on or after 1 July 2012.
40-730(2B)
(Repealed by No 96 of 2014)
History
S 40-730(2B) repealed by No 96 of 2014, s 3 and Sch 5 item 16, effective 30 September 2014. S 40-730(2B) formerly read:
40-730(2B)
However, you cannot deduct expenditure under subsection (2A) if it is expenditure on:
(a)
development drilling for
*
geothermal energy resources; or
(b)
operations in the course of working a property containing geothermal energy resources.
S 40-730(2B) inserted by No 84 of 2013, s 3 and Sch 3 item 16, applicable to expenditure incurred on or after 1 July 2012.
40-730(3)
Also, you cannot deduct expenditure under subsection (1) to the extent that it forms part of the *cost of a *depreciating asset.
History
S 40-730(3) substituted by No 96 of 2014, s 3 and Sch 5 item 17, effective 30 September 2014. S 40-730(3) formerly read:
40-730(3)
You cannot deduct expenditure under subsection (1) or (2A) to the extent that it forms part of the
*
cost of a
*
depreciating asset.
S 40-730(3) amended by No 84 of 2013, s 3 and Sch 3 item 17, by substituting
"
You cannot deduct expenditure under subsection (1) or (2A)
"
for
"
Also, you cannot deduct expenditure under subsection (1)
"
, effective 28 June 2013.
Definitions
40-730(4)
Exploration or prospecting
includes:
(a)
for mining in general, and quarrying:
(i)
geological mapping, geophysical surveys, systematic search for areas containing
*
minerals (except
*
petroleum) or quarry materials, and search by drilling or other means for such minerals or materials within those areas; and
(ii)
search for ore within, or near, an ore-body or search for quarry materials by drives, shafts, cross-cuts, winzes, rises and drilling; and
(b)
for petroleum mining:
(i)
geological, geophysical and geochemical surveys; and
(ii)
exploration drilling and appraisal drilling; and
(c)
feasibility studies to evaluate the economic feasibility of mining minerals or quarry materials once they have been discovered; and
(d)
obtaining
*
mining, quarrying or prospecting information associated with the search for, and evaluation of, areas containing minerals or quarry materials.
(e)
(Repealed by No 96 of 2014)
History
S 40-730(4) amended by No 96 of 2014, s 3 and Sch 5 items 18
-
21, by omitting
"
and for *geothermal energy resources
"
after
"
for petroleum mining
"
from para (b),
"
, or of extracting energy from geothermal energy resources,
"
after
"
quarry materials
"
from para (c), substituting
"
materials.
"
for
"
materials; and
"
in para (d) and repealing para (e), effective 30 September 2014. Para (e) formerly read:
(e)
obtaining
*
geothermal exploration information associated with the search for, and evaluation of, areas containing geothermal energy resources.
S 40-730(4) amended by No 84 of 2013, s 3 and Sch 3 items 19
-
21, by inserting
"
and for
*
geothermal energy resources
"
in para (b),
"
, or of extracting energy from geothermal energy resources,
"
in para (c), and inserting para (e), effective 28 June 2013.
40-730(5)
Minerals
includes
*
petroleum.
40-730(6)
Petroleum
means:
(a)
any naturally occurring hydrocarbon or naturally occurring mixture of hydrocarbons, whether in a gaseous, liquid or solid state; or
(b)
any naturally occurring mixture of:
(i)
one or more hydrocarbons, whether in a gaseous, liquid or solid state; and
(ii)
one or more of the following: hydrogen sulphide, nitrogen, helium or carbon dioxide;
whether or not that substance has been returned to a natural reservoir.
40-730(7)
Mining and quarrying operations
means:
(a)
mining operations on a mining property for extracting
*
minerals (except
*
petroleum) from their natural site; or
(b)
mining operations for the purpose of obtaining petroleum; or
(c)
quarrying operations on a quarrying property for extracting quarry materials from their natural site;
for the
*
purpose of producing assessable income.
History
S 40-730(7) amended by No 14 of 2012, s 3 and Sch 3 item 26, by inserting
"
and quarrying
"
, effective 1 July 2012. For application and transitional provisions see note under s
15-85
.
S 40-730(7) amended by No 66 of 2003.
40-730(7A)
(Repealed by No 96 of 2014)
History
S 40-730(7A) repealed by No 96 of 2014, s 3 and Sch 5 item 22, effective 30 September 2014. S 40-730(7A) formerly read:
40-730(7A)
Geothermal energy resources
means matter occurring naturally within the Earth and containing energy as heat.
S 40-730(7A) inserted by No 84 of 2013, s 3 and Sch 3 item 22, effective 28 June 2013.
40-730(7B)
(Repealed by No 96 of 2014)
History
S 40-730(7B) repealed by No 96 of 2014, s 3 and Sch 5 item 22, effective 30 September 2014. S 40-730(7B) formerly read:
40-730(7B)
Geothermal energy extraction
means operations that are for:
(a)
the extraction of energy from
*
geothermal energy resources; and
(b)
the
*
purpose of producing assessable income.
S 40-730(7B) inserted by No 84 of 2013, s 3 and Sch 3 item 22, effective 28 June 2013.
40-730(8)
Mining, quarrying or prospecting information
is geological, geophysical or technical information that:
(a)
relates to the presence, absence or extent of deposits of
*
minerals or quarry materials in an area; or
(b)
is likely to help in determining the presence, absence or extent of such deposits in an area.
40-730(9)
(Repealed by No 96 of 2014)
History
S 40-730(9) repealed by No 96 of 2014, s 3 and Sch 5 item 22, effective 30 September 2014. S 40-730(9) formerly read:
40-730(9)
Geothermal exploration information
is geological, geophysical or technical information that:
(a)
relates to the presence, absence or extent of
*
geothermal energy resources in an area; or
(b)
is likely to help in determining the presence, absence or extent of such resources in an area.
S 40-730(9) inserted by No 84 of 2013, s 3 and Sch 3 item 23, effective 28 June 2013.
History
S 40-730 inserted by No 76 of 2001.
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