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  • Depreciation (capital allowances)



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    You can claim deductions for depreciation of plant-including fences, dams and certain structural improvements on land used for or in some primary production activities. Structural improvements used for domestic or residential purposes do not qualify unless they are provided for the accommodation of employees, tenants or sharefarmers engaged in some activities.

    As part of its Business Tax Reform, the Government has introduced changes to depreciation and proposes to introduce others. These changes are summarised as follows:

    Changes operating from 11.45 a.m. [by legal time in the Australian Capital Territory (ACT)] on 21 September 1999:

    • end of accelerated depreciation for plant that is commenced to be constructed or acquired under a contract entered into after that time-except for small business taxpayers who meet certain conditions
    • provision for elective reassessment of effective lives of plant and equipment acquired after that time
    • removal of the balancing charge offset-except for small business taxpayers or involuntary disposals
    • disregarding of any capital gain or loss from disposals of plant, gains and losses now being calculated under the depreciation provisions and treated as assessable income or deductions.

    Change operating from 1 July 2000:

    • end of immediate deductions for plant costing $300 or less; this concession continues to apply to small business taxpayers until 1 July 2001, the date proposed for the introduction of the Simplified Tax System
    • replacement of the immediate deduction with an option to depreciate certain plant through a low-value pool, except for small business taxpayers.

    Note: Under proposed legislation contained in an Exposure Draft Bill, New Business Tax System (Capital Allowances) Bill 2000, the immediate deduction for plant costing $300 or less will be reinstated from 1 July 2000 for certain taxpayers who use the plant predominantly to produce assessable income that is not derived from carrying on a business.

    Change operating from 1 July 2001:

    • A uniform capital allowances system will be introduced under proposed legislation contained in the Exposure Draft Bill, New Business Tax System (Capital Allowances) Bill 2000. The system will allow you to calculate deductions for the decline in value of most depreciating assets you hold using a standard set of rules. The new law will maintain the existing deductions for capital expenditure peculiar to primary producers and rural businesses.

    For more information, see the publication Guide to Depreciation .

    Last modified: 28 Oct 2003QC 27383