Senate

New Business Tax System (Capital Allowances) Bill 2001

New Business Tax System (Capital Allowances - Transitional and Consequential) Bill 2001

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OF REPRESENTATIVES TO THE BILL AS INTRODUCED

Chapter 1 - Capital allowances - core rules

Outline of chapter

1.1 This chapter explains amendments made in Schedule 1 to this Bill. The amendments implement the Governments decision to introduce a uniform capital allowance system. This system will consolidate within a single Division of the ITAA 1997 (Division 40) most of the different capital allowances of the current law. This Division will allow taxpayers deductions for the decline in value of a depreciating asset over that assets effective life.

1.2 This chapter also explains amendments that will allow taxpayers deductions as they write off certain other capital expenditure that does not attract a deduction under the current law.

Context of reform

1.3 The introduction of the uniform capital allowance system for depreciating assets and its general application, giving deductions for some previously non-deductible capital expenditure, are key components of the New Business Tax System announced in Treasurers Press Release No. 74 of 11 November 1999 (refer to Attachment L).

1.4 The uniform capital allowance system will offer significant simplification benefits, because it is based on a common set of principles. The existing capital allowance regimes are complex, inconsistent and involve significant replication of parallel but not identical provisions and concepts in the current law. Consolidation of these regimes will overcome these deficiencies. It will also provide a more neutral tax treatment for capital expenditure on depreciating assets and therefore should improve the quality of investment and economic efficiency.

Summary of new law

1.5 The following summarises the key elements of the uniform capital allowance system that is to be included in Division 40.

What the Division does Division 40 provides a set of general rules (in Subdivision 40-B) to calculate the deduction to taxpayers for the notional decline in value of most depreciating assets they hold. It also provides pooling mechanisms, under which some expenditures are pooled and taxpayers are given deductions for the decline of the pool. Further, it allows immediate deductions for certain other capital expenditure.
What is a depreciating asset? A depreciating asset is an asset with a limited effective life that loses value over that life because it is effectively used up.
What is not a depreciating asset? Land, trading stock and most intangible assets are not depreciating assets.
Who is the holder of a depreciating asset? Generally, this will be its legal owner. In specific circumstances, entities other than legal owners will hold an asset.
When does the decline in value start? Usually, once you first use the depreciating asset or install it ready for use for any purpose. The deduction for the decline will be adjusted if the asset is not used for a taxable purpose (e.g. if the asset is for private use).
How is the decline in value calculated? You choose between one of 2 formulas. Both rely on the effective life of the asset, and generate a decline writing the asset off regardless of changes to the actual market value of the asset. Both produce an adjustable value, that is, the amount remaining after the decline.
What is the assets effective life? It is the period that the asset can be used by you or anybody else for income producing purposes, assuming it will be subject to wear and tear at a reasonable rate and that it will be maintained in reasonably good order and condition. You choose between your reasonable assessment of the effective life and any applicable safe harbour determination of effective life by the Commissioner.
What is the assets cost? Generally, it is the amount you paid for it. Special rules adjust this cost in certain cases, for example, non-arms length transactions. The cost rules are detailed in Subdivision 40-C.
What happens when you cease to hold the asset? You calculate a balancing adjustment. This results in a further amount being included in assessable income (if adjustable value is lower than termination value) or allowed as a further deduction (if adjustable value is higher than termination value). This calculation is set out in Subdivision 40-D.
Pooling for certain assets A pooling mechanism can be used as an alternative to calculating the decline in value using the general formula. There is a pool for in-house software development expenditure as well as for assets costing less than $1,000 or that have declined in value below $1,000. This mechanism is set out in Subdivision 40-E.
Primary producers The decline in value for certain primary production assets and deductions for certain expenditure are calculated separately. These separate rules are set out in Subdivisions 40-F and 40-G.
Immediately deductible capital expenditure You can calculate the decline in value of certain capital expenditure that is immediately deductible. These types of expenditure are set out in Subdivision 40-H.
Other capital expenditure deductible over a period of time You can calculate the deduction for the decline in value of certain other deductible capital expenditure. The rules for this calculation are set out in Subdivision 40-I.

Comparison of key features of new law and current law

1.6 The following table sets out the important differences between the various capital allowances in the existing law and the basic rules in Subdivision 40-B. Some of the key features of the new law are subject to exceptions and details as explained under later headings.

New law Current law
The core provisions will apply to most depreciating assets. The existing law applies to depreciating assets that qualify as plant or articles, and to expenditure on assets covered by specific provisions, for example, mining and primary production. Some assets with a limited effective life are not covered by any provision, so no account is taken of expenditure on these assets (blackhole expenditures).
The entity holding a depreciating asset is entitled to write-off the cost of the asset. Depending on the provision that applies, either the owner of the relevant asset or another entity that incurs expenditure on that asset is entitled to the capital allowance.
A depreciating asset begins to be written-off when it is first used for any purpose (or, if the depreciating asset is not a right, when it is installed ready for use). When an asset starts to decline in value varies from regime to regime. The most common variations are when the expenditure is incurred and when the asset is first used for producing assessable income (or installed ready for use and held in reserve).
The cost of a depreciating asset is generally the total of all the amounts that have been paid by the holder to hold it. This expressly includes further costs after the holder begins to hold the asset. The amount on which the decline in value of an asset is based is either the expenditure incurred on creating the asset or its original cost. This generally does not cover explicitly any further costs after the owner takes possession of the asset.
There is a choice between the prime cost method and the diminishing value method for all depreciating assets except intangibles. Particular intangibles must use the prime cost method. For plant depreciation, there is a choice between the prime cost and diminishing value methods. Most other capital allowances are a straight line deduction.
An entity can deduct an amount for the decline in value for an income year of a depreciating asset that they held and used (or installed ready for use) for any time during the year. An entity can deduct an amount for depreciation of a unit of plant for an income year if they were the owner or quasi-owner of the plant in that year.

Detailed explanation of new law

Deducting amounts for depreciating assets

1.7 Subdivision 40-B contains the core provisions for working out the deduction for the decline in value of most depreciating assets. The rules are based on similar principles to those used in calculating depreciation deductions for plant currently allowed under Division 42 of the ITAA 1997. The calculation process has been restructured to deal better with those further costs of a depreciating asset that can arise after taxpayers begin to hold the asset, and to make other improvements to the process.

1.8 The core provisions will not apply to depreciating assets which are water facilities, horticultural plants or grapevines, or to depreciating assets used in landcare operations. Subdivisions 40-F and 40-G maintain the concessional write-off rules provided under the existing law for these depreciating assets used in primary production activities (see Chapters 5 and 6). [Schedule 1, item 1, subsection 40-50(1)]

1.9 A taxpayer will be entitled to a deduction for the decline in value of a depreciating asset that they hold in an income year. This decline in value is a statutory decline; it does not depend on a measure of actual decline in market value in the income year. [Schedule 1, item 1, subsection 40-25(1)]

1.10 The deduction allowable for the amount of a depreciating assets decline in value is reduced where the asset was used for a private or domestic purpose, or to produce exempt income. The adjustment ensures that the amount deducted reflects the extent to which the depreciating asset was used for a taxable purpose, that is for producing assessable income, for exploration or prospecting, or for mining site rehabilitation or for environmental protection activities (essentially, pollution control and waste management). [Schedule 1, item 1, subsections 40-25(2) and (7)]

1.11 The deduction may be further reduced if the depreciating asset is a boat or a leisure facility. Broadly, the deduction for the decline in value of a boat or leisure facility will be further reduced to the extent that the asset is not integral to the taxpayers income producing activities, although used or installed ready for use for a taxable purpose. For example, the deduction will be further reduced if it is not held as trading stock or its use did not give rise to a fringe benefit. [Schedule 1, item 1, subsections 40-25(3) and (4)]

1.12 The general and further reduction rules do not apply to:

·
depreciating assets allocated to a low-value pool (the amount allocated to the pool is reduced instead); and
·
cars whose expenses have been substantiated using the one-third of actual expenses method (the deduction is reduced to one third of the decline instead).

[Schedule 1, item 1, subsections 40-25(5) and (6)]

What is a depreciating asset?

1.13 A depreciating asset is broadly defined in subsection 40-30(1) as being an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. The fact that an asset is not being used does not mean it does not satisfy this definition. Rather it will satisfy the definition if the asset can reasonably be expected to decline in value had it been used. This definition captures the meaning of plant (such as machinery) under the current Division 42 of the ITAA 1997 as well as other assets that are wasting in nature.

1.14 This does not limit depreciating assets to things that lose value steadily over their effective lives. Nor are depreciating assets limited to things that only ever decline in value. Depreciating assets may hold their value for a time, or even increase it for a time. The test of a depreciating asset requires only that the asset lose its value overall (or down to no more than scrap value) by the end of its effective life. From that effective life, the statutory methods produce a statutory decline from time to time, which is not required to be correlated to an expected decline in market value with the same timing. The balancing adjustment rules bring the adjustable value, that is the cost as declined by statute from time to time, back into line with value when a balancing adjustment event occurs - essentially when a taxpayer stops holding the asset.

1.15 Taxpayers will be required to exercise judgement in identifying the depreciating asset where the asset itself is made up of different parts and components. In doing this, the functionality test that is used as a basis of identifying a unit of plant in the existing plant depreciation rules can be used. (Specific reference to a unit or an item is not necessary to attract the test, as the definition of a depreciating asset is based on a life in effective use, and the depreciating asset must be identifiable as having its own life in such use.) [Schedule 1, item 1, subsection 40-30(4)]

1.16 Land is excluded from the definition of depreciating asset as it is not generally considered to have a limited effective life [Schedule 1, item 1, paragraph 40-30(1)(a)] . However improvements to land or fixtures on land may still qualify as depreciating assets. For the purposes of Division 40, these improvements or fixtures are treated as separate assets, not as part of the land, regardless of whether they can be removed from the land or are permanently attached [Schedule 1, item 1, subsection 40-30(3)] . This ensures that all the specific inclusions in the definition of plant under the current section 42-18 of the ITAA 1997 are depreciating assets, so those inclusions are not replicated in the new provisions.

1.17 Other assets that are specifically excluded from the definition of depreciating asset are items of trading stock and any intangible assets not specifically included [Schedule 1, item 1, paragraphs 40-30(1)(b) and (c)] . However, the following types of intangible assets will be depreciating assets to the extent they are not trading stock:

·
mining, quarrying or prospecting rights;
·
mining, quarrying or prospecting information;
·
in-house software;
·
items of intellectual property - for example, patents;
·
an IRU;
·
spectrum licences; and
·
datacasting transmitter licences.

The inclusion of these intangible assets maintains a capital allowance deduction like the write-off they receive under the existing law and includes the new write-off for datacasting transmitter licences, announced by the Government since it publicly exposed a version of this Bill. [Schedule 1, item 1, subsection 40-30(2)]

1.18 With the exception of in-house software and datacasting transmitter licences, these intangibles retain their current tax law definitions. In relation to in-house software, Division 46 of the ITAA 1997 contained a definition of expenditure on software and treated units of software on which you incur expenditure as if they were units of plant that you own. The treatment of in-house software in this Bill does not however, represent an in-substance change in the way in which software is treated. Previously software on which you incur expenditure was treated as if it were plant and now in-house software that satisfies the definition is a depreciating asset. In relation to datacasting transmitter licences, a new definition has been inserted into subsection 995-1(1) of the ITAA 1997.

Depreciating assets excluded from Division 40

1.19 Certain types of depreciating assets are specifically excluded from the uniform capital allowance system. These are:

·
certain depreciating assets used in R & D activities;
·
depreciating assets associated with investments in Australian films;
·
depreciating assets that are capital works under Division 43 of the ITAA 1997;
·
depreciating assets that are associated with certain IRUs; and
·
depreciating assets that are cars where the deductions on those cars have been substantiated using certain methods.

Depreciating assets associated with R & D or with investments in Australian films

1.20 This exclusion from the uniform capital allowance system preserves the concessional tax treatment available under the existing law for capital expenditure incurred in carrying on R & D activities and investments in Australian films. In particular:

·
the proposed capital allowances provisions will only apply where the plant is not installed ready for use exclusively for carrying on R & D activities or where the taxpayer has elected under subsection 73B(18) of the ITAA 1936 that the R & D provisions will not apply [Schedule 1, item 1, subsection 40-45(1)] ; and
·
any taxpayer that has previously deducted or is entitled to deduct an amount under the existing law in respect of Australian films or copyrights acquired over those films will continue to deduct under the existing law and not under Division 40 [Schedule 1, item 1, subsection 40-45(5)] .

Depreciating assets that are capital works under Division 43 of the ITAA 1997

1.21 Expenditure incurred on capital works to which Division 43 of the ITAA 1997 applies is also excluded from the uniform capital allowance system. Those buildings and structural improvements which would be deductible only under Division 43 but which are ineligible because expenditure was incurred or work was started too early to qualify for a deduction will also be excluded from the uniform capital allowance system. As Division 43 only applies where other regimes do not, the buildings and structural improvements currently dealt with in other parts of the taxation law other than Division 43 will be included in the uniform capital allowance system. However, Division 43 will continue to apply to other capital works. [Schedule 1, item 1, subsection 40-45(2)]

Depreciating assets that are associated with certain IRUs

1.22 Also excluded from the uniform capital allowance system are:

·
IRUs to the extent that the expenditure on the IRU was incurred at or before 110 am, by legal time in the Australian Capital Territory, on 21 September 1999 [Schedule 1, item 1, subsection 40-45(3)] ;
·
any international telecommunications submarine cable system, or an IRU over the system, if the system has been used for telecommunications purposes at or before 110 am, by legal time in the Australian Capital Territory, on 21 September 1999 [Schedule 1, item 1, subsection 40-45(4)] .

These exclusions maintain the effect of the existing law.

Depreciating assets that are cars where the deductions on those cars have been substantiated using certain methods

1.23 Taxpayers can choose to use the cents per kilometre method or the 12% of original value method to calculate their car expenses. These methods already take into account the decline in value (or depreciation) of the car. Therefore, no separate deduction for decline in value is necessary. The decline continues, providing the basis of balancing adjustments if applicable. [Schedule 1, item 1, section 40-55]

Who holds a depreciating asset?

1.24 Under subsection 40-25(1), an entity can deduct an amount equal to the decline in value for an income year of a depreciating asset that they held during the year. Working out whether an entity holds an asset is therefore an important step in determining whether the entity can deduct amounts for its cost of a depreciating asset under Division 40.

1.25 In broad terms, a holder of a depreciating asset will be its economic owner. The economic owners are the entities that are able to access the assets economic benefits while stopping other entities from doing the same. [Schedule 1, item 1, section 40-40]

1.26 Entities may be the economic owners of depreciating assets in any of several ways. There may also be several economic owners, each with its own cost of the asset. These may each be holders of the asset, so joint holding of depreciating assets is generally recognised. However, in some cases, for an entity to hold an asset in a particular way excludes another entity from being an economic owner of the asset. In those cases, the entity for whom holding is excluded is specifically identified.

Ownership

1.27 In most cases, the legal owner of a depreciating asset is also its economic owner. This is because a legal owners ability to use or exchange the asset and deny others the same is protected by the courts. On this basis, the legal owner of an asset is treated as holding the asset in most cases. [Schedule 1, item 1, section 40-40, item 10 in the table]

1.28 Where a depreciating asset has both a legal and equitable owner, the legal owner will be regarded as a holder of that asset under this item, unless excluded by another item (such as item 5 or 6).

Economic ownership

1.29 In some cases, however, an economic owner of an asset is not its legal owner. Such an economic owner is a holder of the depreciating asset. Sometimes, also, a legal owner of an asset is not its economic owner. Such a legal owner is not a holder of the depreciating asset. For example, the economic owner of a depreciating asset may lack legal title to that asset merely because it is subject to:

·
a legal mortgage;
·
a hire-purchase agreement;
·
a product financing or product sponsor agreement (see Example 1.1);
·
a reservation of title arrangement; or
·
a bare trust.

1.30 There are 2 general cases in which the economic owner of an asset is someone other than its legal owner, to the exclusion of the legal owner. These cases are dealt with separately because of the need to address both tangible and intangible depreciating assets; but the purpose of both items in the table is the same in principle. There are also a number of other specific cases.

First general case: economic ownership of a tangible depreciating asset

1.31 The first situation is where an asset is apparently held by one entity (perhaps a legal owner), but another entity possesses, or has the right against the apparent holder to possess that asset immediately, in circumstances in which that other entity has a right to become the holder, and it is reasonable to expect:

·
that the other entity will become the holder; or
·
that the asset will be disposed of at the direction and for the benefit of that other entity.

1.32 In this situation, the other entity is the economic owner, and they are the holder of the depreciating asset to the exclusion of the apparent holder. [Schedule 1, item 1, section 40-40, item 6 in the table]

1.33 Where the economic owner does not have actual possession but only a right against the apparent holder to possession, that right must be immediate, unconditional and non-contingent. That is, there must not be any thing to be done before that economic owner has the right to gain actual possession of the asset. For example, a taxpayer may have a call option over a depreciating asset the taxpayer does not hold but until that option is exercised there is no immediate right to possession and the option-holder will not hold that asset.

1.34 This item has to deal with cases where the apparent holder is not the legal owner, as for tangible assets in a range of circumstances there may be an apparent holder who is not the legal owner and against whom the economic owner has both possession (or a right to immediate possession) and rights, the exercise of which will make them a holder. For example, a tenant of land to which a depreciating asset is fixed may give both possession and a right to a transfer of the tenancy to a new economic owner.

Example 1.1 Emma wants to acquire additional finance for her business. In order to do this, she enters into a product financing arrangement with Republic Pty Ltd. Under the arrangement, she sells an item of plant to Republic, but contracts to repurchase it for a price equal to the original sale price plus a finance charge. Emma remains in possession of the item, and continues to use it, even though Republic has been given temporary ownership of it. In this situation, Emma is the holder of the plant under item 6 in the table in section 40-40, because she has the right to possess the plant, the right to again become its legal owner (and therefore its holder), and it is reasonable to expect that this will happen.

Second general case: economic ownership of an intangible depreciating asset

1.35 The second situation occurs where a depreciating asset that is a right is legally owned by one entity, but another entity exercises the subject matter of that right, or has the right to exercise it immediately, in circumstances in which that other entity has a right to become the legal owner, and it is reasonable to expect:

·
that the other entity will become the legal owner; or
·
that the right will be disposed of at the direction and for the benefit of that other entity.

1.36 In this situation, the other entity is the economic owner , and they are the holder of the depreciating asset to the exclusion of the legal owner. Again, where the taxpayer has a right to possession, rather than actual possession, it must be an immediate right of possession (not a right to possession that will become immediate only on exercising an option, for example). [Schedule 1, item 1, section 40-40, item 5 in the table]

Example 1.2 The trustees of Tritech Unit Trust want to raise additional finance. They do this by borrowing money from Apricon Pty Ltd, securing the loan by granting a mortgage over one of the Trusts patents. Under the mortgage agreement, legal title to the patent is assigned to Apricon Pty Ltd, but Apricon grants Tritech a licence to continue to exploit the subject matter of the patent in its business. Thus, Tritech continues to enjoy the subject matter of the patent even though Apricon has been given temporary ownership of it. In this situation, Tritech is the holder of the patent under item 5 in the table in section 40-40, because it exercises the rights over the subject matter of the patent, has the right to again become legal owner of the patent, and it is reasonable to expect that Tritech will become the legal owner.

Specific cases

1.37 There are also a number of more specific cases which recognise that an economic owner of a depreciating asset is its holder. These cases fall into 3 categories:

·
depreciating assets which are leased;
·
depreciating assets which improve, or are fixed to, land over which an entity owns quasi-ownership rights; and
·
depreciating assets held by partnerships.

Depreciating assets which are leased

1.38 The table in section 40-40 contains specific rules relating to depreciating assets which are leased.

1.39 A depreciating asset that is itself subject to a lease may be fixed to land. Assets which become fixtures at common law are regarded as part of the land, and are therefore owned by the lands legal owner. However, in circumstances where the lessor of a depreciating asset has a right to recover that asset, the lessor is still an economic owner. The lessor is recognised as a holder, while their right to recover the asset exists. [Schedule 1, item 1, section 40-40, item 4 in the table]

Example 1.3 Damian leases an ammonia plant to Simon, which Simon attaches to land that he owns. Under the plant lease agreement, Damian has a right to recover the asset upon completion of the plant lease.Damian is a holder of the plant under item 4 in the table in section 40-40 while his right to recover the plant exists, as he is the lessor of the plant.Simon is a holder of the plant under item 10; this will be important if he has costs of the plant (for instance, in modifying or extending it after installation).

1.40 Further, consistent with the current law, where a depreciating asset is a luxury car that is subject to a lease, the lessee is regarded as a holder, and the lessor is not a holder, while the lessees right of use continues. [Schedule 1, item 1, section 40-40, item 1 in the table]

Depreciating assets which improve, or are fixed to, land over which an entity has quasi-ownership rights

1.41 The table in section 40-40 addresses specific cases where a depreciating asset is fixed to land which is itself subject to a quasi-ownership right. A quasi-ownership right is defined in subsection 995-1(1) of the ITAA 1997 as a lease over land, an easement in connection with land, or any other right, power or privilege over the land, or in connection with the land. An entity has a quasi-ownership right if it is the successive owner of such a right. For example, a sublessee will have a quasi-ownership right. The quasi-ownership right need not be held from an Australian government or government agency, a requirement for depreciation under the current law.

1.42 Where the owner of the quasi-ownership right improves the land with a depreciating asset, or improves a depreciating asset that is itself an improvement to the land, and where that improvement is for their own use but they cannot remove that asset from the land, they are nonetheless the holder while their quasi-ownership right exists. [Schedule 1, item 1, section 40-40, item 3 in the table]

Example 1.4 Jerry is leasing land and building from Cantrell Nominees Pty Ltd, on which he carries on business. Jerry installs an in-ground watering system on the land, at his own expense and for the benefit of the business he carries on. Under the lease agreement, Jerry is not permitted to remove fixtures from the property.Even though Cantrell Nominees has become the owner of the watering system under the law of fixtures, Jerry is recognised as a holder while the lease exists under item 3 in the table in section 40-40.

1.43 Where, on the other hand, a depreciating asset is fixed to land where the owner of the quasi-ownership right has a right to remove the asset, the uniform capital allowance system recognises them as the holder while the right of removal exists. Right of removal is consistent with the established legal concept, connoting a right to remove the asset for the benefit of the holder of the right, with the removed item being for their rather than the landowners benefit. Often the right of removal will extend beyond the term of the quasi-ownership right, allowing the quasi-owner reasonable time to remove the asset; they will remain a holder of the asset until that right ends, as until then they might exercise the right and remove the asset, and so continue to hold the asset. [Schedule 1, item 1, section 40-40, item 2 in the table]

Example 1.5 Ben affixes an item of plant to land which he is leasing from Sally. Under the law of fixtures, Sally legally owns the plant. However, under the law of tenants fixtures, Ben has the right to remove fixtures while the lease subsists and for a reasonable time afterwards. While his right of removal remains, Ben is a holder of the plant under item 2 in the table in section 40-40, because he owns a quasi-ownership right over the land.

1.44 The entity with the quasi-ownership right need not be the only holder. For instance, a landlord may agree with a tenant to share the cost of a depreciating asset which is a fixture. The landlord will be a holder of the asset too. Under the joint holding rule, discussed below, each holder will calculate their own decline and will calculate for themselves any reduction in their own deduction.

Depreciating assets held by partnerships

1.45 Property which has become partnership property or a partnership asset at general law is beneficially owned by all of the partners, even if only one partner is the legal owner. Where a depreciating asset is or becomes a partnership asset, it is appropriate to identify the partnership as being the economic owner of the asset. Thus, the partnership, and not any individual partner, is regarded as holding the asset. This is consistent with the structure of the income tax law, under which the partnership is a notional taxpayer arriving at a tax position which is then allocated out between the partners. [Schedule 1, item 1, section 40-40, item 7 in the table]

1.46 Whether a particular depreciating asset is a partnership asset is determined in accordance with partnership law. This is a question of fact that can only be determined from the terms of the partnership agreement and/or inferences drawn from the conduct of the partners towards the asset.

Depreciating assets which are mining information

1.47 To avoid doubt, mining, quarrying or prospecting information that an entity has will be specifically stated as being held by an entity. This will ensure, amongst other things, that the disposal of such information will give rise to a balancing adjustment. Mining information is something that can be held in either of 2 ways. First, taxpayers hold mining information that is relevant to mining operations they carry on, or propose to carry on, or that is relevant to an exploration or prospecting business they carry on. In that case, the taxpayer holds the information even if the information is generally available, because the information is still of special value to the taxpayer. So deductions for the decline of the cost are appropriate. Second, taxpayers hold mining information that is not generally available, because others may want it and not have it, and so the information is of special value to the taxpayer. [Schedule 1, item 1, section 40-40, items 8 and 9 in the table]

1.48 If information becomes generally available, and is not relevant to a mining or exploration business of the taxpayer, the taxpayer stops holding the information. That triggers a balancing adjustment for the taxpayer. This is appropriate, as the information must lose its value to the taxpayer at that point. The hold table helps to ensure this result, even though information is generally something that taxpayers still have however widely they may pass it on.

Extension or renewal of a right

1.49 Extensions or renewals of a depreciating asset that is a right will be taken to be a continuation of that right thus ensuring that a balancing adjustment event will not be triggered merely because the right terminates and is immediately followed by an extension or renewal of that right. This provision is related to the effective life rule, that intangible depreciating assets will have effective lives no greater than their term, but that the term must include any reasonably assured extensions or renewals of the term (see paragraphs 10 to 10 for discussion of that rule). [Schedule 1, item 1, subsection 40-30(5)]

Jointly held depreciating assets

1.50 In applying the table in section 40-40, it is important to note that, in some circumstances, there can be more than one holder of a depreciating asset. The most common situation in which this would be the case is where there are multiple holders under the same item. For example, joint legal owners of a depreciating asset are all holders of that asset.

1.51 This does not necessarily mean that there will be multiple claims for the deduction for decline in value, however, as an entity can only deduct an amount for the decline of the cost of the asset to them. If a depreciating asset cost nothing to an entity, they will generally have no cost to write-off.

1.52 It is also important to note that some of the items in the table in section 40-40 preclude the recognition of some kinds of joint holding under 2 or more different items. The exclusions contained in column 3 of items 1, 5, 6 and 7 effectively prevent some entities from being a holder under one of those items or any other item. Other joint holdings can still arise.

Example 1.6 Gossard Pty Ltd let a bulldozer to Edward under a hire purchase agreement under which Edward paid rental instalments and could exercise an option to purchase the bulldozer after paying the final instalment. Edward is reasonably expected to exercise the option, because the final payment will be well below the expected market value of the bulldozer at the end of the agreement. Edward is therefore the holder under item 6. The legal owner, Gossard Pty Ltd, is not the holder under item 10, because item 6 specifies that the legal owner is not the holder where item 6 applies.

1.53 In addition, it is important to note that partners do not hold partnership assets either alone or jointly with the other partners. Partnership assets are held by the partnership not partners. [Schedule 1, item 1, section 40-40, item 7 in the table]

Common joint holding situations

1.54 Three situations in which the application of the joint holding rule will commonly be significant are:

·
cases of joint ownership;
·
cases where there are multiple interests in the same land or depreciating asset, and more than one holder of an interest contributes to the cost of a depreciating asset; and
·
cases where both lessee and lessor contribute to the cost of a depreciating asset.

1.55 The first of these cases occurs, for example, where there are multiple legal owners [Schedule 1, item 1, section 40-40, item 10 in the table] . Consistently with current practice, where depreciating assets are jointly owned, they may be depreciated by each individual owner according to the use made of the asset by that owner.

1.56 The second case would occur, for example, if 2 or more entities were joint signatories to a lease, and contributed to the cost of acquiring a depreciating asset and affixing it to land. In this situation, both entities would be holders under item 2 or 3 in the table, and each would be able to work out the decline in value of their interest by reference to that portion of the underlying assets cost which they contributed.

1.57 Finally, the third case would typically occur where a lessee attaches a depreciating asset to land, such that it becomes a fixture. The lessee would be regarded as the holder under items 2 or 3, whilst the lessor would be regarded as the holder under item 10. If there is a sharing of costs between lessor and lessee, both parties will be able to deduct the decline in value of their interest in the underlying asset by reference to their contribution to the assets cost.

Decline in value of an interest in a depreciating asset

1.58 Where there is more than one holder of a depreciating asset, it is the decline in value of an entitys cost ofthat asset which is taken into account [Schedule 1, item 1, subsection 40-35(1)] . The interest in the underlying asset is dealt with as if it were the depreciating asset itself. This rule looks to whether, under the table in section 40-40, there is more than one entity which holds the same depreciating asset; it is not necessarily concerned with whether there is joint tenancy or co-ownership at general law.

1.59 When subsection 40-35(1) applies, the decline in value of the actual underlying asset is otherwise disregarded by the entity holding the interest [Schedule 1, item 1, subsection 40-35(2)] . This rule is necessary to ensure that there is no double-counting or miscounting of the decline in value, which would otherwise result if the decline in value of the underlying asset were taken into account and deductions adjusted according to all the holders uses of the asset, with the resulting amount shared out in some way.

1.60 The term interest in the underlying asset is intended to be interpreted broadly, and is not limited to rights which create a proprietary interest in the underlying asset. Rather, an entitys interest is simply a reference to their holding of the underlying asset and the circumstances which bring that about.

1.61 The interest specified in subsection 40-35(1) arises from, and therefore takes on the characteristics of, the underlying asset. This means that the effective life of the interest is that of the underlying asset. However, because each holders interest is dealt with as if it were the asset, changes to one holders interest do not have to affect another holder. For example, if there are 3 joint owners of an asset, and one sells all or part of an interest in the underlying asset to a new co-owner, the other original owners have no change to their asset; no balancing adjustment event occurs for them. Joint ventures that are not partnerships provide a common illustration of the practical application of this rule, as they are joint owners who are each holders of a separate asset under this Bill. Partners do not illustrate the point, as partnership assets are held only by the partnership (and not by the partners).

Example 1.7 Claude purchases a gas furnace, which he affixes to land that he leases from Lonsdale Pty Ltd. The total cost to him of the asset is $10,000. The effective life of the furnace is 10 years, and Claude has only 6 years left on his lease when he installs it.Claude has a right to remove the furnace, while the lease subsists, under the law of tenants fixtures. Claude would be a holder of the unit under item 2 in the table in section 40-40, while his right to remove exists.Lonsdale Pty Ltd is also the holder under item 10 in the table, as the legal owner of the furnace, which has become a fixture. Legal title to a fixture remains with the lessor unless and until the tenant chooses to exercise their right of removal and sever it.As there is more than one holder, the relevant asset for both Lonsdale and Claude is their interest in the furnace (as if that interest were itself the furnace).Lonsdale did not pay anything for its interest. Therefore, its cost is nil, and it is not entitled to deduct amounts for the decline in value of the asset.Claude accounts for the decline in the value of his interest in the furnace under subsection 40-35(1); as a result, he is not otherwise entitled to deduct amounts for the decline in value of the furnace itself. Claude may claim deductions for the decline in value of his interest by reference to his cost of $10,000. He deducts amounts according to an effective life of 10 years. It does not matter that the balance of his lease is of a shorter duration.

Jointly held interests and balancing adjustments

1.62 A balancing adjustment event does not happen in relation to an underlying asset or interest in that asset merely because the underlying asset starts to be, or ceases to be, jointly held. In such a case, the effect of the joint holding rules is that the asset is split, and splitting an asset is not itself a balancing adjustment event. To the extent that a new joint holder then takes one of the assets resulting from the split from the original holder, there will be a balancing adjustment event, but not in any other respect. The balancing adjustment rules are concerned to cover cases only so far as an entity ceases to hold an asset, not where they otherwise begin or cease to hold the asset jointly with others. For further discussion on balancing adjustments, see Chapter 3. For further discussion on splitting or merging assets, see paragraphs 10 to 10 and 10 to 1.153.

When does a depreciating asset start to decline in value?

1.63 The decline in value of a depreciating asset held by a taxpayer is triggered by the earlier of the following events:

·
the taxpayer first uses the asset; or
·
the taxpayer has the asset installed ready for use and held in reserve.

[Schedule 1, item 1, section 40-60]

1.64 The point at which the earliest of these events occurs is referred to as the assets start time . It is irrelevant that the depreciating asset may first be used for a non-taxable purpose. The current law expressly refers to assets installed ready for use and held in reserve, but the express words are not reproduced here, as an unused asset is not installed ready for use unless it is held in reserve. Conversely, an asset which begins to be used must be installed ready for use. There are some assets which by their nature cannot be installed. Their start time will occur once they begin to be used [Schedule 1, item 1, subsection 40-60(2)] . However, there is a further start time when taxpayers start using the asset again after a balancing adjustment event has occurred for that asset. That start time is when the taxpayer begins using that asset again [Schedule 1, item 1, subsection 40-60(3)] .

1.65 The effect of section 40-60 may bring forward the time at which a taxpayer starts to calculate the decline in value of a depreciating asset. Under the existing capital allowances rules, a taxpayer generally will not start to calculate the amount which can be deducted until the asset is first used for income producing purposes or is installed ready to be used for this purpose. So if initial use is private, under the current law, calculations do not start, even though the use by which the assets useful life (and, overall, its value) is absorbed has begun.

Example 1.8: Establishing start time

Roy acquires a car on 5 June 2002 and commences private use of the vehicle from this date. The car is used jointly for business and private purposes from 1 August 2002 when Roy begins a fast food delivery run. In accordance with subsection 40-60(2), the start time for the car is 5 June 2002 - this is the time at which Roy will start to calculate the assets decline in value under the new law.

Under the existing income tax law Roy would not start to calculate the cars depreciation deduction until the 2002-2003 income year, that is, the calculation starts from 1 August 2002.

1.66 The proposed timing rule is an improved way of calculating the decline in value of a depreciating asset (and any deduction allowable) to the current rules in Division 42 of the ITAA 1997. As a whole, the rules under Subdivision 40-B ensure that the results achieved under the uniform capital allowance system are consistent with what would otherwise be obtained using the existing rules.

Example 1.9 To continue with Example 1.8, Roys entitlement to a deduction for the 2001-2002 income year is reduced to nil in accordance with subsection 40-25(2) as the asset was only used for private purposes. In the following income year, Roy will be entitled to deduct that portion of the assets decline in value that relates to business use.Under the existing law, the calculation of decline in value is delayed by an income year. In the 2002-2003 income year, Roy would be required to apportion the deduction allowed for the decline in value of the asset so that it reflects the income producing use of the asset.The total deduction allowed over the 2 year period using the proposed capital allowance regime will equal the result that is obtained under the existing law.

1.67 In reality taxpayers will not generally bother to calculate the decline of depreciating assets that they use totally for private purposes. However, if those assets are used in later years for a taxable purpose, the decline for the private purposes must be reconstructed.

Calculating the decline in value

1.68 Sections 40-70 and 40-75 contain the general rules for working out the decline in value ofdepreciating assets. However, where the depreciating asset forms part of a low-value pool or a software development pool, the taxpayer must calculate the decline in value using the rules provided under Subdivision 40-E (see Chapter 4). [Schedule 1, item 1, subsection 40-65(5)]

1.69 The application of the general rules vary, depending on whether it is the first income year in which the decline in value is being calculated for a particular depreciating asset, or a later income year. There is a limit on the decline in value of a depreciating asset. By limiting each years decline to its base value this ensures that the total decline in value of an asset cannot be greater than the assets total cost. [Schedule 1, item 1, subsections 40-70(3) and 40-75(5)]

Immediate decline in value for assets used in exploration and prospecting

1.70 The decline for a depreciating asset you hold will be the assets cost, if the asset is for exploration and prospecting. This means you must first use the asset for exploration and prospecting for things you can get by mining operations. But you must not use the asset for petroleum development drilling, or for operations in the course of working a mining or quarrying operation; and when you start to use the asset you must carry on mining operations, or objectively you must be going to do so, or you must carry on a business including exploration and prospecting for which the cost of the asset was necessarily incurred. These restrictions mirror the current law; see the former section 330-15 and subsection 330-20(2). [Schedule 1, item 1, subsection 40-80(1)]

1.71 It is thought that much expenditure on exploration or prospecting will be a cost of a depreciating asset, and so be fully deductible in an income year under new subsection 40-80(1). Nevertheless, the new law retains the current rules for deducting expenditure on exploration or prospecting in the event there are some expenditures that currently qualify for immediate deduction and that are not a cost of a depreciating asset [Schedule 1, item 1, section 40-730] . The rules regarding this immediate deduction are explained in full in Chapter 7.

Immediate decline in value for assets costing $300 or less

1.72 An immediate deduction for depreciating assets costing $300 or less will be available to taxpayers who:

·
use the asset predominantly for the purpose of producing assessable income that is not from carrying on a business;
·
do not acquire the asset as part of a set of assets costing more than $300 and acquired in an income year; and
·
do not acquire with one or more assets that are either identical or substantially identical in an income year where the total cost of these acquisitions is more than $300.

The second criterion ensures that taxpayers cannot disaggregate a set of assets by buying individual items from the set (each costing $300 or less) rather than buying the set itself (which costs more than $300) and claiming the immediate deduction. In addition, the third criterion ensures that taxpayers cannot claim an immediate deduction for identical (or substantially identical) assets acquired in an income year where the individual item costs $300 or less but collectively they cost more than $300. For example, a landlord with a furnished rental property cannot claim the immediate deduction in an income year for buying 2 identical lamps which individually cost $280. [Schedule 1, item 1, subsection 40-80(2)]

1.73 It should be noted that subsection 40-80(2) merely works out the deduction. It does not govern the income year in which the deduction is allowed. Rather this is governed by section 40-60, with decline starting from start time.

General rules

Calculating the decline in value for the first income year

Method of calculation

1.74 For each depreciating asset, the taxpayer must decide whether to apply the prime cost or diminishing value method for working out the decline in value. [Schedule 1, item 1, subsection 40-65(1)]

1.75 However, taxpayers can only use the prime cost method to work out the decline in value of in-house software expenditure, intellectual property, spectrum licences and datacasting transmitter licences. [Schedule 1, item 1, subsection 40-70(2)]

1.76 Further, taxpayers must use the same method that their associate was using when they acquire a depreciating asset from that associate. [Schedule 1, item 1, subsection 40-65(2)]

1.77 Also, taxpayers must use the same method that the previous holder of the depreciating asset was using where the end-user of the depreciating asset does not change. Examples of where this could occur are under sale and leaseback arrangements and by a lessee purchasing an asset after the lease of the asset has ended. [Schedule 1, item 1, subsection 40-65(3)]

1.78 Where taxpayers cannot readily ascertain the method that the former holder was using, they must use the diminishing value method. This overcomes any difficulties in obtaining the necessary information to ascertain the method. [Schedule 1, item 1, subsection 40-65(4)]

1.79 For both methods, the decline is limited to the part of the cost that has not already been declined. Under diminishing value, the decline in any year is limited to the base value for the year. Under prime cost, for any year after the first (in which the prime cost formula ensures no more than cost can be claimed), the decline is limited to the opening adjustable value (the cost remaining after the previous years decline) and any second-element costs of the year. [Schedule 1, item 1, subsections 40-70(3) and 40-75(7)]

1.80 The main difference between the prime cost and diminishing value methods of calculation is the way in which the value of a depreciating asset will be written-off. Under the prime cost method, the value of an asset is assumed to decrease uniformly over its effective life, that is, the period the asset is used. The decline each year for the cost of the asset from time to time therefore allocates the remaining cost over the remaining effective life, and produces essentially a straight line write-off. In contrast, the diminishing value method assumes that the decline each year is a constant proportion of the remaining cost, and produces a progressively smaller decline as the remaining cost reduces; the constant rate is based on 1 times the effective life rate, as under the current law, giving larger deductions at first and smaller deductions later in the life compared to the prime cost method.

1.81 There is a separate formula that is used to work out the decline in value of an asset for each method. However, both the prime cost and diminishing value formulas consist of 3 elements, these being:

·
cost or base value;
·
days held; and
·
effective life or remaining effective life.

1.82 A more detailed explanation of the 2 formulas and the individual components is provided in paragraphs 10 to 1.107.

Base value

1.83 This is only relevant for the diminishing value formula. The base value of a depreciating asset represents the value of the asset that can be further declined. For the first income year in which a decline occurs, the base value is the assets first and second element costs at the end of that income year (see Chapter 2). For later years, the base value is the opening adjustable value for the year and any second element costs for the year. [Schedule 1, item 1, subsection 40-70(1)]

1.84 It should be noted that the assets base value may be reduced by an amount of commercial debt that has been forgiven during the income year for which the assets decline in value is calculated. The assets cost is reduced in that income year by the debt forgiveness amount. Where the debt forgiveness occurs in an income year after which the start time occurs, the assets opening adjustable value is also reduced by the debt forgiveness amount, as in those years decline on a prime cost or diminishing value basis includes that amount rather than cost in the formula. [Schedule 1, item 1, section 40-90]

Example 1.10 Chris buys an asset on 1 July 2002 for $2,000 financed through instalment payments. The opening adjustable value as at 10 July 2005 is $1,500. On 1 July 2005 Chris has $300 of the debt forgiven in relation to this asset. The opening adjustable value for the 2005-2006 income year will be $1,200 (i.e. $1,500 - $300). Further, the cost of this asset is now $1,700 rather than $2,000. This is relevant only in calculating a balancing adjustment after a balancing adjustment event has occurred and the asset has a non-taxable use component that will be subject to CGT.

1.85 This provision reflects the general policy for dealing with cost reductions and offsets where they occur. Practically, no other general provision is considered necessary.

1.86 Further, the base value includes costs added during the year. So the costs of any improvements made to a depreciating asset during an income year are to be taken into account when calculating the assets decline in value for that year. Because these costs are simply added to base value, they are (in effect) given the benefit of a whole years decline rather than being apportioned in some way.

Cost

1.87 The assets cost is the basis upon which the decline is calculated using the prime cost formula. For every income year in which a decline occurs and for which one of 6 circumstances do not occur, the cost is the total of the assets first and second elements of cost at the end of the income year in which the start time occurs (see Chapter 2). This maintains the existing prime cost formula. [Schedule 1, item 1, subsection 40-75(1)]

1.88 However, when one or more of 6 circumstances occur in an income year, instead of the cost being first element cost, it becomes the assets opening adjustable value for that income year plus any second element costs for that income year. That then becomes the assets cost for that income year and all later years until one of those 6 circumstances occurs again. [Schedule 1, item 1, paragraph 40-75(3)(a)]

1.89 The 6 circumstances referred to in paragraphs 10 and 10 are:

·
the recalculation of the assets effective life;
·
the incurring of second element costs in an income year after the start time occurs;
·
the application of the debt forgiveness provisions in section 40-90;
·
the obtaining of rollover relief under section 40-340;
·
the obtaining of rollover relief for certain involuntary disposals; and
·
the making of certain GST adjustments under Subdivision 27-B.

[Schedule 1, item 1, subsection 40-75(2)]

Number of days you held the asset

1.90 The days held component of the prime cost and diminishing value formulas refers to the number of days during the income year that the taxpayer held the depreciating asset up until the time a balancing adjustment event occurs in respect of that asset (see Chapter 3 for an explanation of balancing adjustment events). This component ensures that the total amount by which an assets value can be written-off for an income year is reduced where, for example, the asset is acquired or disposed of during the year, or where the taxpayer permanently stops using the asset but continues to hold it. These are events that end or suspend the decline of the asset, because it is neither being used nor held ready for use when they occur. The kind of use a taxpayer makes of an asset affects deductions, but not decline, and is discussed in paragraph 1.10.

1.91 The days held component is calculated from the assets start time. The reason for this is that the value of a depreciating asset cannot begin to decline until the relevant start time has occurred, which may not necessarily coincide with the time the taxpayer actually started to hold the asset. [Schedule 1, item 1, subsections 40-70(1) and 40-75(1)]

Effective life

1.92 The term effective life is used to describe the length of time over which any entity could reasonably expect to use the particular asset for any productive purpose, whether for taxable purposes or for the purpose of producing exempt income. For the first income year the effective life component used under the diminishing value or prime cost methods represents the effective life of the asset calculated as from its start time, that is, the time the asset is first used by the holder for any purpose.

1.93 The rules for working out the assets effective life are discussed in paragraphs 10 to 1.127.

Example 1.11: Diminishing value method Sonja is a tourist operator in the Whitsunday Islands. Sonja decides to expand her operations and acquires a new helicopter on 13 August 2001 at a cost of $1 million. Sonja self assesses the effective life of the asset to be 7 years and decides to work out its decline in value in accordance with the diminishing value formula. Assuming that the asset is first used on 5 September 2001, the assets decline in value for Sonjas income year ended 30 June 2002 is calculated in the following way:

$1,000,000 * (365 - 66)/365 * 150%/7 = $20,479

Example 1.12: Prime cost method During the 2001-2002 income year, Jimmy purchases a piece of machinery for use in his landscaping business. The cost of the asset is $65,000 and Jimmy estimates the effective life to be 8 years. The machinery is first used on 22 October 2001. Using the prime cost method, the decline in value of the asset for the income year ending 30 June 2002 would be calculated as:

$65,000 * (365 - 113)/365 * 100%/8 = $5,609

Calculating decline in value for later income years

Method

1.94 A taxpayer must continue to calculate a depreciating assets decline in value for later income years in accordance with whichever of the prime cost or diminishing value methods was chosen to apply for the first income year. [Schedule 1, item 1, subsections 40-65(1) and 40-130(2)]

Base value

1.95 Broadly, the base value component used under the diminishing value method formula is calculated in a later year of income by adding:

·
the opening adjustable value (essentially the reduced value of the asset at the start of the income year); to
·
the cost of any improvements made to the asset during that year [Schedule 1, item 1, subsection 40-70(1)] . This may require the taxpayer to recalculate the effective life of the depreciating asset (this is discussed in paragraph 10 to 1.133).

Adjustable value

1.96 Section 40-85 introduces the concept of adjustable value for a depreciating asset. The adjustable value of a depreciating asset broadly represents so much of the cost of the asset at a particular time as is not yet declined, and so provides the starting point for further decline calculations and for balancing adjustments. This term essentially replaces the concept of undeducted cost used within the existing depreciation provisions under Division 42 of the ITAA 1997.

1.97 A taxpayer will need to know the adjustable value of an asset:

·
when there is a balancing adjustment event;
·
when there is a splitting or merging of a depreciating asset; or
·
at the end of the income year.

1.98 Where the asset has yet to be used or installed ready for use for any purpose, the adjustable value is the assets cost. Such a rule allows a balancing adjustment calculation to be carried out for such assets. For example, an asset maybe destroyed before it is used. [Schedule 1, item 1, paragraph 40-85(1)(a)]

1.99 For the first income year after which the decline in value is being worked out for a particular asset, the adjustable value is determined in the following way:

adjustable value = assets cost - assets decline in value for the income year

[Schedule 1, item 1, paragraph 40-85(1)(b)]

1.100 Where a taxpayer continues to hold the depreciating asset at the end of the first calculation year, the adjustable value will be carried forward to the start of the following income year as the assets opening adjustable value . [Schedule 1, item 1, subsection 40-85(2)]

Example 1.13: Calculating adjustable value Following from Example 1.12, the adjustable value of the machinery is obtained by subtracting the $5,609 decline in value over the 2001-2002 income year from the original cost of the asset, that is:

$65,000 - $5,609 = $59,391

The amount of $59,391 will be carried forward as the opening adjustable value for the 2002-2003 income year.

1.101 To calculate the adjustable value of a depreciating asset at a particular time in a later income year, the opening adjustable value at the start of that income year is added to the second element costs, such as the cost of any improvements made to the asset, during the year up until that particular time, reduced by the assets decline in value up to that particular time. [Schedule 1, item 1, paragraph 40-85(1)(c)]

1.102 The assets adjustable value will be reduced to take into account any debt forgiveness amount [Schedule 1, item 1, subsection 40-90(3)] . This reduction ensures the amount is taken into account for balancing adjustment purposes and to arrive at the correct opening adjustable value for the following income year.

Number of days held during the income year

1.103 The number of days that a taxpayer held a depreciating asset in a later income year is worked out from the start of the income year for which the decline in value is being calculated. This period is reduced by the number of days that the taxpayer continued to hold the depreciating asset for which the asset was neither used nor installed ready for use (for instance, because it was mothballed). [Schedule 1, item 1, subsections 40-70(1) and 40-75(1)]

Effective Life

1.104 The assets effective life for a later income year will be worked out on the basis of the most recent calculation of the assets whole effective life for the holder. This will be the assets effective life used in calculating the initial decline in value, unless the assets effective life has been recalculated in a later income year. [Schedule 1, item 1, subsection 40-95(1)]

1.105 If the taxpayer recalculates the effective life of a depreciating asset the recalculated life must be used (see paragraphs 10 to 1.133).

1.106 Under the prime cost method formula, the remaining effective life of an asset can be calculated in a later income year in the following way:

remaining effective life = original calculation of effective life - period of time that has elapsed from the assets start time, up until the beginning of the income year for which the decline in value is being calculated

[Schedule 1, item 1, subsection 40-75(4)]

1.107 However, where the effective life of a depreciating asset has been recalculated, the remaining effective life of the asset under the prime cost method formula is calculated as:

remaining effective life = most recent calculation of effective life - period of time that has elapsed from the assets start time, up until the beginning of the income year for which the decline in value is being calculated

Working out effective life of a depreciating asset

Choice of effective life

1.108 For the income year in which the depreciating assets start time occurs a taxpayer will need to decide whether the assets effective life will be worked out by:

·
adopting the Commissioners determination of effective life applicable to that depreciating asset (if there is such a determination) [Schedule 1, item 1, paragraph 40-95(1)(a) and subsection 40-95(3)] ; or
·
self-assessing the assets effective life [Schedule 1, item 1, paragraph 40-95(1)(b) and subsection 40-95(3)] .

1.109 However the choice is not available in 3 situations. First, where the taxpayer acquired the asset from an associate. In this case the effective life is the effective life of the asset that the associate was using, if the taxpayer is using the diminishing value method. If the taxpayer is using the prime cost method then they must use the remaining effective life. [Schedule 1, item 1, subsection 40-95(4)]

1.110 Second, where the end-user of the depreciating asset does not change. In this case the effective life is the effective life of the asset that was used by the previous holder of the depreciating asset, if the taxpayer is using the diminishing value method. If the taxpayer is using the prime cost method then they must use the remaining effective life. Examples of where this could occur are under sale and leaseback arrangements and by a lessee purchasing the asset after the lease has ended. If the Commissioner later finds that the previous holder was using an incorrect effective life and amends the previous holders tax returns to reflect the use of a correct effective life, the effective life as reset by the Commissioner applicable to the previous holder will apply to the new holder. [Schedule 1, item 1, subsection 40-95(5)]

1.111 Where taxpayers cannot readily ascertain the effective life that the former holder was using, they must use the effective life of the asset as determined by the Commissioner. [Schedule 1, item 1, subsection 40-95(6)]

1.112 Third, this choice is also not available for certain intangible assets that qualify for write-off under Division 40. For those assets their effective life is the statutory effective life they had under their existing write-off regime [Schedule 1, item 1, subsections 40-95(7) and 40-105(4)] . However, where those assets are acquired from a former holder, as the taxpayer must use the prime cost method, their effective life is the number of years remaining in that assets effective life at the start of the income year in which the acquisition occurred. This ensures that those intangible assets are written-off in accordance with the statutory period. This does not apply where those intangible assets are copyright, licences over copyright and in-house software. This exclusion ensures taxpayers are required to write-off these 3 types of intangible assets over the statutory effective life from the time they acquire the asset [Schedule 1, item 1, subsections 40-75(5) and (6)] .

1.113 For other intangible assets that are not IRUs and that qualify for write-off under Division 40 the effective life cannot be longer than the term of that intangible asset as extended by any reasonably assured extension or renewal of that term. Together with subsection 40-30(5) this ensures that the effective life of these intangibles that are rights cannot be shortened by a term that excludes any renewal or extension of those rights. [Schedule 1, item 1, subsection 40-95(8)]

What is the effective life of other rights?

1.114 The effective life of an intangible asset that is not covered by the table in new subsection 40-95(7) and is not an IRU, for example, a mining quarrying or prospecting right for use in extracting a resource, is to be worked out under section 40-105 (see paragraphs 10 to 1.127). Under that section, the effective life of a right would have to be worked out taking into account renewals or extensions. [Schedule 1, item 1, subsection 40-30(5)]

1.115 Under relevant Crown laws, mining, quarrying or prospecting rights often are issued for a fixed term, for example 21 years, but can be extended or renewed on an indefinite basis subject to any relevant conditions being meant. This could lead to a conclusion that the effective life of such rights is indeterminate with the consequences that no deduction would be allowable for the cost of the right.

1.116 That would not be appropriate for those rights. Rather, their effective life is the period of time over which the right, including any reasonably assured extensions or renewals, is likely to be used by any person for the purposes of extracting the resource.

1.117 Accordingly, the effective life of such rights is not to be longer that the term of the right, including any reasonably assured extension or renewal of that term [Schedule 1, item 1, subsection 40-95(8)] . In effect, that ensures that the effective life of mining or prospecting rights would generally be the same as the effective life of mining, quarrying or prospecting information in relation to the resource.

1.118 Examples 10 and 10 show how the effective life of mining, quarrying or prospecting rights would be worked out where used for the purpose of extracting a resource.

Example 1.14 Global Resources Limited obtains a right to extract a mineral for an initial term of 21 years. The right can be renewed or extended indefinitely on a 21 year basis while mining continues. Global estimates that, based on its anticipated level of production, the resource will be fully exhausted after 30 years. It could be concluded that the right, together with any reasonably assured extensions or renewals, will exist for 42 years. However, based on Globals plans, Global or any other person is likely to use the right for 30 years only. Accordingly, Global could reasonably adopt an effective life of 30 years for the right.

Example 1.15 Global Resources Limited identifies a major uranium deposit that could last for up to 100 years. For political reasons, the Government is prepared to allow Global to mine the uranium for 10 years only. There is no reasonable expectation of the right being extended or renewed. Under those circumstances, Global could reasonably conclude that the effective life of the right is 10 years.

What is the effective life of IRUs?

1.119 For IRUs, the effective life is the effective life of the international telecommunications submarine cable over which the IRU is granted. This maintains the existing law. By excluding IRUs from subsection 40-95(7), it allows the effective life of IRUs to be determined by the Commissioner or it allows taxpayers to self-assess the effective life. Further, the effective life can be recalculated if in fact the effective life of the international telecommunications submarine cable over which the IRU is granted can be recalculated. [Schedule 1, item 1, subsection 40-95(9)]

Commissioners determination of effective life

1.120 Subsection 40-100(1) maintains the Commissioners existing powers to make a written determination of the effective life of a depreciating asset [Schedule 1, item 1, subsection 40-100(1)] . That determination may specify its date of effect and it may also operate retrospectively to that date but only in 2 circumstances. First, where there was no determination at the date for that particular asset. Second, where the determination specifies a shorter effective life [Schedule 1, item 1, subsections 40-100(2) and (3)] .

1.121 In making a determination, the Commissioner works out the estimated period such a depreciating asset can be used by any entity for income producing purposes assuming:

·
it will be subject to wear and tear at a rate that is reasonable for the Commissioner to assume; and
·
it will be maintained in reasonably good order and condition.

In estimating this period the Commissioner has regard to the likelihood of the asset being scrapped, sold for scrap or abandoned, as the effective life ends when these events happen even if otherwise the life would be longer. [Schedule 1, item 1, subsection 40-100(4)]

1.122 The appropriate determination to be applied in establishing the effective life of the asset is that which is in force at the earlier of the following times:

·
the time the taxpayer enters into a contract to acquire the asset;
·
the time the taxpayer acquires the asset; and
·
the time the taxpayer begins construction of the asset,

provided that the assets start time is within 5 years of the appropriate time. Otherwise the appropriate determination is the one in force at the assets start time. This does not mean the asset must be used within 5 years to attract the earlier determination, provided it is installed ready for use within that time. The 5-year rule helps to ensure that the taxpayer was really committed at the time from which an earlier determination would apply. [Schedule 1, item 1, paragraph 40-95(2)(a)]

1.123 However, where the depreciating asset that is plant was acquired under a contract or otherwise acquired or construction of it commenced before 110 am, by legal time in the Australian Capital Territory on 21 September 1999 the appropriate determination to be applied is that which was in force at that time. There is no restriction on the period within which this plant must be first used or held ready for use. [Schedule 1, item 1, paragraph 40-95(2)(b)]

Self-assessing effective life

1.124 An alternative option to relying on the Commissioners effective life determination is for the asset holder to self-assess the assets effective life [Schedule 1, item 1, paragraph 40-95(1)(b)] . Diagram 10 illustrates how the effective life of a depreciating asset is worked out by a taxpayer, for the first income year that the decline in value is to be calculated.

Diagram 1.1: Determining the effective life of a depreciating asset for the first calculation year

Diagram 1.1:  Determining the effective life of a depreciating asset for the first calculation year

1.125 The initial estimate of an assets effective life must be worked out from the depreciating assets start time, that is, when the asset is first used, or first installed ready for use, for any purpose. However, the choice need not be made at that time. The choice only needs to be made for the income year in which the start time occurs. [Schedule 1, item 1, subsection 40-95(3)]

1.126 A reasonableness test applies when estimating the wear and tear of the asset and the condition in which the asset will be maintained. A reasonable estimate will depend on the circumstances in which the asset is to be used by the taxpayer (or any other expected user).

Example 1.16: Effective life Andre runs a tennis-coaching clinic. During the income year, Andre purchases a new ball launching machine for use during training sessions. According to the machines specifications, the maximum number of tennis balls that can be launched from the machine is 1 million. From previous coaching experience, Andre estimates that the machine will be used to fire an average of 10,000 tennis balls per month. The effective life of the machine, based on Andres anticipated level of usage, is therefore 8 1/3 years.

1.127 The estimated effective life of an asset is to be expressed in terms of years, including parts of years - it is not estimated and then rounded to the nearest whole year. Therefore, if the effective life of a particular asset is estimated to be 4 years and 7 months, the effective life component in the formulas would be expressed as 4 and 7/12 years. Of course, for many assets, the actual effective life will be estimated to be a number of whole years.

Recalculating effective life

1.128 A taxpayer may choose, and in some cases is required, to recalculate the effective life of a depreciating asset. The methodology used for recalculating the effective life of a depreciating asset is based on the same principles that apply when self-assessing the original effective life of a depreciating asset: see section 40-105. [Schedule 1, item 1, subsection 40-110(4)]

1.129 For each income year in which improvements have been made to a depreciating asset, a taxpayer must consider the effect of these additions on the assets effective life. This allows for an appropriate allocation of the cost of these improvements over the effective life of the asset. In consequence, a taxpayer must recalculate the effective life of a depreciating asset in the following circumstances:

·
the taxpayer has self assessed the effective life and its cost increased by at least 10% in that year;
·
the taxpayer uses the Commissioners determination of effective life, uses the prime cost method and the depreciating assets cost increased by at least 10% in that year; or
·
the taxpayer uses an effective life because of subsection 40-95(4) and (5) and the depreciating assets cost increased by at least 10% in that year.

[Schedule 1, item 1, subsections 40-110(2) and (3)]

1.130 Without the requirement to reassess when using the Commissioners determination and the prime cost method, second element costs incurred late in the assets effective life could be deducted almost immediately even though these costs relate to future activities over a substantial period. The requirement to reassess is not necessarily burdensome, however, for example, if expenditure has not altered a previously estimated effective life, its reasonable simply to decide accordingly.

1.131 A taxpayer may choose to determine a new effective life for a depreciating asset where the way the asset is used or other circumstances relating to the nature of its use have changed, and the change means the effective life the taxpayer is using is no longer accurate. [Schedule 1, item 1, subsection 40-110(1)]

1.132 The application of subsection 40-110(1) is limited to cases where the basis used by the taxpayer in most recently estimating the effective life of the asset has changed. It does not extend to situations where the basis of the effective life estimate used in the calculations is incorrect due to a mistake of fact or error made by the taxpayer. In these cases, the taxpayer may apply to the Commissioner for an amendment of prior assessments.

1.133 The ability to reassess effective life applies regardless of whether the taxpayer has chosen to self-assess the effective life of the asset, has adopted the Commissioners determination of effective life or has reassessed under section 40-110. The general requirements for choices made under Division 40 do not apply in respect of recalculations of effective life. So taxpayers can reassess again if circumstances change again, and taxpayers can reassess effective life if circumstances change even if they were previously relying on a determination by the Commissioner [Schedule 1, item 1, subsection 40-130(3)] . Taxpayers cannot reassess the effective life of an intangible depreciating asset listed in subsection 40-95(7) [Schedule 1, item 1, subsection 40-110(5)] .

Splitting a depreciating asset

1.134 A taxpayer can split a depreciating asset into 2 or more assets. When a depreciating asset is split, the taxpayer no longer holds the original depreciating asset, instead the taxpayer now holds a number of different assets. The granting of a licence over an item of intellectual property will also be treated as a part disposal of that item of intellectual property. This will apply to allocate a portion of the cost to the split item of intellectual property disposed of as a result of the granting of the licence. This is done for the purposes of making any balancing adjustment or CGT calculation. [Schedule 1, item 1, section 40-115]

1.135 A balancing adjustment event does not occur when a depreciating asset is split (although generally a balancing adjustment event occurs when, amongst other things, a taxpayer either stops holding a depreciating asset or stops using the depreciating asset). Because there is no balancing adjustment event when a depreciating asset is split, there will not be an adjustment to the taxpayers taxable income for any difference between the actual value of the asset when the taxpayer stopped holding the depreciating asset (i.e. when it was split) and its adjustable value. Balancing adjustment events and affiliated rules are discussed in Chapter 3. [Schedule 1, item 1, subsection 40-295(3)]

1.136 In determining whether the split assets can be declined, each asset must individually be identified and must satisfy the requirements in Subdivision 40-B. Depreciating assets are practically unlikely to be split into assets that are not depreciating assets, however.

1.137 The first element of the cost for each of the split assets is a reasonable proportion of the sum of the adjustable value of the original asset just before it was split and the same proportion of the amount the taxpayer is taken to have paid under section 40-185 to receive the economic benefit involved in splitting the original asset (i.e. essentially, the cost of the split) - cost is discussed in Chapter 2. [Schedule 1, item 1, section 40-205]

1.138 If a balancing adjustment event occurs to one of the new depreciating assets, the amount to be included in the taxpayers assessable income or the amount that can be deducted is reduced by:

·
the amount that is attributable to the use of the asset other than for a taxable purposes; and
·
the amount that can reasonably be attributed to the use of the original depreciating asset (before it was split) for non-taxable purposes.

[Schedule 1, item 1, subsection 40-290(3)]

Example 1.17: Splitting depreciating assets Hamish is an owner-driver of a transport truck. 90% of the trucks use can be attributed to a taxable purpose. In August 2001 Hamish removes the CB radio that is attached to his truck and installs it at home. Assuming that the CB radio is part of the whole truck, there has been a splitting of a depreciating asset. There will be no balancing adjustment event when the CB radio is split from the truck. The first element of the cost of the CB radio will be determined in accordance with section 40-205.One year later Hamish sells the CB radio that he and his family have been using from home. The use of the radio that can be attributed to non-taxable purposes is 40%, the remaining use has been for a taxable purpose. In determining the amount that is either to be included in Hamishs assessable income or that can be deducted, the use that can be attributed to non-taxable purposes must be calculated not only when the radio was used at home (at 40% for that period) but also when it was a part of the truck (at 10% for that period).

1.139 An asset that has been split may be merged with other depreciating assets in accordance with section 40-115 (these rules are discussed in paragraphs 10 to 1.153).

1.140 If a taxpayer holds a depreciating asset jointly, section 40-35 provides that each taxpayers holding of the underlying asset is treated as a separate depreciating asset (these rules are discussed in paragraphs 10 to 1.62). [Schedule 1, item 1, section 40-35]

1.141 When a taxpayer stops holding part of a depreciating asset because it is now held jointly they are considered to have split the original depreciating asset into an asset that is kept by the taxpayer and an asset that the taxpayer ceases to hold. In other words, when a taxpayer becomes a joint holder, because they give up an interest in a depreciating asset, they are taken to have split the underlying asset into new assets, that is, the interest retained and the interest given up. The normal balancing adjustment rules apply to the new asset that the taxpayer is taken to have stopped holding. The same principles that are discussed in paragraphs 10 and 10 in relation to balancing adjustments and cost applies to the new assets that have been created by the split. [Schedule 1, item 1, subsection 40-115(2)]

Example 1.18: Splitting part of a depreciating asset PJ Ltd holds a 50% interest in a depreciating asset with another joint venturer. Pursuant to section 40-35, PJ Ltds 50% interest in the depreciating asset is considered to be a separate depreciating asset. Two years later, PJ Ltd decides to sell 15% of the underlying depreciating asset. In accordance with subsection 40-115(2), PJ Ltd is treated as having split the depreciating asset it holds into 2 separate assets. The first of these new assets is the asset that is to be sold. The second asset is the asset that PJ Ltd is to retain. PJ Ltd will need to choose between self-assessing the effective life for the depreciating asset and using the Commissioners safe harbour determination of effective life if there is one. As the underlying asset does not change and neither do the circumstances of use, the actual effective life will not change. PJ Ltd must also choose a method for calculating the assets decline in value.

Spectrum licences

1.142 A spectrum licence is issued by the ACA pursuant to the Radcom Act for a period of up to 15 years. Spectrum licences allow the licence holders access to specified parts of the radio frequency spectrum in order to provide telecommunications services such as mobile telephone services.

1.143 An objective of the ACAs spectrum licensing process is to allow the market to play a part in the allocation of spectrum between users, not only in the auction process (the initial allocation of spectrum by the ACA), but also by the creation of a legislative environment that allows for a secondary market in spectrum licences. Licensees are able to trade licences, or parts of licences, provided that they follow the rules about trading which are found in sections 85 to 88 of the Radcom Act. The Radcom Act defines part of a licence to include both geographic area and radio frequency (Radcom Act at section 5).

1.144 Taxpayers are able to acquire licences or parts of licences from each other in the market place and aggregate them to form licences covering, for example, a larger area or more bandwidth. Taxpayers are also capable of dividing their licences into smaller parts and disposing of any or all of these parts.

1.145 The ACA has the authority to vary existing spectrum licences, or to issue one or more new licences, to give effect to an assignment of part of a licence, under Division 5 of Part 30 of the Radcom Act, or the partial resumption of a licence under Division 6 of Part 30 of that Act. The ACA may:

·
vary the original licence by reducing the spectrum specified in the licence;
·
vary the original licence to reflect part of the remaining spectrum and issue one or more new licences (to the same entity) to reflect the remaining spectrum; or
·
issue one or more new licences which reflect all of the reduced spectrum.

1.146 In these circumstances the modified original licence or the new licence(s) will not be the same depreciating asset as the original licence. Therefore a balancing adjustment would be triggered. However, the reality is that the taxpayer still holds the same spectrum. A legislative fiction has been created to treat the whole process as a splitting of the original licence (just after the assignment has taken place) into the replacement licences. [Schedule 1, item 1, subsection 40-120(1)]

1.147 The provisions in this Bill relating to merging depreciating assets, splitting depreciating assets and replacement spectrum licences are all capable of operating on spectrum licences in some way.

Example 1.19: Disposal of spectrum Consider the example in section 40-120. The assignment of the spectrum relating to area C triggers the operation of subsection 40-115(2) because MGP has stopped holding part of a depreciating asset (the spectrum relating to area C). The spectrum relating to area C is now taken to be a different depreciating asset. The adjustable value of $1 million that is allocated to that asset is compared to the amount received from the assignee in order to calculate the balancing adjustment under section 40-285.

Example 1.20: Replacement spectrum licences To carry the previous example further, the ACA decides to modify the licence that MGP holds in order to reflect the fact that it now only specifies areas A and B (because they are adjoining areas) and issues a new licence to MGP that specifies only area D. The 2 licences together specify the same rights that were covered by the original licence just after the assignment of the spectrum relating to area C (i.e. areas A, B and D). Therefore, subsection 40-120(1) operates to split the original licence into the 2 new licences.

1.148 Because of the trading market that has been set up in spectrum, a taxpayer may eventually acquire several licences over adjoining areas. In such cases the ACA may resume all of those licences and replace them with one licence specifying all of the areas. Such a scenario would trigger the operation of section 40-120. The adjustable values of all of the separate spectrum licences would be added together and become the adjustable value of the replacement licence.

Merging a depreciating asset

1.149 A taxpayer can merge a depreciating asset he or she holds into another asset. When this occurs the taxpayer no longer holds the original depreciating asset, but holds the merged asset. [Schedule 1, item 1, section 40-125]

1.150 A balancing adjustment event does not occur to depreciating assets that are merged into one or more other depreciating assets. [Schedule 1, item 1, subsection 40-295(3)]

1.151 In determining whether the merged asset or assets can be written-off, the requirements in Subdivision 40-B must be satisfied. The first element of the cost of each of the merged depreciating assets is the reasonable proportion of the sum of the adjustable values of the original assets just before they were merged, and the amount the taxpayer is taken to have paid under section 40-185 to receive the economic benefit involved in merging the original assets (i.e. essentially, the cost of the merger). [Schedule 1, item 1, section 40-210]

1.152 If a balancing adjustment event occurs to one of the new merged depreciating assets, the amount to be included in the taxpayers assessable income or the amount that can be deducted is reduced by:

·
the amount that is attributable to the use of the asset other than for a taxable purpose; and
·
the amount that can be reasonably attributed to the use of the original depreciating assets prior to the merger for non taxable purposes (these rules are discussed in Chapter 3).

[Schedule 1, item 1, section 40-290]

1.153 An asset that has been merged may itself then be split into separate depreciating assets in accordance with section 40-115 (these rules are discussed in paragraphs 10 to 1.141). Similarly, an asset that has been split from another asset may then be merged. The rules are designed to work together in such cases to give the same outcome as if a succession of separate splits and mergers had taken place.

Choices under Division 40

1.154 The general rules relating to when a taxpayer must exercise a choice provided under Division 40, and the effect of this decision, are contained in section 40-130. For the income year that the decline in value is first calculated, a taxpayer will need to decide:

·
whether the prime cost or diminishing value method will be used in calculating the decline in value of the asset; and
·
whether the effective life of the depreciating asset will be self-assessed or whether the taxpayer will rely on the Commissioners determination of effective life.

1.155 The decisions must generally be made by the time the taxpayer actually lodges the income tax return for the first income year that the decline in value is being calculated for [Schedule 1, item 1, paragraph 40-130(1)(a)] . Further, a taxpayer cannot revoke a decision once it has been made [Schedule 1, item 1, subsection 40-130(2)] . This rule prevents taxpayers from swapping between the prime cost and diminishing value methods, or varying the effective life of an asset, without the necessary changes in circumstances occurring, when it would be advantageous to do so.

1.156 However, in certain cases a taxpayer may be allowed additional time for making these decisions [Schedule 1, item 1, paragraph 40-130(1)(b)] . An example of where the Commissioner might grant such an extension is where a taxpayer has sought a determination of the effective life of an asset and has asked for an extension of time to make a choice.

1.157 There is no requirement for the taxpayer to formally notify the Commissioner of the method chosen for calculating the decline in value of a depreciating asset. The Commissioner might, however, require notification of a taxpayers choice to self-assess the effective life of a depreciating asset on an income tax return.

Anti-avoidance rules

1.158 Where a taxpayer is entitled to receive a deduction under Division 40 in respect of a depreciating asset, section 40-135 treats the taxpayer as the owner of the asset for the purposes of applying certain anti-avoidance provisions. This rule replicates Common Rule 3 of the existing capital allowances anti-avoidance provisions. [Schedule 1, item 1, section 40-135]

1.159 The relevant anti-avoidance provisions are those relating to disallowable deductions in respect of property held under certain leveraged arrangements, and certain non-leveraged finance arrangements relating to the use of property. These are presently section 51AD and Division 16D of the ITAA 1936. [Schedule 1, item 1, section 40-135]

Obtaining information from associates

1.160 To assist associates with the implementation of the rules, section 40-140 authorises a taxpayer to issue to the associate from whom they acquired a depreciating asset a written notice within 60 days of acquisition requesting the associate to provide information on:

·
whether the prime cost or diminishing value method was applied in determining the assets decline in value for the period that the associate held the asset; and
·
the period of effective life the associate attributed to the asset.

[Schedule 1, item 1, subsection 40-140(1) and paragraph 40-140(2)(a)]

1.161 A notice issued to an associate must also address the following matters in order for the taxpayers request to be valid:

·
the period within which the associate must provide the information being sought. The taxpayer must give at least 60 days for enabling an associate to respond; and
·
the implications of failing to comply with the request (i.e. that a penalty of 10 penalty units applies).

[Schedule 1, item 1, paragraphs 40-140(2)(b) and (c)]

1.162 In the case where an associate of the taxpayer is a partnership, the obligation to provide the information requested by the taxpayer is imposed on each of the partners. Any one of the partners may respond to the request. [Schedule 1, item 1, paragraph 40-140(4)(b)]

1.163 It is an offence for an associate to fail or intentionally refuse to provide the information requested by the taxpayer [Schedule 1, item 1, subsections 40-140(3) and (5)] . In order to avoid the imposition of a penalty an associate will have only one opportunity to discharge the obligations arising from a notice issued in accordance with subsection 40-140(1). This is because the associate cannot be issued with more than one notice in respect of each depreciating asset [Schedule 1, item 1, subsection 40-140(6)] . If charged for an offence under Subdivision 40-B, a taxpayer can rely on the relevant defences available under the Criminal Code Act 1995 [Schedule 1, item 1, section 40-145] .

1.164 A penalty of 10 penalty units applies for failing to comply with a notice issued pursuant to section 40-115. [Schedule 1, item 1, subsections 40-140(3) and (5)]


View full documentView full documentBack to top