Taxation Laws Amendment (Research and Development) Act 2001 (170 of 2001)

Schedule 2   Plant etc.

Part 3   Effective life basis for deduction

Division 2   Amendments commencing immediately after the New Business Tax System (Capital Allowances) Act 2001

Income Tax Assessment Act 1997

79   After section 40-290

Insert:

40-292 Adjustments where deductions for decline in value also allowable under section 73BA or 73BH of Income Tax Assessment Act 1936

Section applies if deductions for decline in value under both this Division and section 73BA

(1) This section applies if:

(a) a *balancing adjustment event occurs for a *depreciating asset you *held and:

(i) whose decline in value you worked out under Subdivision 40-B; or

(ii) whose decline in value you would have worked out under that Subdivision if you had used the asset; and

(b) you also deducted an amount for the asset under section 73BA or 73BH of the Income Tax Assessment Act 1936, or could have so deducted an amount if you had not chosen a tax offset under section 73I of that Act, for any income year in which you held the asset.

Section 40-290 to be applied as if use for carrying on research and development activities were use for a taxable purpose

(2) If this section applies, you must, in applying section 40-290 (including references in that section to the reduction of deductions under section 40-25) in relation to the *depreciating asset, assume that when you used it either for a taxable purpose or for the purpose of the carrying on by or on behalf of you of research and development activities, within the meaning of section 73B of the Income Tax Assessment Act 1936, you used it for a taxable purpose.

Increase in amounts deductible or assessable under section 40-285 where 1.25 rate deductions under section 73BA or 73BH

(3) If:

(a) this section applies; and

(b) the amount you deducted under section 73BA or 73BH of the Income Tax Assessment Act 1936, as mentioned in paragraph (1)(b) of this section, for at least one income year was worked out by multiplying a notional Division 40 deduction (within the meaning of section 73BA) or a notional Division 42 deduction (within the meaning of section 73BJ) by 1.25;

then subsection (4) applies.

(4) Any amount (the section 40-285 amount ) that you can deduct, or that is included in your assessable income, for the *depreciating asset under section 40-285 (after applying subsection (2) of this section) is increased by the amount worked out using the formula:

where:

adjusted section 40-285 amount means:

(a) if the section 40-285 amount is a deduction - the amount of the deduction; or

(b) if the section 40-285 amount is an amount included in your assessable income - so much of the section 40-285 amount as does not exceed the formula component total decline in value .

sum of all 1.25 rate notional Division 40/42 deductions means the sum of all notional Division 40 deductions and notional Division 42 deductions (see paragraph (3)(b)) that were multiplied by 1.25 in working out the amounts you deducted for the *depreciating asset as mentioned in paragraph (1)(b).

total decline in value means the cost of the *depreciating asset less its *adjustable value.