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 40-180   First element of cost  

40-180(1)  


The first element is worked out as at the time when you began to *hold the *depreciating asset (except for a case to which item 3, 4 or 14 of the table in subsection (2) applies). It is:


(a) if an item in that table applies - the amount specified in that item; or


(b) otherwise - the amount you are taken to have paid to hold the asset under section 40-185 .

Note 1:

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

Note 2:

Section 230-505 provides special rules for working out the amount of consideration for an asset if the asset is a Division 230 financial arrangement or a Division 230 financial arrangement is involved in that consideration.

40-180(2)  


If more than one item in this table covers the asset, apply the last item that covers it.


First element of the cost of a depreciating asset
Item In this case: The cost is:
1 A *depreciating asset you *hold is split into 2 or more assets For each of the assets into which it is split, the amount worked out under section 40-205
.
2 A *depreciating asset or assets that you *hold is or are merged into another depreciating asset For the other asset, the amount worked out under section 40-210
.
3 A *balancing adjustment event happens to a *depreciating asset you *hold because you stop using it for any purpose expecting never to use it again, and you continue to hold it The *termination value of the asset at the time of the event
.
4 A *balancing adjustment event happens to a *depreciating asset you *hold but have not used because you expect never to use it, and you continue to hold it The *termination value of the asset at the time of the event
.
5 A partnership asset that was *held, just before it became a partnership asset, by one or more partners (whether or not any other entity was a joint holder) or a partnership asset to which subsection 40-295(2) applies The *market value of the asset when the partnership started to hold it or when the change referred to in subsection 40-295(2) occurred
.
6 There is roll-over relief under section 40-340 for a *balancing adjustment event happening to a *depreciating asset The *adjustable value of the asset to the transferor just before the balancing adjustment event occurred
.
7 You are the legal owner of a *depreciating asset that is hired under a *hire purchase agreement and you start *holding it because the entity to whom it is hired does not become the legal owner The *market value of the asset when you started to hold it
.
8 You started to *hold the asset under an *arrangement and: The market value of the asset when you started to hold 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 first element of the asset ' s cost would exceed its *market value
.
9 You started to *hold the asset under an *arrangement that was private or domestic in nature to you (for example, a gift) The *market value of the asset when you started to hold it
.
10 The *Finance Minister has determined a cost for you under section 49A, 49B, 50A, 50B, 51A or 51B of the Airports (Transitional) Act 1996 The cost so determined
.
11 To which Division 58 (which deals with assets previously owned by an *exempt entity) applies The amount applicable under subsections 58-70(3) and (5)
.
12 A *balancing adjustment event happens to a *depreciating asset because a person dies and the asset devolves to you as the person ' s *legal personal representative The asset ' s *adjustable value on the day the person died or, if the asset is allocated to a low-value pool, so much of the *closing pool balance for the income year in which the person died as is reasonably attributable to the asset
.
13 You started to *hold a *depreciating asset because it *passed to you as the beneficiary or a joint tenant The *market value of the asset when you started to hold it reduced by any *capital gain that was disregarded under section 128-10 or subsection 128-15(3), whether by the deceased or by the *legal personal representative
.
14 A *balancing adjustment event happens to a *depreciating asset you *hold because of subsection 40-295(1B) What would, apart from subsection 40-285(3), be the asset ' s *adjustable value on the day the *balancing adjustment event occurs

40-180(3)  


The first element of *cost includes an amount you paid or are taken to have paid in relation to starting to *hold the *depreciating asset if that amount is directly connected with holding the asset.

40-180(4)  


The first element of *cost of a *depreciating asset does not include an amount that forms part of the second element of cost of another depreciating asset.
Note:

The first element of cost may be reduced under section 40-1130 to account for exploration benefits received under farm-in farm-out arrangements.


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