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-B - Core provisions  

SECTION 40-37   Post-30 June 2001 mining expenditure  

40-37(1)  
This section applies to you if:


(a) you incur expenditure after 30 June 2001 under a contract entered into before that day; and


(b) the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and


(c) the expenditure does not relate to a depreciating asset.

40-37(2)  
Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset ) you hold on this basis:


(a) it has a cost at the time you incur the expenditure equal to the amount of the expenditure; and


(b) in applying the formula in section 40-75 of the new Act for the income year in which you incur the expenditure - you use the adjustments in subsection 40-75(3) of the new Act; and


(c) it is taken to be used for a taxable purpose when you incur the expenditure; and


(d) it has an effective life worked out under subsection (3); and


(e) you must use the prime cost method.

Note:

There are special rules for entities that have substituted accounting periods: see section 40-65 .

40-37(3)  
The effective life of the notional asset at the start of an income year ( present income year ) for which you are working out its decline in value is:


(a) for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining - the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or


(b) for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining - the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or


(c) for an amount of expenditure incurred in carrying on eligible quarrying operations - the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year.

40-37(4)  
Sections 40-95 and 40-110 of the new Act do not apply to the expenditure.

40-37(5)  
If both of these paragraphs apply:


(a) any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property );


(b) in an income year (the cessation year ), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;

there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset's adjustable value as relates to the other property.

40-37(6)  
If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:


(a) if the other property is sold for a price specific to that property - that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or


(b) if the other property is sold with additional property without a specific price being allocated to it - the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or


(c) if the other property is lost or destroyed - the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or


(d) if you own the other property and you stop using it for a taxable purpose - its market value at that time; or


(e) if you do not own the property and you stop using it for a taxable purpose - a reasonable amount.

However, the amount included is reduced to the extent (if any) that it is also included under subsection 40-830(6) of the new Act.




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