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You need to know
You show at M Depreciation expenses item P8 the depreciation claimed in your books of account other than for those assets allocated in a prior year to a general STS pool or a long-life STS pool. For assets allocated to such a pool, include here the amount of the pool deduction to be claimed for tax purposes.
The depreciation amount shown at M should not include profit or loss on the sale of depreciating assets. You should include profits on the sale of depreciating assets in Other business income at I or J in the Income section of item P8 on your schedule. You should include losses on the sale of depreciating assets at P All other expenses in the Expenses section.
Accounting or book depreciation may differ from the deduction for the decline in value of depreciating assets.
You carry out the reconciliation between accounting depreciation and the deduction for decline in value at H Expense reconciliation adjustments in the Reconciliation items section of item P8.
You can use the decline in value calculator on our website to calculate the decline in value of these assets or see the Guide to depreciating assets 2005-06 (NAT 1996-6.2006) for more information on how to calculate decline in value.
Is expenditure revenue or capital in nature?
Law Administration Practice Statement PS LA 2003/8 - Taxation treatment of expenditure on low cost items for taxpayers carrying on a business provides guidance on two straightforward methods which can be used by taxpayers carrying on a business to help determine whether expenditure incurred to acquire certain low-cost items is to be treated as revenue or capital expenditure.
Subject to certain qualifications, the two methods cover expenditure below a threshold and the use of statistical sampling to estimate total revenue expenditure on low-cost items. The threshold rule allows an immediate deduction for qualifying low-cost business items costing $100 or less. The sampling rule allows taxpayers with a low-value pool to use statistical sampling to determine the proportion of the total purchases on qualifying low-cost business items that are revenue expenditure.
A deduction for expenditure incurred on low-cost assets calculated in accordance with this Practice Statement will be accepted by the ATO.
Completing this item
Step 1, Write your total primary production depreciation expenses at Depreciation expenses in the Primary production column, item P8 on page 3 of your schedule. Do not show cents.
Step 2, Write your total non-primary production depreciation expenses at Depreciation expenses in the Non-primary production column. Do not show cents.
Step 3, Add up your primary production and non-primary production depreciation expenses and write the total at M.
Is the amount at M greater than $15,000?
No, Go to Step 4.
Yes, You will need to complete and attach a Capital allowances schedule 2006 unless you:
- have chosen to enter or continue in the STS at item S1, or
- are exiting the STS at item S1 or have previously exited the STS, and the amount at label M relates entirely to STS depreciating assets.
For more information, see Capital allowances schedule instructions 2005-06 (NAT 4089-6.2006).
Step 4, If you are exiting the STS or have previously exited the STS, and are continuing to claim a deduction in respect of a prior STS pool at M Depreciation expenses, print in the code box at M the appropriate code from table 2.
In all other cases leave the code box blank.
Last modified: 01 Sep 2006QC 18499
Type of depreciation expense
The amount at M relates entirely to STS depreciating assets.
Do not complete a Capital allowances schedule 2005-06
The amount at M relates to both STS depreciating assets and to UCA items.
You will need to complete and attach a Capital allowances schedule 2005-06 if the total amount at M exceeds $15,000.