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  • Split or merged depreciating assets



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

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    If you hold a depreciating asset that is split into two or more assets, or a depreciating asset that is merged into another depreciating asset, you are taken to have stopped holding the original depreciating asset and to have started holding the split or merged asset. However, a balancing adjustment event does not occur just because depreciating assets are split or merged.

    An example of splitting a depreciating asset is removing a CB radio from a truck. If you install the radio in another truck you may be merging the two assets (radio and truck).

    After depreciating assets are split or merged, each new asset must satisfy the definition of a depreciating asset if the UCA rules are to apply to it. For each depreciating asset you start to hold, you need to establish the effective life and cost.

    The first element of cost for each of the split or merged depreciating assets is:

    • a reasonable proportion of the adjustable value of the original asset just before the split or merger, and
    • the same proportion of any costs of the split or merger.

    If a balancing adjustment event occurs to a merged or split depreciating asset – for example, if it is sold – the balancing adjustment amount is reduced:

    • to the extent the asset has been used for a non-taxable purpose
    • by any amount of the original depreciating asset that is reasonably attributable to use for a non-taxable purpose of the original depreciating asset before the split or merger.

    This reduction is not required if the depreciating asset is mining, quarrying or prospecting rights or information, providing certain activity tests are satisfied.

    Last modified: 14 Jul 2020QC 27915