INCOME TAX (TRANSITIONAL PROVISIONS) 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  

SECTION 40-285   Balancing adjustments  

40-285(1)  
Paragraphs 40-285(1) (a) and (2) (a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset's decline in value under Division 40 .

40-285(2)  
You are entitled to a further deduction under subsection (3) if:


(a) you are entitled to a deduction under subsection 40-285(2) of the new Act for a balancing adjustment event happening to a depreciating asset:


(i) to which Division 58 of the former Act applied; or

(ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and


(b) you would have been entitled to a further deduction under section 42-197 of the former Act.

40-285(3)  
The amount of the further deduction is the amount worked out under section 42-197 of the former Act.

40-285(4)  
Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day.

40-285(5)  
The amount included in your assessable income under subsection 40-285(1) or section 40-370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if:


(a) the asset is either:


(i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or

(ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and


(b) any capital gain or capital loss would be disregarded (if Part 3-1 of the new Act applied):


(i) because of section 118-5 (about cars, motor cycles and valour decorations); or

(ii) because of section 118-10 (about collectables); or

(iii) because of section 118-12 (about plant used to produce exempt income); or

(iv) because the asset was a pre-CGT asset at the time of the balancing adjustment event.

40-285(6)  
The reduction is:

graphic

where:

sum of reductions
is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose.

total decline
is the decline in value of the depreciating asset since you started to hold it.

40-285(7)  
Section 118-24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens:


(a) if the depreciating asset is plant - at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or


(b) if the depreciating asset is not plant - before 1 July 2001;

where:


(c) the time of the event is when you entered into the contract for the disposal of the asset; and


(d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b).




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