INCOME TAX ASSESSMENT ACT 1997
You work out the decline in value of a * depreciating asset for an income year using the prime cost method in this way:
|Asset ' s *cost||×||
Asset ' s *effective life
days held has the same meaning as in subsection 40-70(1) .
Greg acquires an asset for $3,500 and first uses it on the 26th day of the income year. If the effective life of the asset is 3 1/3 years, the asset would decline in value in that year by:
$3,500 × [ 365 - 25 ]
The asset ' s adjustable value at the end of the income year is:
$3,500 - $978 = $2,522
However, you must adjust the formula in subsection (1) for an income year (the change year ):
(a) for which you recalculate the * depreciating asset ' s * effective life; or
(b) after the year in which the asset ' s start time occurs and in which an amount is included in the second element of the asset ' s * cost; or
(c) for which the asset ' s * opening adjustable value is reduced under section 40-90 (about debt forgiveness); or
(d) in which the *remaining effective life of the asset is calculated under section 40-103 ; or
(e) for which there is a reduction to the asset ' s opening adjustable value under paragraph 40-365(5)(b) (about involuntary disposals) where you are using the prime cost method; or
(f) for which the opening adjustable value of the asset is modified under subsection 27-80(3A) or (4) , 27-85(3) or 27-90(3) ; or
(g) for which there is a reduction in the asset ' s opening adjustable value under section 775-70 ; or
(h) for which there is an increase in the asset ' s opening adjustable value under section 775-75 .
The adjustments apply for the change year and later years.
For recalculating a depreciating asset ' s effective life: see section 40-110 .
You may also adjust the formula for an income year if you had undeducted core technology expenditure for the asset at the end of your last income year commencing before 1 July 2011 (see section 355-605 of the Income Tax (Transitional Provisions) Act 1997 ).
The adjustments are:
(a) instead of the asset ' s * cost, you use its * opening adjustable value for the change year plus the amounts (if any) included in the second element of its cost for that year; and
(b) instead of the asset ' s * effective life, you use its * remaining effective life. 40-75(4)
The remaining effective life of a * depreciating asset is any period of its * effective life that is yet to elapse as at:
(a) the start of the change year; or
(b) in the case of a roll-over under section 40-340 - the time when the * balancing adjustment event occurs for the transferor.
Effective life is worked out in years and fractions of years.
You must also adjust the formula in subsection (1) for an intangible * depreciating asset that:
(a) is mentioned in an item in the table in subsection 40-95(7) (except item 5, 7 or 8); and
(b) you acquire from a former * holder of the asset.
The adjustment applies for the income year in which you acquire the asset and later income years.40-75(6)
Instead of the asset ' s * effective life under the table in subsection 40-95(7) , you use the number of years remaining in that effective life as at the start of the income year in which you acquire the asset. Limit on decline 40-75(7)
The decline in value of a * depreciating asset under this section for an income year cannot be more than:
(a) for the income year in which the asset ' s * start time occurs - its * cost; or
(b) for a later year - the sum of its * opening adjustable value for that year and any amount included in the second element of its cost for that year.