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 intermittent hourly, daily, weekly or monthly basis where there is no substantial continuity of hiring. 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.
- 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 in having developed) in-house software you intend to use solely for a taxable purpose. Once you do allocate expenditure on such software to a pool, you must allocate all such expenditure incurred thereafter (in that year or in a later year) 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.
- you have not previously allocated such expenditure to a software development pool and you choose not to do so this year, or
- you incur the expenditure 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 you start to use it (or install it 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, such an item costing less than $1,000 will qualify for an outright deduction.