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The termination value is, generally, what you receive for the asset when a balancing adjustment event occurs. It is made up of amounts received and the market value of non-cash benefits (such as goods or services) you have received for the asset.
The most common example of termination value is the proceeds from selling an asset. The termination value may also be an insurance pay-out for the loss or destruction of a depreciating asset.
Apart from what is actually received, termination value can be what is taken to have been received under the legislation. For example, if you dispose of a depreciating asset for less than market value and do not deal at arm's length with the other parties to the transaction, or you stop holding an asset under a private or domestic arrangement (for instance, you give an asset to a family member), the termination value of the asset is its market value just before you stopped holding it.
The termination value of a unit of in-house software you still hold but stop using and expect never to use again or decide never to use is zero-see Units of in-house software.
The termination value is different for any other asset. If you stop using the asset and expect never to use it again but still hold it, the termination value is the market value when you stop using it. For a depreciating asset you decide never to use but still hold, the termination value is the market value when you make the decision.
If you die and a depreciating asset starts to be held by your legal personal representative (the executor or administrator of your estate), a balancing adjustment event occurs. The termination value of the asset is its adjustable value at the date of death. If the asset passes directly to a beneficiary of the estate or to a surviving joint tenant, the termination value is the market value just before you die.
The termination value is reduced by the GST payable if the balancing adjustment event is a taxable supply. It can be modified by increasing or decreasing adjustments. If the termination value is taken to be the market value of the asset, the market value is reduced to exclude the GST payable if the balancing adjustment event is a taxable supply.
If you receive a payment for several items that include a depreciating asset, you need to apportion the payment between the termination value of the depreciating asset and the other items.
In most cases, the termination value can be reduced by any expenses of the balancing adjustment event-for example, advertising or commission expenses. The expenses must not be otherwise deductible.
Last modified: 01 Jun 2005QC 27399