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 40-38   Mining cash bidding payments  

40-38(1)  
This section applies to expenditure you incur, under a contract entered into before 30 June 2001, if:


(a) the expenditure would have been a mining cash bidding payment under Subdivision 330-D of the former Act; and


(b) either:


(i) you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day ) after 30 June 2001; or

(ii) the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day ) after 30 June 2001.

40-38(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 start day 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 the start day occurs - 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 on the start day; 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 .

40-38(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.

40-38(4)  
Sections 40-95 and 40-110 of the new Act do not apply to the expenditure.

40-38(5)  
If both of these paragraphs apply:


(a) any of the expenditure referred to in subsection (1) relates to a depreciating asset (the real asset );


(b) in an income year (the cessation year ) you stop holding the real asset, or 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 real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.

40-38(6)  
If section 40-115 of the new Act applies, or section 40-125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then:


(a) if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split - subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or


(b) if the real asset is merged into another depreciating asset - section 40-125 does not apply to the asset into which it is merged while you continue to hold it.




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