CHAPTER 2
-
LIABILITY RULES OF GENERAL APPLICATION
PART 2-10
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CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE
Division 40
-
Capital allowances
History
Div 40 substituted for Divs 40, 41 and 42 by No 76 of 2001.
Subdivision 40-B
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Core provisions
History
Subdiv 40-B substituted by No 76 of 2001.
Operative provisions
SECTION 40-105
Self-assessing effective life
40-105(1)
You work out the
effective life
of a *depreciating asset yourself in accordance with this section.
History
S 40-105(1) substituted by No 93 of 2011, s 3 and Sch 3 item 20, effective 8 September 2011. For application, savings and transitional provisions see note under Div
355
heading. S 40-105(1) formerly read:
40-105(1)
You work out the
effective life
of a
*
depreciating asset yourself by estimating the period (in years, including fractions of years) it can be used by any entity for a
*
taxable purpose or for the purpose of producing
*
exempt income or
*
non-assessable non-exempt income and, if relevant for the asset:
(a)
having regard to the wear and tear you reasonably expect from your expected circumstances of use; and
(b)
assuming that it will be maintained in reasonably good order and condition.
S 40-105(1) amended by No 147 of 2005 and No 66 of 2003.
40-105(1A)
Firstly, estimate the period (in years, including fractions of years) the asset can be used by any entity for one or more of the following purposes:
(a)
a *taxable purpose;
(b)
the purpose of producing *exempt income or *non-assessable non-exempt income;
(c)
the purpose of conducting *R
&
D activities, assuming that this is reasonably likely.
History
S 40-105(1A) inserted by No 93 of 2011, s 3 and Sch 3 item 20, effective 8 September 2011. For application, savings and transitional provisions see note under Div
355
heading.
40-105(1B)
Secondly, if relevant for the asset:
(a)
have regard to the wear and tear you reasonably expect from your expected circumstances of use; and
(b)
assume that the asset will be maintained in reasonably good order and condition.
History
S 40-105(1B) inserted by No 93 of 2011, s 3 and Sch 3 item 20, effective 8 September 2011. For application, savings and transitional provisions see note under Div
355
heading.
40-105(2)
If, in working out that period, you decide that the asset would be likely to be:
(a)
scrapped; or
(b)
sold for no more than scrap value or abandoned;
before the end of that period, its
effective life
ends at the earlier time. However, when making your decision, disregard reasons attributable to the technical risk in conducting *R
&
D activities if it is reasonably likely that the asset will be used for such activities.
History
S 40-105(2) substituted by No 93 of 2011, s 3 and Sch 3 item 20, effective 8 September 2011. For application, savings and transitional provisions see note under Div
355
heading. S 40-105(2) formerly read:
40-105(2)
If, in working out that period, you conclude that the asset would be likely to be scrapped, sold for no more than scrap value or abandoned before the end of that period, its
effective life
ends at the earlier time.
40-105(3)
You work out the period mentioned in subsection (1A) or (2) beginning at the *start time of the *depreciating asset.
History
S 40-105(3) substituted by No 93 of 2011, s 3 and Sch 3 item 20, effective 8 September 2011. For application, savings and transitional provisions see note under Div
355
heading. S 40-105(3) formerly read:
40-105(3)
You work out the period in subsection (1) or (2) as from the
*
start time of the
*
depreciating asset.
Exception: intangibles
40-105(4)
This section does not apply to the following intangible *depreciating assets:
(a)
assets to which an item in the table in subsection
40-95(7)
applies;
(b)
*mining, quarrying or prospecting rights;
(c)
*mining, quarrying or prospecting information.
History
S 40-105(4) amended by No 69 of 2014, s 3 and Sch 1 item 6, by inserting para (c), effective 1 July 2014. For application provisions see note under s
40-300(2)
.
S 40-105(4) substituted by
No 78 of 2007
, s 3 and Sch 1 item 4, applicable to assessments for the income year in which 1 July 2001 occurred and later income years. S 40-105(4) formerly read:
40-105(4)
This section does not apply to an intangible
*
depreciating asset to which an item in the table in subsection
40-95(7)
applies.
S 40-105(4) amended by No 147 of 2005.
S 40-105 inserted by No 76 of 2001.