For certain depreciating assets, deductions must be claimed under the UCA rather than under the STS rules:
- assets that are leased out, or are expected to be leased out, for more than 50% of the time on a depreciating asset lease-this does not apply to depreciating assets subject to hire purchase agreements, or short-term hire agreements on an hourly, daily, weekly or monthly basis: depreciating assets used in rental properties are generally excluded from the STS capital allowance rules on the basis that they are subject to a depreciating asset lease
- assets allocated to a low-value or a common-rate pool before entering the STS: those assets must remain in the pool and deductions must be claimed under the UCA rules
- horticultural plants (including grapevines)
- in-house software where the development expenditure is allocated to a software development pool see Software development pools.
Capital expenditure deductible under the UCA
As the STS capital allowance rules apply only to depreciating assets, certain capital expenditure incurred by an STS taxpayer that does not form part of the cost of a depreciating asset may be deducted under the UCA rules for deducting capital expenditure.
This includes capital expenditure on certain business related costs and amounts directly connected with a project see Capital expenditure deductible under the UCA for more information.
Under the UCA rules, you can choose to allocate to a software development pool expenditure you incur in developing (or having developed) in-house software you intend to use solely for a taxable purpose. Once you have allocated expenditure on such software to a pool, all such expenditure incurred thereafter (in that year or in a later year) must also be allocated to a pool see Software development pools.
If you have allocated such expenditure to a software development pool either before or since entering the STS, you must continue to allocate such expenditure to a software development pool and calculate your deductions under the UCA.
If you have not previously allocated such expenditure to a software development pool and you choose not to do so this year or if the expenditure was incurred in developing in-house software which you do not intend using solely for a taxable purpose, you can capitalise it into the cost of the unit of software developed and claim deductions for the unit of in-house software under the STS rules when it starts to be used or is installed ready for use for a taxable purpose.
Deductions for in-house software acquired off the shelf by an STS taxpayer for use in their business are available under the STS rules. For example, an item costing less than $1,000 will qualify for an outright deduction.