Income Tax Assessment Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-10 - CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE  

Division 40 - Capital allowances  

Subdivision 40-C - Cost  

Operative provisions

SECTION 40-190   Second element of cost  

40-190(1)    
The second element is worked out after you start to ^* hold the ^* depreciating asset.

40-190(2)    

The second element is:

(a) the amount you are taken to have paid under section 40-185 for each economic benefit that has contributed to bringing the asset to its present condition and location from time to time since you started to ^* hold the asset; and

(b) expenditure you incur that is reasonably attributable to a ^* balancing adjustment event occurring for the asset.

Example 1:

Andrew adds a new tray and canopy to his ute. The materials and labour that go into the addition are economic benefits that Andrew received and that contribute to the ute ' s present condition.

The payments he makes for those economic benefits are included in the second element of the ute ' s cost.

Example 2:

Leonie needed to replace one of her old depreciating assets that was fixed to her land with a new, more efficient one. Leonie paid a contractor a fee to demolish and remove the old asset. This resulted in a balancing adjustment event occurring for the old asset, and the fee forms part of the second element of the cost of the old asset that was demolished.

Note:

The second element of the cost may be modified by a later provision in this Subdivision.

40-190(2A)    

Paragraph (2)(b) does not apply to a ^* balancing adjustment event referred to in item 6 or 11 of the table in subsection 40-300(2) .

40-190(3)    
However, the second element is worked out using this table if an item in it applies. Use the last applicable item.

Second element of the cost of a depreciating asset
Item	In this case:	The second element of cost is:
1	You received the benefit under an *arrangement and:	The market value of the benefit when you received it
	(a)	there is at least one other party to the arrangement with whom you did not deal at *arm ' s length; and
	(b)	apart from this item, the second element of cost for the benefit would exceed its *market value
.
2	You received the benefit under an *arrangement that was private or domestic in nature to you	The *market value of the benefit when you received it