• 47 Capital allowances

    Small business entities

    Broadly, a small business entity is a business with an aggregated turnover of less than $2 million.

    You do not include information at this item if you are a small business entity that has chosen to use the simplified depreciation rules. For information about these rules, see Small business entity concessions.

    Depreciating assets first deducted in 2015–16

    Intangible depreciating assets first deducted

    Show at A the cost of all intangible depreciating assets for which the partnership is claiming a deduction for decline in value for the first time.

    The following intangible assets are regarded as depreciating assets (as long as they are not trading stock):

    • certain items of intellectual property, such as patents, registered designs, copyrights and certain types of licences of these
    • computer software, or a right to use computer software, that the partnership acquires, develops or has someone else develop for its own use (that is, in-house software)
    • mining, quarrying or prospecting rights and information
    • spectrum licences
    • datacasting transmitter licences
    • certain indefeasible rights to use telecommunications cable systems (IRUs)
    • some access rights to telecommunications sites.

    A depreciating asset that the partnership holds starts to decline in value from the time the partnership uses it (or installs it ready for use) for any purpose, including a private purpose. However, the partnership can only claim a deduction for the decline in value to the extent it uses the asset for a taxable purpose, such as for producing assessable income.

    If the partnership has allocated any intangible depreciating assets with a cost of less than $1,000 to a low-value pool for the income year, also include the cost of those assets at A. Do not reduce the cost for estimated non-taxable use.

    Do not include expenditure on in-house software which has been allocated to a software development pool.

    Other depreciating assets first deducted

    Show at B the cost of all depreciating assets (other than intangible depreciating assets) for which the partnership is claiming a deduction for the decline in value for the first time.

    A depreciating asset the partnership holds starts to decline in value from the time the partnership uses it (or installs it ready for use) for any purpose. However, the partnership can only claim a deduction for the decline in value to the extent it uses the asset for a taxable purpose, such as for producing assessable income.

    If any assets (other than intangible depreciating assets) costing less than $1,000 have been allocated to a low-value pool for the income year, also include the cost of those assets at B. Do not reduce the cost for any estimated non-taxable use.

    Self-assessment of effective life

    For most depreciating assets, you can choose to:

    • work out the effective life yourself (self-assess), or
    • adopt the Commissioner’s determination in Taxation Ruling TR 2015/2 Income Tax: effective life of depreciating assets (applicable from 1 July 2015).

    If you have adopted the Commissioner’s effective life determination for all your depreciating assets print X in the No box at C.

    If you have self-assessed the effective life of any of your depreciating assets, print X in the Yes box at C.

    For all depreciating assets

    Recalculation of effective life

    You may recalculate the effective life of assets in certain circumstances if the effective life you have been using is no longer accurate. There are also circumstances where you must recalculate the effective life of a depreciating asset.

    If you have not recalculated the effective life of any of your depreciating assets in this income year, print X in the No box at D.

    If you have recalculated the effective life of any of your depreciating assets in this income year, print X in the Yes box at D.

    Total adjustable values at end of income year

    At E, write the total of the adjustable values of your depreciating assets as at the end of the income year.

    If the partnership has allocated any assets with a cost of less than $1,000 to a low-value pool, do not include the adjustable values of those assets at E Total adjustable values at end of income year.

    Assessable balancing adjustments on the disposal of intangible depreciating assets

    At F, write the total assessable income you have from balancing adjustment events on the disposal of intangible depreciating assets that occurred this income year (this type of assessable income may arise if, for example, you disposed of a depreciating asset for more than its adjustable value). If you do not have any assessable balancing adjustment amount this year, leave this label blank. For more information, see Appendix 6.

    If the partnership has allocated any assets with a cost of less than $1,000 to a low-value pool, do not include the assessable balancing adjustments for these assets at F Assessable balancing adjustments on the disposal of intangible depreciating assets.

    Deductible balancing adjustments on the disposal of intangible depreciating assets

    At G, write the total deductible amount you have from balancing adjustment events on the disposal of intangible depreciating assets that occurred this income year (this type of deduction may arise if, for example, you disposed of a depreciating asset for less than its adjustable value). If you do not have any deductible balancing adjustment amount this year, leave this label blank. For more information, see Appendix 6.

    If the partnership has allocated any assets with a cost of less than $1,000 to a low-value pool, do not include the assessable balancing adjustments for these assets at G Deductible balancing adjustments on the disposal of intangible depreciating assets.

    Termination value of intangible depreciating assets

    Show at H the termination value of each balancing adjustment event occurring for intangible depreciating assets to which the UCA rules applied, including assets allocated to a low-value pool.

    Do not show at H any consideration received during the income year for in-house software for which the partnership has allocated expenditure to a software- development pool.

    The relevant law states that a balancing adjustment event occurs if:

    • you stop holding the asset, or
    • you stop using it and expect never to use it again, or
    • you have not used it and you decide never to use it.

    Generally, the termination value is the amount the partnership receives or is deemed to receive for the balancing adjustment event. It includes the market value of any non-cash benefits, such as goods and services the partnership receives for the asset.

    Termination value of other depreciating assets

    Show at I the termination value of each balancing adjustment event occurring for depreciating assets, including assets allocated to a low-value pool.

    Do not show at I any consideration received during the income year for:

    • depreciating assets allocated in a prior year to a general small business pool (including assets reallocated to the general small business pool from a former long-life small business pool)
    • intangible depreciating assets
    • buildings or structures for which a deduction is available under the capital works provisions
    • assets used in research and development (R&D) activities, or
    • assets falling within the provisions relating to investments in Australian films.

    A balancing adjustment event occurs if the partnership stops holding or using a depreciating asset and expects never to use it again, or decides not to use it in the future, for example, assets sold, lost or destroyed. Generally, the termination value is the amount the partnership receives or is deemed to receive for the balancing adjustment event. It includes the market value of any non-cash benefits, such as goods and services the partnership receives for the asset.

    Deduction for project pool

    Show at J the partnership’s deductions for project pools. For more information, see Appendix 6.

    Section 40-880 deduction.

    Show at K the total of the partnership’s deductions allowable under section 40-880 of the ITAA 1997. For more information, see Appendix 6.

    For more information on deductions you can claim for depreciating assets and other capital expenditure, see Guide to depreciating assets 2016. You can also work out your depreciation and capital allowance claims by using the Depreciation and Capital Allowances Tool (DCAT) on ato.gov.au

    Last modified: 10 Aug 2016QC 48217