Income Tax Assessment Act 1997
SECTION 40-110 Recalculating effective life 40-110(1)
You may choose to recalculate the * effective life of a * depreciating asset from a later income year if the effective life you have been using is no longer accurate because of changed circumstances relating to the nature of the use of the asset.
Example:
Some examples of changes in circumstances that may result in your recalculating the effective life of a depreciating asset are:
• your use of the asset turns out to be more or less rigorous than you expected (or was anticipated by the Commissioner ' s determination); • there is a downturn in demand for the goods or services the asset is used to produce that will result in the asset being scrapped; • legislation prevents the asset ' s continued use; • changes in technology make the asset redundant; • there is an unexpected demand, or lack of success, for a film.
40-110(2)
You must recalculate a * depreciating asset ' s * effective life from a later income year if:
(a) you:
(i) self-assessed its effective life; or
(ii) are using an effective life worked out under section 40-100 (about the Commissioner ' s determination), or 40-102 (about the capped life of certain depreciating assets), and the * prime cost method; or
(iii) are using an effective life because of subsection 40-95(4), (4B), (4C), (5), (5B) or (5C) ; and
(b) its * cost is increased in that year by at least 10%.
Note 1:
You may conclude that the effective life is the same.
Note 2:
For the elements of the cost of a depreciating asset, see Subdivision 40-C .
Example 1:
Paul purchases a photocopier and self-assesses its effective life at 6 years. In a later year he incurs expenditure to increase the quality of the reproductions it makes. He recalculates its effective life, but concludes that it remains the same.
Example 2:
Fiona also purchases a photocopier and self-assesses its effective life at 6 years. In a later year she incurs expenditure to incorporate a more robust paper handling system. She recalculates its effective life, and concludes that it is increased to 7 years.
40-110(3)
You must recalculate a * depreciating asset ' s * effective life for the income year in which you started to * hold it if:
(a) you are using an effective life because of subsection 40-95(4) , (4B), (4C), (5), (5B) or (5C); and
(b) the asset ' s * cost is increased after you started to hold it in that year by at least 10%.
40-110(3A)
Subsections (1), (2) and (3) do not apply to a *depreciating asset that is a *mining, quarrying or prospecting right or *mining, quarrying or prospecting information.
40-110(3B)
You may choose to recalculate the *effective life of a *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, from a later income year if the effective life you have been using is no longer accurate:
(a) because of changed circumstances relating to an existing or proposed mine, petroleum field or quarry to which that right or information relates; or
(b) because that right or information now relates to an existing or proposed mine, petroleum field or quarry; or
(c) because that right or information no longer relates to an existing or proposed mine, petroleum field or quarry.
40-110(4)
A recalculation under this section must be done using:
(a) if paragraph (b) does not apply - section 40-105 (about self-assessing effective life); or
(b) if the *depreciating asset is a *mining, quarrying or prospecting right or *mining, quarrying or prospecting information:
(i) subsections 40-95(10) and (11) (if the right or information relates to an existing or proposed mine, petroleum field or quarry); or
(ii) subsection 40-95(12) (if the right or information no longer relates to an existing or proposed mine, petroleum field or quarry).
Exception: intangibles
40-110(5)
This section does not apply to an intangible * depreciating asset to which an item in the table in subsection 40-95(7) applies.
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