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-D - Balancing adjustments  

Operative provisions

SECTION 40-365   Involuntary disposals  

40-365(1)  
You may exclude some or all of an amount that has been included in your assessable income for a * depreciating asset (the original asset ) as a result of a * balancing adjustment event to the extent that you choose to treat it as an amount to be applied under subsection (5) for one or more replacement assets.

40-365(2)  
You can only make this choice if you stop * holding the asset because:


(a) the original asset is lost or destroyed; or


(b) the original asset is compulsorily acquired by an * Australian government agency; or


(c) the original asset is acquired by an entity (other than an Australian government agency or a *foreign government agency) under a power of compulsory acquisition conferred by a law covered under subsection (2A); or


(d) you dispose of the original asset to an entity (other than a foreign government agency) in circumstances meeting all of these conditions:


(i) the disposal takes place after a notice was served on you by or on behalf of the entity;

(ii) the notice invited you to negotiate with the entity with a view to the entity acquiring the asset by agreement;

(iii) the notice informed you that if the negotiations were unsuccessful, the asset would be compulsorily acquired by the entity;

(iv) the compulsory acquisition would have been under a power of compulsory acquisition conferred by a law covered under subsection (2A); or


(e) you dispose of land onto which the original asset was fixed to an entity (other than a foreign government agency) in circumstances meeting all of these conditions:


(i) a mining lease was compulsorily granted over the land;

(ii) the lease significantly affected your use of the land;

(iii) the lease was in force just before the disposal;

(iv) the entity to which you dispose of the land was the lessee under the lease; or


(f) you dispose of land onto which the original asset was fixed to an entity (other than a foreign government agency) in circumstances meeting all of these conditions:


(i) a mining lease would have been compulsorily granted over the land if you had not disposed of it;

(ii) that lease would have significantly affected your use of the land;

(iii) the entity to which you dispose of the land would have been the lessee under the lease.

40-365(2A)  


A law is covered under this subsection if it is:


(a) an *Australian law (other than Chapter 6A of the Corporations Act 2001 ); or


(b) a *foreign law (other than a foreign law corresponding to Chapter 6A of the Corporations Act 2001 ).

40-365(3)  
You can only make this choice for a replacement asset if you incur the expenditure on the replacement asset, or you start to * hold it:


(a) no earlier than one year, or within a further period the Commissioner allows, before the * balancing adjustment event occurred; and


(b) no later than one year, or within a further period the Commissioner allows, after the end of the income year in which the balancing adjustment event occurred.

40-365(4)  
You can only make this choice for a replacement asset if:


(a) at the end of the income year in which you incurred the expenditure on the asset, or you started to * hold it, you used it, or had it * installed ready for use, wholly for a * taxable purpose; and


(b) you can deduct an amount for it.

40-365(5)  


For the purposes of applying this Act to the replacement asset:


(a) its * cost is reduced by the amount covered by the choice for the income year in which the asset ' s * start time occurs; and


(b) if the income year is later than the one in which the asset ' s * start time occurs - the sum of its * opening adjustable value for that later year and any amount included in the second element of the asset ' s cost for that later year is reduced by the amount covered by the choice.

40-365(6)  
If you are making the choice for 2 or more replacement assets, you apportion the amount covered by the choice between those items in proportion to their * cost.


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