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  • 9. Capital allowances

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Do not include information at this item if you are a small business entity that has chosen to use the simplified depreciation rules. See Concessions for small business entities for information about these rules.

    Depreciating assets first deducted this income year:

    A - Intangible depreciating assets first deducted

    Write at A the cost of all intangible depreciating assets for which the company is claiming a deduction for decline in value for the first time.

    The following intangible assets are regarded as depreciating assets (as long as they are not trading stock):

    • certain items of intellectual property (patents, registered designs, copyrights and licences of these)
    • computer software, or a right to use computer software, that the company acquires, develops or has someone else develop for its use for the purposes for which it is designed (in-house software)
    • mining, quarrying or prospecting rights and information
    • spectrum licences
    • datacasting transmitter licences
    • certain indefeasible rights to use telecommunications cable systems (IRUs)
    • certain telecommunications site access rights.

    A depreciating asset that the company holds starts to decline in value from the time the company uses it (or installs it ready for use) for any purpose. However, the company can only claim a deduction for the decline in value to the extent it uses the asset for a taxable purpose, such as for producing assessable income.

    If the company has allocated any intangible depreciating assets with a cost of less than $1,000 to a low-value pool for the income year, also include the cost of those assets at A. Do not reduce the cost for estimated non-taxable use.

    Expenditure on in-house software which has been allocated to a software development pool is not included at A.

    For more information on decline in value, cost, low-value pools, in-house software and software-development pools, see the Guide to depreciating assets 2016.

    Information for consolidated and multiple entry consolidated (MEC) groups

    The head company of a consolidated or MEC group must also include the cost of intangible depreciating assets that a subsidiary member would have included at A if it had not joined the consolidated or MEC group. However, the head company must not include the cost of depreciating assets at A Intangible depreciating assets first deducted if the subsidiary member deducted their decline in value before becoming a member of the consolidated or MEC group.

    End of example

    For a company that was a subsidiary member of a consolidated or MEC group for part of the income year and is completing a tax return because of any non-membership periods, write at A the cost of intangible depreciating assets first deducted during the non-membership periods. However, do not include the cost of depreciating assets where the head company of the consolidated or MEC group deducted its decline in value during any period that the subsidiary was a member of the group, and that period was before the non-membership period in which the subsidiary first deducted the decline in value.

    B - Other depreciating assets first deducted

    A depreciating asset that the company holds starts to decline in value from the time the company uses it (or installs it ready for use) for any purpose. However, the company can only claim a deduction for the decline in value to the extent it uses the asset for a taxable purpose, such as for producing assessable income.

    Write at B the cost of all depreciating assets (other than intangible depreciating assets) for which the company is claiming a deduction for the decline in value for the first time.

    If the company has allocated any assets (other than intangible depreciating assets) with a cost of less than $1,000 to a low-value pool for the income year, also include the cost of those assets at B Other depreciating assets first deducted. Do not reduce the cost for estimated non-taxable use.

    For information on decline in value, cost and low-value pools, see the Guide to depreciating assets 2016.

    Information for consolidated and multiple entry consolidated (MEC) groups

    The head company of a consolidated or MEC group must also include the cost of depreciating assets that a subsidiary member would have included at B if it had not joined the consolidated or MEC group. However, the head company must not include the cost of depreciating assets at B if the subsidiary member deducted its decline in value before becoming a member of the consolidated or MEC group.

    End of example

    For a company that was a subsidiary member of a consolidated or MEC group for part of the income year and is completing a tax return because of any non-membership periods, write at B the cost of depreciating assets first deducted during the non-membership periods. However, do not include the cost of depreciating assets where the head company of the consolidated or MEC group deducted its decline in value during any period the subsidiary was a member of the group, and that period was before the non-membership period in which the subsidiary first deducted the decline in value.

    C - Self-assessment of effective life

    For most depreciating assets, you can choose to:

    • work out the effective life yourself (self-assess), or
    • use an effective life determined by the Commissioner.

    If you have adopted the Commissioner’s effective life determination for all your depreciating assets, print X in the No box at C.

    If you have self-assessed the effective life of any of your depreciating assets, print X in the Yes box at C.

    For all depreciating assets:

    D - Recalculation of effective life

    You may recalculate the effective life of assets in certain circumstances if the effective life you have been using is no longer accurate. There are also circumstances where you must recalculate the effective life of a depreciating asset. See When must you recalculate effective life?

    If you have not recalculated the effective life of any of your depreciating assets in this income year, print X in the No box at D.

    If you have recalculated the effective life of any of your depreciating assets this income year, print X in the Yes box at D.

    E - Total adjustable values at end of income year

    Write at E the total of the adjustable values of your depreciating assets as at the end of the income year.

    If the company has allocated any assets with a cost of less than $1,000 to a low-value pool for the income year, do not include the adjustable values of those assets at E.

    F - Assessable balancing adjustments on the disposal of intangible depreciating assets

    Write at F the total assessable income you have from balancing adjustment events on the disposal of intangible depreciating assets that occurred this income year (this type of assessable income may arise if, for example, you disposed of an intangible depreciating asset for more than its adjustable value). If you do not have any assessable balancing adjustment amounts for intangible assets this year, leave this label blank.

    If the company has allocated any assets with a cost of less than $1,000 to a low-value pool for the income year, do not include the assessable balancing adjustments for these assets at F.

    G - Deductible balancing adjustments on the disposal of intangible depreciating assets

    Write at G the total deductible amount you have from balancing adjustment events on the disposal of intangible depreciating assets that occurred this income year (this type of deduction may arise if, for example, you disposed of an intangible depreciating asset for less than its adjustable value). If you do not have any deductible balancing adjustment amounts for intangible assets this year, leave this label blank.

    If the company has allocated any assets with a cost of less than $1,000 to a low-value pool for the income year, do not include the assessable balancing adjustments for these assets at G.

    H - Termination value of intangible depreciating assets

    Write at H the termination value of each balancing adjustment event occurring for intangible depreciating assets to which the UCA rules in Division 40 of the ITAA 1997 apply, including assets allocated to a low-value pool.

    Do not write at H any termination value for in-house software for which the company has allocated expenditure to a software development pool.

    A balancing adjustment event occurs if the company stops holding or using a depreciating asset or decides not to use it in the future, for example, assets were sold, lost or destroyed.

    Generally, the termination value is the amount the company received or is deemed to have received for the balancing adjustment event. It also includes the market value of any non-cash benefits, such as goods and services that the company receives for the asset.

    For more information on balancing adjustment events, termination value, in-house software and software development pools, see the Guide to depreciating assets 2016.

    I - Termination value of other depreciating assets

    Write at I the termination value of each balancing adjustment event occurring for depreciating assets, including assets allocated to a low-value pool.

    Do not include at I any termination value for:

    • assets allocated in a prior year to a general small business pool or long life small business pool
    • intangible depreciating assets
    • buildings or structures for which a deduction is available under the capital works provisions
    • assets used in R&D activities that are subject to the R&D tax incentive
    • assets falling within the provisions relating to investments in Australian films.

    A balancing adjustment event occurs if the company stops holding or using a depreciating asset or decides not to use it in the future, for example, assets were sold, lost or destroyed.

    Generally, the termination value is the amount the company received or is deemed to have received for the balancing adjustment event. It also includes the market value of any non-cash benefits, such as goods and services that the company received for the asset.

    For more information on balancing adjustment events and termination value, see the Guide to depreciating assets 2016.

    For entities connected with mining operations, exploration or prospecting:

    At J write the total of any amounts you have allocated to a project pool for mining capital expenditure or transport capital expenditure incurred this income year. If you have not allocated any such amounts to a project pool, leave this label blank.

    See the Guide to depreciating assets 2016 for information on project amount and how to work out your deductions.

    Questions 9K and 9L require information on your deductions for the decline in value of depreciating assets used in exploration or prospecting. If you did not claim any deductions for depreciating assets used in exploration or prospecting, you do not need to complete these questions.

    At K write the total of your deductions for decline in value of intangible depreciating assets used in exploration or prospecting.

    At L write the total of your deductions for decline in value of other depreciating assets used in exploration or prospecting.

    Last modified: 12 Feb 2019QC 48080