INCOME TAX (TRANSITIONAL PROVISIONS) ACT 1997

CHAPTER 1 - INTRODUCTION AND CORE PROVISIONS  

PART 1-1 - PRELIMINARY  

Division 1 - Preliminary  

SECTION 1-1   1-1   Short title  
This Act may be cited as the Income Tax (Transitional Provisions) Act 1997.

SECTION 1-5   1-5   Commencement  
This Act commences on 1 July 1997.

SECTION 1-7   1-7   Administration of this Act  


The Commissioner has the general administration of this Act.
Note:

An effect of this provision is that people who acquire information under this Act are subject to the confidentiality obligations and exceptions in Division 355 in Schedule 1 to the Taxation Administration Act 1953.

SECTION 1-10   Definitions and rules for interpreting this Act  

1-10(1)  
In this Act, an expression has the same meaning as in the Income Tax Assessment Act 1997.

1-10(2)  
Division 950 of the Income Tax Assessment Act 1997 (which contains rules for interpreting that Act) applies to this Act as if the provisions of this Act were provisions of that Act.

PART 1-3 - CORE PROVISIONS  

Division 4 - How to work out the income tax payable on your taxable income  

SECTION 4-1   4-1   Application of the Income Tax Assessment Act 1997  
The Income Tax Assessment Act 1997, as originally enacted, applies to assessments for the 1997-98 income year and later income years.

Note:

For the application of amendments of that Act (including new provisions inserted in it), see the Acts making the amendments.

SECTION 4-10   4-10   Temporary flood and cyclone reconstruction levy  
(Repealed by No 16 of 2011)

SECTION 4-11   Temporary budget repair levy  

Temporary budget repair levy

4-11(1)  
You must pay extra income tax ( temporary budget repair levy ) for a financial year if:


(a) you are an individual; and


(b) your taxable income for the corresponding income year exceeds $180,000; and


(c) the financial year is a temporary budget repair levy year.

Note:

This section will also affect the income tax payable by some trustees who are taxed as if certain trust income were income of individuals. See sections 98 and 99 of the Income Tax Assessment Act 1936.

Amount of temporary budget repair levy

4-11(2)  
Your temporary budget repair levy is worked out by reference to your taxable income for the corresponding income year using the rate or rates that apply to you.

Interaction with other provisions

4-11(3)  
For the purpose of working out your income tax for the financial year:


(a) section 4-10 of the Income Tax Assessment Act 1997 has effect as if it made you liable to pay the extra tax mentioned in subsection (1) of this section; and


(b) subsection 4-10(3) of that Act has effect as if step 4 of the method statement in that subsection were omitted and the following were substituted:


Step 3A.

Subtract your tax offsets from your basic income tax liability.

For the list of tax offsets, see section 13-1.


Step 3B.

Add the extra income tax you must pay as mentioned in subsection 4-11(1) of the Income Tax (Transitional Provisions) Act 1997.


Step 4.

If an amount of your tax offset for foreign income tax under Division 770 remains after applying section 63-10, subtract the remaining amount from the result of step 3B. The result is how much income tax you owe for the financial year.

4-11(4)  
To avoid doubt, temporary budget repair levy is not included in your basic income tax liability.

Note:

As a result, you cannot apply any tax offsets against temporary budget repair levy under Part 2-20 of the Income Tax Assessment Act 1997 (apart from the foreign income tax offset applied under step 4 of the method statement in subsection (3)).

Meaning of temporary budget repair levy year

4-11(5)  
Each of the following is a temporary budget repair levy year :


(a) the 2014-15 financial year;


(b) the 2015-16 financial year;


(c) the 2016-17 financial year.

Division 5 - How to work out when to pay your income tax  

Subdivision 5-A - How to work out when to pay your income tax  

SECTION 5-5   5-5   Application of Division 5 of the Income Tax Assessment Act 1997  


Subject to section 5-15 of this Act, Division 5 of the Income Tax Assessment Act 1997, as originally enacted, applies in relation to income tax or shortfall interest charge you must pay for:


(a) the 2010-11 financial year; or


(b) a later financial year.

SECTION 5-7   References in tax sharing agreements to former section 204  

5-7(1)  
A reference in an agreement to section 204 of the Income Tax Assessment Act 1936 is taken, from the commencement of this section, to be a reference to section 5-5 of the Income Tax Assessment Act 1997, if:


(a) paragraph 721-25(1)(a) of the Income Tax Assessment Act 1997 applies to the agreement; and


(b) the agreement was in force just before the commencement of this section.

5-7(2)  
This section applies in relation to tax to which Division 5 of the Income Tax Assessment Act 1997 applies.

SECTION 5-10   General interest charge liabilities under former subsection 204(3)  

5-10(1)  
This section applies if, just before the commencement of this section, you were liable, under subsection 204(3) (the old provision ) of the Income Tax Assessment Act 1936, to pay the general interest charge on an unpaid amount (the liability ) of any tax or shortfall interest charge.

5-10(2)  
On that commencement, the old provision ceases to apply to the liability.

5-10(3)  
From that commencement, section 5-15 (the new provision ) of the Income Tax Assessment Act 1997, as originally enacted, applies to the liability as if:


(a) the liability remained unpaid at that time; and


(b) so much of the charge under the old provision as remained unpaid at that time had been imposed under the new provision and remained unpaid at that time.

SECTION 5-15   Application of section 5-15 of the Income Tax Assessment Act 1997  

5-15(1)  
Section 5-15 of the Income Tax Assessment Act 1997 (General interest charge payable on unpaid income tax or shortfall interest charge), as originally enacted, applies to an amount of income tax or shortfall interest charge you must pay for a financial year, if the income tax or shortfall interest charge is due to be paid on or after the commencement of that section.

5-15(2)  
For the purposes of subsection (1), it does not matter whether the financial year ended before, on or after the commencement of that section.

Division 6 - Assessable income and exempt income  

SECTION 6-2   6-2   Effect of this Division  
This Division has effect for the purposes of the Income Tax Assessment Act 1997 and of this Act.

SECTION 6-3   6-3   Assessable income for income years before 1997-98  
For the 1996-97 income year or an earlier income year, assessable income means all the amounts that under the Income Tax Assessment Act 1936 are included in the assessable income.

SECTION 6-20   6-20   Exempt income for income years before 1997-98  
For the 1996-97 income year or an earlier income year, exempt income means income which is exempt from tax and includes income which is not assessable income.

Division 8 - Deductions  

SECTION 8-2   8-2   Effect of this Division  
This Division has effect for the purposes of the Income Tax Assessment Act 1997 and of this Act.

SECTION 8-3   8-3   Deductions for income years before 1997-98  
For the 1996-97 income year or an earlier income year, deduction means a deduction allowable under the Income Tax Assessment Act 1936.

SECTION 8-10   8-10   No double deductions for income year before 1997-98 and income year after 1996-97  
If:


(a) a provision of the Income Tax Assessment Act 1936 allows you a deduction in respect of an amount for the 1996-97 income year or an earlier income year; and


(b) a different provision of that Act, or a provision of the Income Tax Assessment Act 1997, allows you a deduction in respect of the same amount for the 1997-98 income year or a later income year;

you can deduct only under the provision that is most appropriate.

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-1 - ASSESSABLE INCOME  

Division 15 - Some items of assessable income  

SECTION 15-1   General application provision  

15-1(1)  
Division 15 of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

15-1(2)  
However, the sections of that Act listed in the table apply in accordance with the corresponding sections of this Act.


Application provisions for specific sections
Item This section of the Income Tax Assessment Act 1997 ... Applies as described in this section of this Act ...
1 15-10 15-10
.
2 15-15 15-15
.
3 15-20 15-20
.
4 15-30 15-30
.
5 15-35 15-35

SECTION 15-10   15-10   Application of section 15-10 of the Income Tax Assessment Act 1997 to bounties and subsidies  


Section 15-10 (Bounties and subsidies) of the Income Tax Assessment Act 1997 applies to a bounty or subsidy received in the 1997-98 income year or a later income year.

SECTION 15-15   15-15   Application of section 15-15 of the Income Tax Assessment Act 1997 to profit-making undertaking or plan  


Section 15-15 (Profit-making undertaking or plan) of the Income Tax Assessment Act 1997 applies to a profit arising in the 1997-98 income year or a later income year, even if the undertaking or plan was entered into, or began to be carried on or carried out, before the 1997-98 income year.

SECTION 15-20   15-20   Application of section 15-20 of the Income Tax Assessment Act 1997 to royalties  


Section 15-20 (Royalties) of the Income Tax Assessment Act 1997 applies to an amount received as or by way of royalty in the 1997-98 income year or a later income year.

SECTION 15-30   15-30   Application of section 15-30 of the Income Tax Assessment Act 1997 to insurance or indemnity payments  


Section 15-30 (Insurance or indemnity for loss of assessable income) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997-98 income year or a later income year as insurance or indemnity for the loss at any time of an amount that would have been assessable income under the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997.

SECTION 15-35   15-35   Application of section 15-35 of the Income Tax Assessment Act 1997 to interest on overpayments and early payments of tax  


Section 15-35 (Interest on overpayments and early payments of tax) of the Income Tax Assessment Act 1997 applies to interest that is paid or applied in the 1997-98 income year or a later income year, even if some or all of the interest became payable earlier.

Division 20 - Items included to reverse the effect of past deductions  

Subdivision 20-A - Insurance, indemnity or recoupment for deductible expenses  

SECTION 20-1   20-1   Application of Subdivision 20-A of the Income Tax Assessment Act 1997  


Subdivision 20-A of the Income Tax Assessment Act 1997 applies to an assessable recoupment received in the 1997-98 income year or a later income year of a loss or outgoing whenever incurred.

Subdivision 20-B - Disposal of a car for which lease payments have been deducted  

SECTION 20-100   20-100   Application of Subdivision 20-B of the Income Tax Assessment Act 1997  


Subdivision 20-B of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

SECTION 20-105   The cost of a car acquired in the 1996-97 income year or an earlier income year  

20-105(1)  
If:


(a) in the 1997-98 income year or a later income year you dispose of a car that was leased to you or your associate; and


(b) the lessor acquired the car in the 1996-97 income year or an earlier income year;

the cost of the car to the lessor for the purposes of section 20-120 of the Income Tax Assessment Act 1997 is worked out under the depreciation provisions of the Income Tax Assessment Act 1936.

Note 1:

Section 20-120 of the Income Tax Assessment Act 1997 is about a limit on the amount to be included in your assessable income because of your disposal of the car.

Note 2:

The depreciation provisions were in Subdivision A of Division 3 of Part III of the Income Tax Assessment Act 1936.

20-105(2)  


In working out the cost of the car to the lessor, disregard any election the lessor made under former subsection 59(2A) or (2D) of the Income Tax Assessment Act 1936 to reduce the cost of the car.

SECTION 20-110   20-110   The termination value of a car disposed of in the 1996-97 income year or an earlier income year  


If:


(a) in the 1997-98 income year or a later income year you dispose of a car that was leased to you or your associate; and


(b) the lessor disposed of the car in the 1996-97 income year or an earlier income year;

the car's termination value (in respect of the disposal by the lessor) for the purposes of section 20-120 of the Income Tax Assessment Act 1997 is the consideration receivable by the lessor for the disposal (worked out under former section 59 of the Income Tax Assessment Act 1936).

Note:

Section 20-120 of the Income Tax Assessment Act 1997 is about a limit on the amount to be included in your assessable income because of your disposal of the car.

SECTION 20-115   20-115   Reducing the assessable amount for the disposal of a car in the 1997-98 income year or later if there has been an earlier disposal of it  


If:


(a) section 20-110 or 20-125 of the Income Tax Assessment Act 1997 includes an amount in your assessable income for the 1997-98 income year or a later income year because of your disposal of a car; and


(b) in the 1996-97 income year or an earlier income year (but after the lease period began) there was an earlier disposal of the car, or an interest in it, by you or another entity in a situation described in the following table;

each limit on the amount to be included in your assessable income is reduced as follows:


Reducing each limit on the amount to be included
Item In this situation: reduce each limit by:
1 Former section 26AAB of the Income Tax Assessment Act 1936 included an amount in your assessable income in respect of such an earlier disposal by you that amount
.
2 Former section 26AAB of the Income Tax Assessment Act 1936 included an amount in another entity's assessable income in respect of such an earlier disposal by the other entity that amount
.
3 Former section 26AAB of the Income Tax Assessment Act 1936 would have included an amount in your assessable income in respect of such an earlier disposal by you but for the operation of former subsection 26AAB(12) of that Act that amount
.
4 Former section 26AAB of the Income Tax Assessment Act 1936 would have included an amount in another entity's assessable income in respect of such an earlier disposal by the other entity but for the operation of former subsection 26AAB(12) of that Act that amount
.
5 Former subsection 26AAB(9) of the Income Tax Assessment Act 1936 reduced the amount to be included in your assessable income in respect of such an earlier disposal by you the amount of the reduction
.
6 Former subsection 26AAB(9) of the Income Tax Assessment Act 1936 reduced the amount to be included in another entity's assessable income in respect of such an earlier disposal by the other entity the amount of the reduction

Division 22 - Amounts you must repay are not assessable income  

SECTION 22-5   22-5   Application of Division 22 of the Income Tax Assessment Act 1997  
(Repealed by No 66 of 2003)

PART 2-5 - RULES ABOUT DEDUCTIBILITY OF PARTICULAR KINDS OF AMOUNTS  

Division 25 - Some amounts you can deduct  

SECTION 25-1   25-1   Application of Division 25 of the Income Tax Assessment Act 1997  


Division 25 (Some amounts you can deduct) of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years, except as provided by this Division.

SECTION 25-40   25-40   Application of section 25-40 of the Income Tax Assessment Act 1997  


Section 25-40 (Loss from profit-making undertaking or plan) of the Income Tax Assessment Act 1997 applies to a loss arising in the 1997-98 income year or a later income year, even if the undertaking or plan was entered into, or began to be carried on or carried out, before the 1997-98 income year.

SECTION 25-45   25-45   Application of section 25-45 of the Income Tax Assessment Act 1997  


Section 25-45 (which is about deductions for losses by theft etc.) of the Income Tax Assessment Act 1997 applies to a loss discovered in the 1997-98 income year or a later income year.

SECTION 25-50   25-50   Application of section 25-90 of the Income Tax Assessment Act 1997  


Section 25-90 (which is about deductions relating to foreign exempt income) of the Income Tax Assessment Act 1997 applies to an amount incurred in an income year that begins on or after 1 July 2001.

SECTION 25-65   25-65   Local government election expenses  


Section 25-65 of the Income Tax Assessment Act 1997 applies to the 2006-07 income year and later income years, in relation to expenditure whenever incurred. In relation to expenditure incurred in the 2005-06 income year or an earlier income year, it applies as if:


(a) it had applied to all income years before the 2006-07 income year; and


(b) an allowable deduction for the expenditure under section 74A of the Income Tax Assessment Act 1936 had been a deduction for the expenditure under section 25-65 of the Income Tax Assessment Act 1997.

Note:

This section also has the result that, to the extent that a recoupment of the expenditure has been included in your assessable income by former subsections 74A(4) and (5) of the Income Tax Assessment Act 1936, the expenditure will be disregarded in applying the $1,000 per election deduction limit: see subsection 25-65(2) of the Income Tax Assessment Act 1997.

Division 26 - Some amounts you cannot deduct, or cannot deduct in full  

SECTION 26-1   26-1   Application of Division 26 of the Income Tax Assessment Act 1997  


Division 26 of the Income Tax Assessment Act 1997 (whichprevents or limits deductions) applies to assessments for the 1997-98 income year and later income years, except as provided by this Division.

SECTION 26-30   26-30   Application of section 26-30 of the Income Tax Assessment Act 1997  


Section 26-30 (which denies a deduction for relative's travel expenses) of the Income Tax Assessment Act 1997 applies to travel on or after 1 July 1997.

Division 30 - Gifts or contributions  

SECTION 30-1   30-1   Application of Division 30 of the Income Tax Assessment Act 1997  


Division 30 of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

SECTION 30-5   Keeping in force old declarations and instruments  

30-5(1)  
This section applies to a declaration or other instrument (described in column 2 of an item in the table in this section) that is in force at the end of 30 June 1997 for the purposes of the provision of the Income Tax Assessment Act 1936 referred to in that column of the item.

30-5(2)  
On and after 1 July 1997 the declaration or other instrument also has effect as if it were an approval or declaration (described in column 3 of the same item) made for the purposes of the provision of the Income Tax Assessment Act 1997 referred to in that column of the item.

Anything done on or after 1 July 1997 in relation to an approval or declaration described in column 3 of an item in the table also has effect as if it had been done in relation to the declaration or other instrument described in column 2 of that item.


On and after 1 July 1997
Item This approval, declaration or other instrument: also has effect as if it were:
1 An instrument certifying an institution to be a technical and further education institution for the purposes of item 2.1.7 of table 2 in subsection 78(4) A declaration that the institution is a technical and further education institution for the purposes of item 2.1.7 of the table in subsection 30-25(1)
.
2 An instrument certifying that purposes of an institution covered by item 2.1.7 of table 2 in subsection 78(4), or of the college covered by item 2.2.14 of that table, relate exclusively to tertiary education A declaration (for the purposes of section 30-30) that those purposes of the institution, or of the college, relate solely to tertiary education
.
3 An instrument approving an organisation, or a branch or section of an organisation, to be a marriage guidance organisation for the purposes of item 8.1.1 of table 8 in subsection 78(4) A declaration that the organisation, or branch or section of the organisation, is a marriage guidance organisation for the purposes of item 8.1.1 of the table in subsection 30-70(1)
.
4 A declaration that a public fund is an eligible fund for the purposes of item 9.1.1 of table 9 in subsection 78(4) A declaration that the public fund is a relief fund for the purposes of item 9.1.1 of the table in subsection 30-80(1)
.
5 An instrument approving a person as a valuer under subsection 78(18) An approval of the person as a valuer under section 30-210
.
6 An instrument approving an organisation as an approved organisation for the purposes of subsection 78(21) A declaration that the organisation is an approved organisation for the purposes of section 30-85
.
7 An instrument certifying a country to be a developing country for the purposes of subsection 78(21) A declaration that the country is a developing country for the purposes of section 30-85

SECTION 30-10   30-10   Applications for approval of testamentary gifts not yet decided  
(Repealed by No 12 of 2012)

SECTION 30-15   30-15   Keeping in force the guidelines for deciding testamentary gifts  
(Repealed by No 12 of 2012)

SECTION 30-20   30-20   Keeping in force certificates approving testamentary gifts  
(Repealed by No 12 of 2012)

SECTION 30-25   Keeping in force the old gifts registers  

30-25(1)  
On and after 1 July 1997, the register described in column 2 of an item in the table in this section (as the register existed at the end of 30 June 1997) also has effect as if it were the register described in column 3 of that item.

Column 2 refers to provisions of the Income Tax Assessment Act 1936. Column 3 refers to provisions of the Income Tax Assessment Act 1997.

30-25(2)  
Anything done on or after 1 July 1997 in relation to the register described in column 3 of an item in the table also has effect as if it had been done in relation to the register described in column 2 of that item.


On and after 1 July 1997
Item This register: also has effect as if it were:
1 The register of cultural organisations kept under section 78AA The register of cultural organisations kept under Subdivision 30-F
.
2 The register of environmental organisations kept under section 78AB The register of environmental organisations kept under Subdivision 30-E

SECTION 30-102   Fund, authorities and institutions taken to be endorsed  

30-102(1)  
The authorities and institutions listed in this table are taken to have been endorsed by the Commissioner of Taxation for the purposes of item 12A.1.1 of the table in section 30-102 of the Income Tax Assessment Act 1997 under paragraph 30-120(a) of that Act.


Item Fund, authority or institution Established under legislation of the following State or Territory
1 State Emergency Service New South Wales
2 Country Fire Authority Victoria
3 Victoria State Emergency Service Victoria
4 Queensland Fire and Rescue Service Queensland
5 State Emergency Service Queensland
6 Fire and Emergency Services Authority of Western Australia Western Australia
7 State Emergency Service South Australia South Australia
8 Tasmania Fire Service Tasmania
9 State Emergency Service Tasmania
10 ACT Rural Fire Service Australian Capital Territory
11 ACT State Emergency Service Australian Capital Territory

30-102(2)  
The fund listed in this table is taken to have been endorsed by the Commissioner of Taxation for the purposes of item 12A.1.2 of section 30-102 of the Income Tax Assessment Act 1997 under paragraph 30-120(b) of that Act.


Item Fund, authority or institution Established under legislation of the following State or Territory
1 CFA & Brigades Donations Fund Victoria

30-102(3)  
The funds, authorities and institutions referred to in subsections (1) and (2) are taken to have been endorsed on the day on which Schedule 7 to the Tax Laws Amendment (2010 Measures No. 4) Act 2010 commences.

Division 32 - Entertainment expenses  

SECTION 32-1   32-1   Application of Division 32 of the Income Tax Assessment Act 1997  


Division 32 of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

Division 34 - Non-compulsory uniforms  

SECTION 34-1   34-1   Application of Division 34 of the Income Tax Assessment Act 1997  


Division 34 (Non-compulsory uniforms) of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

SECTION 34-5   Things done under former section 51AL of the Income Tax Assessment Act 1936  

34-5(1)  


From 1 July 1997, anything done under or in connection with a provision of former section 51AL of the Income Tax Assessment Act 1936 has effect as if it had been done under or in connection with the corresponding provision of Division 34 of the Income Tax Assessment Act 1997.

34-5(2)  


From 1 July 1997, a thing described in column 2 of an item in the table (as that thing existed at the end of 30 June 1997) has effect as if it were the thing described in column 3 of that item.

Column 2 refers to provisions of the Income Tax Assessment Act 1936. Column 3 refers to provisions of the Income Tax Assessment Act 1997.


As from 1 July 1997
Item This: has effect as if it were this:
1 The Register of Approved Occupational Clothing that former subsection 51AL(5) requires the Industry Secretary tokeep The Register of Approved Occupational Clothing that section 34-45 requires the Industry Secretary to keep
.
2 Approved occupational clothing guidelines in force under former subsection 51AL(7) Approved occupational clothing guidelines made under section 34-55
.
3 A delegation by the Industry Secretary under former subsection 51AL(23) A delegation by the Industry Secretary under section 34-65

34-5(3)  
Subsection (2) does not limit the generality of subsection (1).

Division 35 - Deferral of losses from non-commercial business activities  

SECTION 35-10   35-10   Deductions for certain new business investment  


The rule in subsection 35-10(2) of the Income Tax Assessment Act 1997 does not apply for an income year to a business activity if:


(a) apart from that rule, you could otherwise deduct amounts under Division 41 of that Act for that income year; and


(b) the total of those amounts is more than or equal to the excess worked out under that subsection for the business activity for the income year.

SECTION 35-20   35-20   Application of Commisioner's decisions  


A decision of the Commissioner made under section 35-55 of the Income Tax Assessment Act 1997:


(a) before the commencement of Schedule 2 to the Tax Laws Amendment (2009 Budget Measures No 2) Act 2009; and


(b) for one or more income years;

continues to have effect, after that commencement, for those income years despite the amendments made by that Schedule.

Division 36 - Tax losses of earlier income years  

SECTION 36-100   36-100   Tax losses for the 1997-98 and later income years  
To work out your tax loss (if any) for the 1997-98 income year or a later income year, apply the provisions of the Income Tax Assessment Act 1997 about tax losses.

Start at Division 36 of that Act.

SECTION 36-105   Tax losses for 1989-90 to 1996-97 income years  

36-105(1)   [Incurring tax loss]  

If you incurred a loss for the purposes of section 79E (General domestic losses of 1989-90 to 1996-97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989-90 to 1996-97 income years, the loss is your tax loss for that income year, which is called a loss year .

36-105(2)   [Deducting loss in 1997/98 or later]  

You can deduct the tax loss in the 1997-98 or a later income year only to the extent that it has not already been deducted.

SECTION 36-110   Tax losses for 1957-58 to 1988-89 income years  

36-110(1)  
If you incurred a loss for the purposes of section 80AA (Primary production losses of pre-1990 years of income) of the Income Tax Assessment Act 1936 in any of the 1957-58 to 1988-89 income years, the loss is your tax loss for that income year, which is called a loss year . The loss is also called a primary production loss .

36-110(2)  
You can deduct the tax loss in the 1997-98 or a later income year only to the extent that it has not already been deducted.

36-110(3)  
You deduct your primary production losses (in the order in which you incurred them) before any other tax losses of the same or any other loss year, except film losses.

36-110(4)  
A company cannot transfer any amount of a primary production loss for the 1983-84 or an earlier income year under Subdivision 170-A (Transfer of tax losses within wholly-owned groups of companies) of the Income Tax Assessment Act 1997.

36-110(5)  
For the purposes of determining how much (if any) of a primary production loss you can deduct in the 1997-98 or a later income year, subsections 80AA(9), (10) and (11) of the Income Tax Assessment Act 1936 apply in the same way as they apply for the purposes they refer to.

PART 2-10 - CAPITAL ALLOWANCES: RULES ABOUT DEDUCTIBILITY OF CAPITAL EXPENDITURE  

Division 40 - Capital allowances  

Subdivision 40-B - Core provisions  

SECTION 40-10   Plant  

40-10(1)  
This section applies to you if:


(a) you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act ) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and


(b) either:


(i) you hold the plant at 1 July 2001; or

(ii) subparagraph (i) does not apply and you were the owner or quasi-owner of the plant at the end of 30 June 2001.

40-10(2)  
Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001 (the new Act ) applies to the plant on this basis:


(a) the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant's opening adjustable value; and


(b) you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and


(c) if you excluded an amount from your assessable income under section 42-290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 - the cost of the plant, and its opening adjustable value, are reduced by that amount; and


(d) if subparagraph (1)(b)(ii) applies to you - you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi-owner of the plant under the former Act continue.

Note:

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

40-10(3)  
If you were using a rate for the plant under subsection 42-160(1) or 42-165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis:


(a) for the diminishing value method - replace the component in the formula in subsection 40-70(1) of the new Act that includes the plant's effective life with the rate you were using; and


(b) for the prime cost method:


(i) replace the component in the formula in subsection 40-75(1) of the new Act that includes the plant's effective life with the rate you were using; and

(ii) increase the plant's cost under Division 42 of the former Act by any amounts included in the second element of the plant's cost after 30 June 2001.
Note 1:

Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced.

Note 2:

Small business entities can choose to work out the decline in value of their depreciating assets under Division 328.

SECTION 40-12   Plant acquired after 30 June 2001  

40-12(1)  
This section applies to you if:


(a) you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or


(b) you started to construct an item of plant before 1 July 2001 and you complete its construction after 30 June 2001.

40-12(2)  
Division 40 of the new Act applies to the plant.

40-12(3)  
If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40-70(1) or 40-75(1) of the new Act that includes the plant's effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day.

SECTION 40-13   Accelerated depreciation for split or merged plant  

40-13(1)  
This section applies to a depreciating asset that is plant if:


(a) you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and


(b) you held it at the end of 30 June 2001; and


(c) on or after 1 July 2001:


(i) the plant is split into 2 or more depreciating assets; or

(ii) the plant is merged into another depreciating asset.

40-13(2)  
For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if it you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets.

40-13(3)  
For a case where the plant is merged into another depreciating asset, section 40-125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it.

SECTION 40-15   40-15   Recalculating effective life  


You cannot recalculate the effective life of a depreciating asset for which:


(a) you were using, just before 1 July 2001, a rate under subsection 42-160(1) or 42-165(1) of the former Act; or


(b) you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day.

SECTION 40-20   IRUs  

40-20(1)  
This section applies to you if:


(a) you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and


(b) you hold the IRU at 1 July 2001.

40-20(2)  
Division 40 of the new Act applies to the IRU on this basis:


(a) you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and


(b) the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU's opening adjustable value.

Note:

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

SECTION 40-25   Software  

40-25(1)  
Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001.

40-25(2)  
For a unit of software for which you were deducting amounts under Subdivision 46-B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis:


(a) its cost is the amount of expenditure you incurred on the unit; and


(b) you must use the prime cost method; and


(c) its opening adjustable value at 1 July 2001 is its undeducted cost at the end of 30 June 2001; and


(d) you must use the same effective life you were using under Subdivision 46-B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001.

Note:

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

SECTION 40-30   Spectrum licences  

40-30(1)  
This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day.

40-30(2)  
Division 40 of the new Act applies to the spectrum licence on this basis:


(a) its cost is your expenditure incurred in obtaining the licence; and


(b) its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and


(c) its effective life is the same as it had under the former Act; and


(d) you must use the prime cost method.

Note:

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

SECTION 40-33   Datacasting transmitter licences  

40-33(1)  
This section applies to you if you hold a datacasting transmitter licence at 1 July 2001.

40-33(2)  
Division 40 of the new Act applies to the licence on this basis:


(a) its cost is your expenditure incurred in obtaining the licence; and


(b) its opening adjustable value at 1 July 2001 is its cost; and


(c) its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and


(d) you must use the prime cost method.

SECTION 40-35   Mining unrecouped expenditure  

40-35(1)  
This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001.

Note:

Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8).

40-35(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 an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330-80 of the former Act for your income year ending on 30 June 2001; and


(b) it has a cost equal to the total amount of allowable capital expenditure under the former Act; and


(c) in applying the formula in section 40-75 of the new Act for the income year in which 1 July 2001 occurs - you use the adjustments in subsection 40-75(3) of the new Act; and


(d) it is taken to have been used for a taxable purpose at the start of 1 July 2001; and


(e) it has a remaining effective life worked out under subsection (3); and


(f) you must use the prime cost method.

Note:

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

40-35(3)  
The remaining 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 unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these:


(i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible;

(ii) 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 unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these:


(i) the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible;

(ii) 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 unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these:


(i) the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and

(ii) 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.

40-35(4)  
Sections 40-95 and 40-110 of the new Act do not apply to the unrecouped expenditure.

40-35(5)  
If either:


(a) both of these subparagraphs apply:


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

(ii) in an income year (the cessation year ) you stop holding the real asset, or stop using it for a taxable purpose; or


(b) both of these subparagraphs apply:


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

(ii) in 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 real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.

40-35(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.

40-35(7)  


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.

40-35(8)  


Subsection (6) also applies to a case where:


(a) you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and


(b) that expenditure relates to property that is not a depreciating asset (the other property ); and


(c) after that day, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose.

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.

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.

SECTION 40-40   Transport expenditure  

40-40(1)  
This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330-H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001.

40-40(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 an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and


(b) it has a cost equal to the total amount of transport capital expenditure under the former Act; and


(c) in applying the formula in section 40-75 of the new Act for your income year in which 1 July 2001 occurs - you use the adjustments in subsection 40-75(3) of the new Act; and


(ca) it is taken to have been used for a taxable purpose at the start of 1 July 2001; and


(d) it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330-395 of the former Act; 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.

40-40(3)  
Sections 40-95 and 40-110 of the new Act do not apply to the expenditure.

40-40(4)  
If either:


(a) both of these subparagraphs apply:


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

(ii) in an income year (the cessation year ) you stop holding the real asset, or stop using it for a taxable purpose; or


(b) both of these subparagraphs apply:


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

(ii) in 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 real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.

40-40(5)  
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.

40-40(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 (4) 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 (4) 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.

SECTION 40-43   Post-30 June 2001 transport expenditure  

40-43(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 transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330-H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and


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

40-43(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 your 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 have been used for a taxable purpose when you incur the expenditure; and


(d) it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330-395 of the former Act; 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.

40-43(3)  
Sections 40-95 and 40-110 of the new Act do not apply to the expenditure.

40-43(4)  
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.

40-43(5)  
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.

SECTION 40-44   No additional decline in certain cases  

40-44(1)  
Despite subsections 40-35(5), 40-38(5) and 40-40(4), there is no additional decline in the value of the notional asset referred to in those subsections if:


(a) apart from this section, subsection 40-35(5), 40-38(5) or 40-40(4) would apply because the real asset referred to in that subsection is disposed of; and


(b) roll-over relief is chosen under subsection 40-340(3) of the Income Tax Assessment Act 1997 for the disposal.

40-44(2)  
Instead, the cost to the transferee of that real asset is the sum of:


(a) the adjustable value of that real asset; and


(b) the adjustable value of the notional asset referred to in subsection 40-35(5), 40-38(5) or 40-40(4);

just before the disposal.

SECTION 40-45   Intellectual property  

40-45(1)  
This section applies to you if:


(a) at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373-35 of the former Act; and


(b) you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day.

40-45(2)  
Division 40 of the new Act applies to the item on this basis:


(a) it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and


(b) its cost is its original unrecouped expenditure under the former Act; and


(c) its effective life is the same as it had under the former Act; and


(d) you must use the prime cost method.

Note:

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

SECTION 40-47   IRUs  

40-47(1)  
Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time ).

40-47(2)  
Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time.

SECTION 40-50   Forestry roads and timber mill buildings  

40-50(1)  
This section applies to you if:


(a) you have deducted or can deduct an amount under Subdivision 387-G of the former Act for an amount (the qualifying amount ) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and


(b) you hold the road or building at the end of 30 June 2001.

40-50(2)  
Division 40 of the new Act applies to the asset on this basis:


(a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and


(b) in applying the formula in section 40-75 of the new Act for your income year in which 1 July 2001 occurs - you use the adjustments in subsection 40-75(3) of the new Act; and


(c) its cost is the qualifying amount; and


(d) it has an effective life equal to the remaining life you last estimated for it under the former Act; and


(e) you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and


(f) you must use the prime cost method.

Note:

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

SECTION 40-55   Environmental impact assessment  

40-55(1)  
This section applies to you if you have deducted or can deduct an amount under Subdivision 400-A of the former Act for an amount (the qualifying amount ) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400-A of the former Act.

40-55(2)  
Division 40 of the new Act applies to the qualifying amount as if it were a depreciating asset on this basis:


(a) it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and


(b) it has a cost equal to the qualifying amount; and


(c) it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400-15(3) of the former Act; and


(d) you must use the prime cost method.

Note:

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

SECTION 40-60   Pooling under Subdivision 42-L of the former Act  

40-60(1)  
Units of plant that you had allocated to a pool under Subdivision 42-L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act.

40-60(2)  
Division 40 of the new Act applies to the single depreciating asset on this basis:


(a) its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and


(b) you must use the diminishing value method; and


(c) in applying the formula in section 40-70 of the new Act for your income year in which 1 July 2001 occurs - it has a base value equal to that opening adjustable value; and


(d) you replace the component in the formula in subsection 40-70(1) of the new Act that includes an asset's effective life with the pool percentage you were using for the pool; and


(e) if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40-115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and


(f) if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset.

Note:

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

40-60(3)  
An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item).

Note 1:

You work out the decline in value of an item removed under this subsection under Subdivision 40-B of the new Act, using the cost for it worked out under section 40-205 of the new Act.

Note 2:

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

SECTION 40-65   Substituted accounting periods  

40-65(1)  
This section sets out special rules for the application of Division 40 of the new Act to an entity that:


(a) has a substituted accounting period; and


(b) because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset.

40-65(2)  
The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year ) in this way:


(a) the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and


(b) the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section.

40-65(3)  
The asset's opening adjustable value for the purposes of Division 40 of the new Act is:


(a) for a unit of plant (including IRUs and expenditure on software that is not pooled) - its undeducted cost at the end of 30 June 2001; or


(b) for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence - the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or


(c) for transport capital expenditure - the entity's amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or


(d) for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine - the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or


(e) for expenditure on evaluating the impact on the environment of a project - the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or


(f) for assets that were pooled under Subdivision 42-M or 42-L of the former Act - the closing balance of the pool at the end of 30 June 2001.

40-65(4)  
The asset's base value for applying the formula in section 40-70 of the new Act for the diminishing value method is that opening adjustable value.

40-65(5)  
The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40-75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way:


(a) for an item of plant for which you were using the prime cost method - using the rules in section 40-10 of this Act; and


(b) for an IRU for which you were using the prime cost method - using the rules in section 40-20 of this Act; and


(c) for a unit of software for which the entity was deducting amounts under Subdivision 46-B of the former Act - using the rules in subsection 40-25(2) of this Act; and


(d) for a spectrum licence - using the rules in section 40-30 of this Act; and


(e) for an item of intellectual property - using the rules in section 40-45 of this Act; and


(f) for an amount of expenditure on evaluating the impact on the environment of a project - using the rules in section 40-55 of this Act.

40-65(6)  
The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40-75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way:


(a) for an amount of unrecouped expenditure under Division 330 of the former Act - using the rules in section 40-35 of this Act; and


(b) for an amount of transport capital expenditure under Division 330 of the former Act - using the rules in section 40-40 of this Act; and


(c) for a forestry road or timber mill building - using the rules in section 40-50 of this Act.

40-65(7)  
The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act.

40-65(8)  
The entity must, in working out its deductions under this section for the calculation year for:


(a) allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330-C of the former Act; or


(b) transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330-H of the former Act; or


(c) a water facility for which the entity had deducted or can deduct an amount under Subdivision 387-B of the former Act; or


(d) expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387-E of the former Act; or


(e) expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387-E of the former Act;

reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365.

40-65(9)  
The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001.

40-65(10)  
You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount ) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount ).

40-65(11)  
You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount.

SECTION 40-67   Methods for working out decline in value  

40-67(1)  
Subsections 40-65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened:


(a) you have deducted one or more amounts under former section 73BA of the Income Tax Assessment Act 1936 for an asset;


(b) you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act.

40-67(2)  
Assume:


(a) paragraph 40-65(6)(a) of the Income Tax Assessment Act 1997 included both eventsset out in subsection (1) of this section; and


(b) subsections 40-65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events.

SECTION 40-70   References to amounts deducted and reductions in deductions  

40-70(1)  
A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936.

40-70(2)  


An amount you have deducted or can deduct for a water facility under Subdivision 387-B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40-F of the new Act.

40-70(3)  
A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936.

SECTION 40-72   New diminishing value method not to apply in some cases  

40-72(1)  
If:


(a) you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40-115 (about splitting a depreciating asset) or 40-125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and


(b) it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40-72 of that Act;

that Act applies to you as if you had started to hold the split or merged asset or assets before 10 May 2006.

40-72(2)  
The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if:


(a) you had actually started to hold it before that day; and


(b) on or after 10 May 2006, you stop holding the depreciating asset; and


(c) it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40-72 of that Act.

40-72(3)  
The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset ) before 10 May 2006 if:


(a) you started to hold the substituted asset on or after that day under an arrangement; and


(b) the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and


(c) you did not deal with the other entity at arm's length; and


(d) it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40-72 of that Act.

SECTION 40-75   Mining expenditure incurred after 1 July 2001 on an asset  

40-75(1)  
This section applies to you if:


(a) you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you:


(i) started to hold under a contract entered into before 1 July 2001; or

(ii) constructed where the construction started before that day; or

(iii) started to hold in some other way before that day; and


(b) your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001.

40-75(2)  
If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct theexpenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act.

40-75(3)  
Otherwise, Subdivision 40-B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section.

40-75(4)  
The effective life of the depreciating asset is the shorter of its effective life worked out under Division 40 and:


(a) if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining - the shorter of:


(i) 10 years; and

(ii) the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or


(b) if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining - the shorter of:


(i) 10 years; and

(ii) the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or


(c) if the expenditure on the asset was incurred in relation to eligible quarrying operations - the shorter of:


(i) 20 years; or

(ii) the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life.

SECTION 40-77   Mining, quarrying or prospecting rights or information held before 1 July 2001  

40-77(1)  
Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001.

Note:

If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3-1 or 3-3 of the Income Tax Assessment Act 1997.

40-77(1A)  


Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001.

40-77(1B)  


Subsection (1) applies to a mining, quarrying or prospecting right (the new right ) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if:


(a) you started to hold another mining, quarrying or prospecting right before that day; and


(b) the other right ends on or after that day; and


(c) the new right and the other right relate to the same area, or any difference in area is not significant.

40-77(1C)  


Division 40 of the new Act does not apply to a mining, quarrying or prospecting right if:


(a) a company (the original holder ) started to hold the right before 1 July 2001; and


(b) the right is transferred after that day to another company where:


(i) the other company is a member of the same wholly-owned group as the original holder and was a member of that group just before that day; and

(ii) the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer.

40-77(1D)  


Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if:


(a) you acquired the interest under an interest realignment arrangement; and


(b) the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001.

40-77(1E)  


If:


(a) you acquired, under an interest realignment arrangement, an interest (a new interest ) in a mining, quarrying or prospecting right; and


(b) the interest was acquired in exchange for one or more other interests ( old interests ) in other mining, quarrying or prospecting rights; and


(c) you started to hold some of the old interests before 1 July 2001;

Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001.

40-77(2)  
If, after 30 June 2001:


(a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly-owned group); or


(b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership;

the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act.

40-77(3)  
An amount that would be included in your assessable income under section 15-40 or subsection 40-285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that:


(a) you have not deducted and cannot deduct (either immediately or over time) under the former Act; and


(b) did not form part of allowable capital expenditure under the former Act; and


(c) did not entitle you to a deduction under section 330-235 of the former Act;

but only to the extent that you have not already applied the amount under this section.

40-77(4)  


Your assessable income includes an amount if:


(a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and


(b) you have deducted or can deduct an amount for it under Subdivision 330-C in relation to Subdivision 330-D or 330-E of the former Act.

The amount included is the amount you have deducted or can deduct.

40-77(5)  


Your assessable income also includes an amount if:


(a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and


(b) because of section 40-35 or 40-38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act.

The amount included is the amount you have deducted or can deduct.

40-77(6)  


Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3-1 and 3-3 and Division 243.

40-77(7)  


An amount that would be included in your assessable income under subsection 40-285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if:


(a) you acquired the right from an associate (except a company that is a member of the same wholly-owned group) on or after 1 July 2001; and


(b) the associate started to hold the right before that day.

40-77(8)  


The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section.

SECTION 40-80   Other expenditure incurred after 1 July 2001 on a depreciating asset  

40-80(1)  
This section applies to you if:


(a) you incur expenditure after 30 June 2001 that forms part of the cost of a depreciating asset; and


(b) the depreciating asset is one that you:


(i) started to hold under a contract entered into before 1 July 2001; or

(ii) constructed where the construction started before that day; or

(iii) started to hold in some other way before that day; and


(c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46-B or 387-G, of the former Act.

40-80(2)  
Subdivision 40-B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001.


SECTION 40-95   Accelerated depreciation for split or merged plant  

40-95  
(Repealed by No 58 of 2006)

SECTION 40-100   40-100   Commissioner's determination of effective life  
A determination by the Commissioner of the effective life of an asset that was made under section 42-110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40-100 of the new Act.

SECTION 40-105   Calculations of effective life  

40-105(1)  
This section applies to the following (the instrument ):


(a) a determination under section 40-100 of the Income Tax Assessment Act 1997 of the effective life of an asset;


(b) a calculation under section 40-105 of that Act of the effective life of an asset;

if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011.

40-105(2)  
The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011.

Subdivision 40-C - Cost  

SECTION 40-230   Car limit  

40-230(1)  
Division 40 of the new Act applies as if references in that Division to the car limit included references to:


(a) the car depreciation limit under Division 42 of the former Act; and


(b) the motor vehicle depreciation limit under former section 57AF of the Income Tax Assessment Act 1936.

40-230(2)  
If you:


(a) have a substituted accounting period; and


(b) start to hold a car in your 2001-02 income year but before 1 July 2001;

you must use as the car limit the car depreciation limit under section 42-80 of the former Act for the 2000-01 financial year.

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 candeduct 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).

SECTION 40-287   Disposal of pre-1 July 2001 mining depreciating asset to associate  

40-287(1)  
This section applies if:


(a) on or after 1 July 2001, a company (the transferor ) disposes of a depreciating asset to another company; and


(b) the companies are members of the same linked group at the time of the disposal; and


(c) apart from this section, the disposal would have resulted in:


(i) an amount (the included amount ) being included in the assessable income of the transferor under subsection 40-285(1) of the Income Tax Assessment Act 1997; and

(ii) the transferor having an additional decline in value (the deductible amount ) under subsection 40-35(5), 40-38(5) or 40-40(4) of this Act; and


(d) the included amount is more than the deductible amount.

40-287(2)  
Subsection 40-35(5), 40-38(5) or 40-40(4) of this Act does not apply to the disposal.

40-287(3)  
The amount that is included in the transferor's assessable income under subsection 40-285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount.

SECTION 40-288   Disposal of pre-1 July 2001 mining non-depreciating asset to associate  

40-288(1)  
This section applies if:


(a) on or after 1 July 2001, a company (the transferor ) disposes of property that is not a depreciating asset to another company; and


(b) the companies are members of the same linked group at the time of the disposal; and


(c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount ) under subsection 40-35(5), 40-37(5), 40-40(4) or 40-43(4) of this Act; and


(d) the sum of:


(i) the money the transferor receives, or is entitled to receive, in respect of the disposal; and

(ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal;
is more than the deductible amount.

40-288(2)  
There is no additional decline in value of the notional asset referred to in subsection 40-35(5), 40-37(5), 40-40(4) or 40-43(4) as a result of the disposal.

40-288(3)  
Any amount that would be included in the transferor's assessable income under subsection 40-35(6), 40-37(6), 40-38(6), 40-40(5) or 40-43(5) of this Act, or subsection 40-830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount.

SECTION 40-289   40-289   Surrendered firearms  


If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40-285(1) of the Income Tax Assessment Act 1997.

SECTION 40-290   40-290   Reduction of deductions under former Act etc.  


Subsection 40-290(2) of the new Act has effect in relation to a depreciating asset that you held at 1 July 2001 as if:


(a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40-25 of the new Act; and


(b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936.

SECTION 40-292   Balancing adjustment - assets used for both general tax purposes and R&D activities  

R&D entity has old law R&D decline in value deductions

40-292(1)  
This section applies to an R&D entity if:


(a) a balancing adjustment event happens in an income year (the event year ) commencing on or after 1 July 2011 for an asset held by the R&D entity and:


(i) the R&D entity can deduct, for an income year, an amount under section 40-25 of the Income Tax Assessment Act 1997 (the new Act ), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act ); or

(ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and


(b) either or both of the following subparagraphs apply:


(i) the R&D entity can deduct (the old law deductions ) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset;

(ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions ) under those former sections for one or more income years for the asset.
Note:

This section applies even if the R&D entity is entitled under section 355-100 of the new Act to tax offsets for one or more income years for deductions under section 355-305 of that Act for the asset.

Section 40-290 to be applied as if use for carrying on R&D activities were use for a taxable purpose

40-292(2)  
In applying section 40-290 of the new Act (including references in that section to the reduction of deductions under section 40-25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for:


(a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or


(b) if the R&D entity is entitled under section 355-100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions ) under section 355-305 of that Act for the asset - the purpose of conducting the R&D activities to which the new law deductions relate. Increase in amounts deductible or assessable under section 40-285

40-292(3)  
Any amount (the section 40-285 amount ):


(a) that the R&D entity can deduct for the asset under section 40-285 of the new Act (after applying subsection (2) of this section) for the event year; or


(b) that is included in the R&D entity's assessable income for the asset under section 40-285 of the new Act (after applying subsection (2) of this section) for the event year;

is taken to be increased under section 40-292 of the new Act by the following amount:

formula - amounts deductible

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 the R&D entity's assessable income - so much of the section 40-285 amount as does not exceed the total decline in value.

old law 1.25 rate deductions
means the sum of the R&D entity's notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions.

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

Normal rules do not apply for the asset and the event

40-292(4)  
Neither of the following sections:


(a) section 40-292 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011);


(b) section 40-292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011);

to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event.

Note 1:

The section 40-292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions.

Note 2:

The section 40-292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions.

SECTION 40-293   Balancing adjustment - partnership assets used for both general tax purposes and R&D activities  

Partners have old law R&D decline in value deductions

40-293(1)  
This section applies to an R&D partnership if:


(a) a balancing adjustment event happens in an income year (the event year ) commencing on or after 1 July 2011 for an asset held by the R&D partnership and:


(i) the R&D partnership can deduct, for an income year, an amount under section 40-25 of the Income Tax Assessment Act 1997 (the new Act ), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act ); or

(ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and


(b) either or both of the following subparagraphs apply:


(i) one or more partners of the R&D partnership can deduct (the old law deductions ) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset;

(ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions ) under those former sections for one or more income years for the asset.
Note:

This section applies even if the partners are entitled under section 355-100 of the new Act to tax offsets for one or more income years for deductions under section 355-520 of that Act for the asset.

Section 40-290 to be applied as if use for carrying on R&D activities were use for a taxable purpose

40-293(2)  
In applying section 40-290 of the new Act (including references in that section to the reduction of deductions under section 40-25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for:


(a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or


(b) if one or more partners of the R&D partnership are entitled under section 355-100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions ) under section 355-520 of that Act for the asset - the purpose of conducting the R&D activities to which the new law deductions relate. Increase in amounts deductible or assessable under section 40-285

40-293(3)  
Any amount (the section 40-285 amount ):


(a) that the R&D partnership can deduct for the asset under section 40-285 of the new Act (after applying subsection (2) of this section) for the event year; or


(b) that is included in the R&D partnership's assessable income for the asset under section 40-285 of the new Act (after applying subsection (2) of this section) for the event year;

is taken to be increased under section 40-293 of the new Act by the following amount:

deductible amount

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 the R&D partnership's assessable income - so much of the section 40-285 amount as does not exceed the total decline in value.

old law 1.25 rate deductions
means the sum of the partners' notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions.

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

Normal rules do not apply for the asset and the event

40-293(4)  
Section 40-293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event.

Note:

Section 40-293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions.

SECTION 40-295   Later year relief  

40-295(1)  
You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999-2000 or 2000-01 income year to the extent that you choose under section 42-290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant.

40-295(2)  
You can only make this choice for the replacement plant if:


(a) you acquire it:


(i) within 2 income years after the end of the income year in which the balancing adjustment event occurred; and

(ii) in your 2001-02 or 2002-2003 income year; and


(b) at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and


(c) you can deduct an amount for its decline in value; and


(d) you had not made a choice under section 42-285 or 42-293 of the former Act for the balancing adjustment event.

40-295(3)  
The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it.

SECTION 40-340   Roll-overs  

40-340(1)  
This section applies to an entity (the transferee ) if:


(a) there is roll-over relief under section 40-340 of the new Act as a result of a balancing adjustment event happening to plant; and


(b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40-10(3) or 40-12(3) of this Act.

Plant acquired before 21 September 1999

40-340(2)  
The transferee works out the decline in value of the plant under subsection 40-10(3) or 40-12(3) of this Act using the same method as the transferor if:


(a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or


(b) the transferor constructed it and the construction started at or before that time; or


(c) the transferor acquired it in some other way at or before that time; or


(d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40-10(3) or 40-12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor.

Small business taxpayers

40-340(3)  
The transferee also works out the decline in value of the plant under subsection 40-10(3) or 40-12(3) of this Act using the same method as the transferor if:


(a) the plant was not acquired as mentioned in subsection (2); and


(b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42-160(1) or 42-165(1) of the former Act; and


(c) the conditions set out in this table are satisfied:


Conditions for small business taxpayers retaining accelerated rates
Item Condition
1 The transferee must have been a small business taxpayer for the income year (the start year ) that includes the time when the entity first used the plant, or first had it installed ready for use.
.
2 At that time, at least 50% of the transferee's intended use of the plant must be in carrying on a business for the purpose of producing assessable income.
.
3 At that time, neither of these applies:
(a) it could reasonably be expected that, because of the plant's use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;
(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection (5).

40-340(4)  
For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership.

40-340(5)  
A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short-term hire agreement.

40-340(6)  
The transferee works out the decline in value of the plant by:


(a) for the diminishing value method - replacing the component in the formula in subsection 40-70(1) of the new Act that includes the plant's effective life with the rate the transferor, or the earliest successive transferor, was using; or


(b) for the prime cost method:


(i) replacing the component in the formula in subsection 40-75(1) of the new Act that includes the plant's effective life with the rate the transferor, or the earliest successive transferor, was using; and

(ii) increasing the plant's cost under Division 42 of the former Act by any amounts included in the second element of the plant's cost after 30 June 2001.
Meaning of small business taxpayer

40-340(7)  
An entity is a small business taxpayer for an income year if:


(a) the entity carries on a business in that year; and


(b) the entity's average turnover for that year is less than $1,000,000.

Note:

An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).

Meaning of average turnover

40-340(8)  
An entity's average turnover for an income year (the current year ) is:


Sum of relevant group turnovers
Number of averaging years

where:

number of averaging years
is:


(a) 3; or


(b) if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business.

Note:

An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).

sum of relevant group turnovers
is the sum of:


(a) the entity's group turnover for the current year; and


(b) the entity's group turnover (if any) for the 2 preceding income years.

Meaning of group turnover

40-340(9)  


The group turnover of an entity (the primary entity ) for an income year is the sum of:


(a) the value of the business supplies the primary entity made in the income year; and


(b) the value of the business supplies entities connected with the primary entity madein the income year;

reduced by:


(c) that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and


(d) that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and


(e) that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity.

Value of business supplies

40-340(10)  


The value of the business supplies an entity makes in an income year is the sum of:


(a) for taxable supplies (if any) the entity makes during the year in the course of carrying on a business - the value (as defined by section 9-75 of the GST Act) of the supplies; and


(b) for other supplies the entity makes during the year in the course of carrying on a business - the prices (as defined by section 9-75 of the GST Act) of the supplies.

Winding up a business

40-340(11)  


Subsections (7) and (8) apply to an entity as if it carried on a business in an income year if:


(a) in that year the entity was winding up a business it previously carried on; and


(b) the entity was a small business taxpayer for the income year in which it stopped carrying on that business.

SECTION 40-345   Balancing adjustments for depreciating assets that retain CGT indexation  

40-345(1)  
The amount included in your assessable income under subsection 40-285(1) or 104-240(1) of the new Act as a result of a balancing adjustment event occurring for:


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


(b) a depreciating asset that is not plant and that you acquired before 1 July 2001;

is reduced (but not below nil) if:


(c) for a paragraph (a) case - there would have been a reduction under subsection 42-192(2) of the former Act as a result of that event; or


(d) for a paragraph (b) case - there would have been a reduction under subsection 42-192(2) of the former Act as a result of that event if the asset were plant.

40-345(2)  
The amount of the reduction is the amount worked out under subsection 42-192(2) of the former Act.

40-345(3)  
There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104-240(1) if the balancing adjustment event results in a discount capital gain under Division 115.

40-345(4)  
However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain.

40-345(5)  
Subsection (6) applies to an entity (the transferee ) if there is roll-over relief under section 40-340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee.

40-345(6)  
Subsections (1), (2), (3) and (4) apply also to the transferee if:


(a) for a depreciating asset that is plant:


(i) the transferor referred to in section 40-340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or

(ii) the transferor constructed it and the construction started at or before that time; or

(iii) the transferor acquired it in some other way at or before that time; or

(iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40-10(3) or 40-12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or


(b) for a depreciating asset that is not plant:


(i) the transferor started to hold the asset under a contract entered into before 1 July 2001; or

(ii) the transferor constructed it and the construction started at or before that day; or

(iii) the transferor acquired it in some other way before that day.

SECTION 40-365   40-365   Involuntary disposals  


Section 40-365 of the new Act applies to a case where:


(a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42-293(2) of the former Act before 1 July 2001; and


(b) you start to hold a replacement asset or assets after that day; and


(c) the conditions in subsections 40-365(3) and (4) of the new Act are satisfied.

Subdivision 40-E - Low-value and software development pools  

SECTION 40-420   Low-value pools under Division 42 continue  

40-420(1)  
A low-value pool you created under Subdivision 42-M of the former Act continues under the new Act as if it had been created under Subdivision 40-E of the new Act.

40-420(2)  
For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40-440(1) of the new Act applies to the pool closing balance, worked out under section 42-470 of the former Act, for the income year before that year.

SECTION 40-425   40-425   Allocating depreciating assets to low-value pools  
(Repealed by No 119 of 2002)

SECTION 40-430   40-430   Allocating assets to low-value pools  


For the purposes of Subdivision 40-E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low-value pool if:


(a) you can deduct an amount for the asset under former section 73BA of the Income Tax Assessment Act 1936; or


(b) you could so deduct an amount if you had not chosen a tax offset under former section 73I of that Act;

for a period before, or starting at the same time as, the allocation has effect.

SECTION 40-450   40-450   Software development pools  


Subsection 40-450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act.

Subdivision 40-F - Primary production depreciating assets  

SECTION 40-515   Water facilities, grapevines and horticultural plants  

40-515(1)  
This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount ) of expenditure on any of these (the primary production asset ):


(a) the construction, manufacture, installation or acquisition of a water facility; or


(b) the establishment of horticultural plants; or


(c) the establishment of grapevines;

and you would have been able to deducts amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply.

40-515(2)  
Subdivision 40-F of the new Act applies to the primary production asset on this basis:


(a) the qualifying amount is taken to be:


(i) for a water facility - the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or

(ii) for a horticultural plant or a grapevine - the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and


(b) for horticultural plants, you use the effective life determined under section 387-175 of the former Act; and


(c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40-F of the new Act.

SECTION 40-520   Special rule for water facilities you no longer hold  

40-520(1)  
This section applies to you if:


(a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount ) of expenditure on a water facility; and


(b) you do not hold the water facility at the start of 1 July 2001.

40-520(2)  
Subdivision 40-F of the new Act applies to the water facility on the basis specified in subsection 40-515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act.

SECTION 40-525   40-525   Amounts deducted for water facilities  


The reference in subsection 40-555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40-F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under:


(a) Subdivision 387-B of the former Act; or


(b) former section 75B of the Income Tax Assessment Act 1936.

Subdivision 40-G - Capital expenditure of primary producers and other landholders  

SECTION 40-645   Electricity supply and telephone lines  

40-645(1)  
This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount ) of expenditure on:


(a) connecting or upgrading the supply of mains electricity to land; or


(b) a telephone line on land;

and you hold the land to which the electricity or telephone line relates at the start of 1 July 2001.

40-645(2)  
You deduct amounts for the qualifying amount under Subdivision 40-G of the new Act in the same way you were writing it off under Division 387 of the former Act.

40-645(3)  
A reference in subsection 40-650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40-G of that Act includes a reference to an amount being deducted under:


(a) Subdivision 387-F of the former Act; or


(b) former section 70 of the Income Tax Assessment Act 1936.

SECTION 40-650   Special rule for land that you no longer hold  

40-650(1)  
This section applies to you if:


(a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount ) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and


(b) you do not hold the land to which the electricity or telephone line relates at the start of 1 July 2001.

40-650(2)  
Subdivision 40-G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act.

SECTION 40-670   40-670   Farm consultants  


A person approved as a farm consultant under Subdivision 387-A of the former Act is taken to be approved as a farm consultant under section 40-670 of the new Act.

Subdivision 40-I - Capital expenditure that is deductible over time  

SECTION 40-825   40-825   Genuine prospectors  


The exemption provided by section 330-60 of the former Act continues to apply to ordinary income derived before 20 August 2001.

SECTION 40-832   40-832   New method not to apply in some cases  


If:


(a) on or after 10 May 2006 you abandon, sell or otherwise dispose of a project; and


(b) you have deducted or can deduct amounts for project amounts in relation to that project; and


(c) on or after that day, you start to operate that project again; and


(d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40-832 of that Act;

the Income Tax Assessment Act 1997 applies to you as if the project had started to operate before 10 May 2006.

Subdivision 40-J - Ships depreciated under section 57AM of the Income Tax Assessment Act 1936  

SECTION 40-830   Ships depreciated under section 57AM of the Income Tax Assessment Act 1936  

40-830(1)  
This section applies if:


(a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and


(b) you hold the ship when this section commences.

40-830(2)  
Division 40 of the Income Tax Assessment Act 1997 applies to the ship after the commencement of this section.

40-830(3)  
For the purposes of that application:


(a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and


(b) the ship's adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and


(c) paragraphs 40-285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship's decline in value under Subdivision 40-B of the Income Tax Assessment Act 1997.

Division 43 - Deductions for capital works  

SECTION 43-100   43-100   Application of Division 43 to quasi-ownership rights over land  
Division 43 of the Income Tax Assessment Act 1997 applies to quasi-ownership rights over land granted in respect of:


(a) capital works being a hotel building or an apartment building begun after 30 June 1997; and


(b) other capital works begun after 26 February 1992.

SECTION 43-105   43-105   Application of subsections 43-50(1) and (2) to hotel buildings and apartment buildings  
Subsections 43-50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997.

SECTION 43-110   43-110   Application of subsection 43-75(3)  
Subsection 43-75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997.

Division 45 - Disposal of leases and leased plant  

SECTION 45-1   45-1   Application of Division 45 of the Income Tax Assessment Act 1997  


Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years.

SECTION 45-3   Application of Division 45 to disposals between February 1999 and September 1999  

45-3(1)  
For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section.

45-3(2)  
That Division applies as if subsection 45-5(2) were replaced by this provision:


(2)
The amount included is the lesser of:


(a) the excess referred to in paragraph (1)(e); and


(b) the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest.

It is included for the income year in which the disposal occurred.

45-3(3)  
That Division applies as if paragraph 45-5(5)(a) were replaced by this provision:


(a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3-1 and 3-3 (about capital gains and losses); or

45-3(4)  
That Division applies as if subsection 45-10(2) were replaced by this provision:


(2)
The amount included is the lesser of:


(a) the excess referred to in paragraph (1)(f); and


(b) that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount ) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest.

It is included for the income year in which the disposal occurred.

45-3(5)  
That Division applies as if paragraph 45-10(5)(a) were replaced by this provision:


(a) it is included in that assessable income under a provision of this Act outside this Division and Parts 3-1 and 3-3 (about capital gains and losses); or

45-3(6)  
That Division applies as if this section were added at the end of that Division:

SECTION 45-40 Application of Division to plant formerly owned by exempt entities  


45-40(1)
There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3).


Consequences for transition entities
Item In this situation: There are these consequences:
1 The entity chooses, under section 58-20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant (a) section 45-5 has effect as if paragraph 45-5(2)(b) were omitted and replaced by paragraph 58-85(8)(a); and
(b) section 45-10 has effect as if paragraph 45-10(2)(b) operated on that part of the amount worked out under paragraph 58-85(8)(a) that has been or would be reflected inthe entity's interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.
.
2 The entity chooses, under section 58-20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre-existing audited book value of plant (a) section 45-5 has effect as if paragraph 45-5(2)(b) were omitted and replaced by paragraph 58-145(8)(a); and
(b) section 45-10 has effect as if paragraph 45-10(2)(b) operated on that part of the amount worked out under paragraph 58-145(8)(a) that has been or would be reflected in the entity's interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.


45-40(2)
There are the consequences set out in this table for an entity that:


(a) acquired the plant from a tax exempt vendor in connection with the acquisition of a business; and


(b) disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3).


Consequences for transition entities
Item In this situation: There are these consequences:
1 The entity chooses, under section 58-155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant (a) section 45-5 has effect as if paragraph 45-5(2)(b) were omitted and replaced by paragraph 58-215(3)(a); and
(b) section 45-10 has effect as if paragraph 45-10(2)(b) operated on that part of the amount worked out under paragraph 58-215(3)(a) that has been or would be reflected in the entity's interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.
.
2 The entity chooses, under section 58-155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre-existing audited book value of plant (a) section 45-5 has effect as if paragraph 45-5(2)(b) were omitted and replaced by paragraph 58-270(3)(a); and
(b) section 45-10 has effect as if paragraph 45-10(2)(b) operated on that part of the amount worked out under paragraph 58-270(3)(a) that has been or would be reflected in the entity's interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.


45-40(3)
The entities are:


(a) an exempt entity; or


(b) the trustee of a complying superannuation fund; or


(c) the trustee of a complying approved deposit fund; or


(d) the trustee of a pooled superannuation trust; or


(e) an entity that is not an Australian resident; or


(f) an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division.

Apportionment


45-40(4)
If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45-5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest.


45-40(5)
If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45-10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest.

PART 2-15 - NON-ASSESSABLE INCOME  

Division 50 - Exempt entities  

SECTION 50-1   50-1   Application of Division 50 of the Income Tax Assessment Act 1997  


Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

SECTION 50-50   50-50   Charities established prior to 1 July 1997  


Disregard the use of the following amounts in determining (for the purposes of Subdivision 50-A of the Income Tax Assessment Act 1997) whether a fund established before 1 July 1997 operates and pursues its purposes in Australia:


(a) an amount received by the entity before 1 July 1997;


(b) an amount derived from an amount mentioned in paragraph (a) or this paragraph.

Division 51 - Exempt amounts  

SECTION 51-1   51-1   Application of Division 51 of the Income Tax Assessment Act 1997  


Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

Division 52 - Certain pensions, benefits and allowances are exempt from income tax  

SECTION 52-1   52-1   Application of Division 52 of the Income Tax Assessment Act 1997  


Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

SECTION 52-5   52-5   Application of Subdivision 52-D of the Income Tax Assessment Act 1997  
(Repealed by No 83 of 1999)

Division 53 - Various exempt payments  

SECTION 53-1   53-1   Application of Division 53 of the Income Tax Assessment Act 1997  


Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

Division 54 - Exemption for certain payments made under structured settlements and structured orders  

SECTION 54-1   Application of Division 54 of the Income Tax Assessment Act 1997  

54-1(1)  
Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001-2002 income year and later income years.

54-1(2)  
However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date.

Division 55 - Payments that are not exempt from income tax  

SECTION 55-1   55-1   Application of Division 55 of the Income Tax Assessment Act 1997  


Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

Division 59 - Particular amounts of non-assessable non-exempt income  

Subdivision 59-N - Native title benefits  

SECTION 59-50   59-50   Indigenous holding entities  


Without limiting subsection 59-50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if:


(a) the time occurred:


(i) during an income year starting on or after 1 July 2008; and

(ii) before the commencement of Chapter 2 of the Australian Charities and Not-for-profits Commission Act 2012; and


(b) at that time, the entity was endorsed under Subdivision 50-B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50-5 of that Act, as in force at that time.

PART 2-20 - TAX OFFSETS  

Division 61 - Generally applicable tax offsets  

Subdivision 61-L - Tax offset for Medicare levy surcharge (lump sum payments in arrears)  

SECTION 61-575   61-575   Application of Subdivision 61-L of the Income Tax Assessment Act 1997  


Subdivision 61-L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005-06 income year and later income years.

Division 67 - Refundable tax offset rules  

Subdivision 67-L - Notices of totals of tax offset refunds for 2012-13 income year  

Giving notices

SECTION 67-100   67-100   Notices of total of tax offset refunds  
(Repealed by No 8 of 2019)

SECTION 67-105   67-105   Deemed notices  
(Repealed by No No 8 of 2019)

SECTION 67-110   67-110   Requests for notices  
(Repealed by No 8 of 2019)

SECTION 67-115   67-115   Effect of notices  
(Repealed by No 8 of 2019)

Amending notices

SECTION 67-120   67-120   Amendment of notices  
(Repealed by No 8 of 2019)

Validity of notices, evidence and review

SECTION 67-125   67-125   Validity of notices  
(Repealed by No 8 of 2019)

SECTION 67-130   67-130   Evidence  
(Repealed by No 8 of 2019)

SECTION 67-135   67-135   Review of notices  
(Repealed by No 8 of 2019)

PART 2-25 - TRADING STOCK  

Division 70 - Trading stock  

SECTION 70-1   Application of Division 70 of the Income Tax Assessment Act 1997  

70-1(1)  


Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997-98 income year and later income years.

70-1(2)  
However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act.


Application provisions for specific sections
Item This section of the Income Tax Assessment Act 1997 ... Applies as described in this provision of this Act ...
1 70-20 70-20
.
2 70-55 70-55(1)
.
3 70-70 70-70
.
4 70-90 70-90
.
5 70-95 70-90
.
6 70-100 70-100
.
7 70-105 70-105
.
8 70-115 70-115


SECTION 70-10   Accounting for your disposal of items that stop being trading stock because of the change of definition  

70-10(1)  
This section explains how to account for your disposal of an item during or after the 1997-98 income year if:


(a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and


(b) at no time since that time has the item been an item of your trading stock, as defined in section 70-10 of the Income Tax Assessment Act 1997.

Example:

This section applies to an item you produced, manufactured, acquired or purchased before 1997-98 for manufacture, sale or exchange, but have not held for that purpose at any time since justbefore the start of that year.

If the disposal is outside the ordinary course of business

70-10(2)  
If:


(a) the disposal occurred on or after 1 July 1997; and


(b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997;

sections 70-90 and 70-95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70-10 of the Income Tax Assessment Act 1997).

Note:

This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock.

Additional rule for early balancers

70-10(3)  


If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70-10 of the Income Tax Assessment Act 1997.
Note:

See the note to subsection (2).

Deduction for closing value at end of 1996-97

70-10(4)  
If:


(a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and


(b) the item's value was taken into account at the end of the 1996-97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936;

you can deduct for the income year of the disposal the item's value as so taken into account.

Note:

This deduction offsets the effect of the item's value not having been taken into account under Subdivision 70-C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal.

SECTION 70-20   70-20   Application of section 70-20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997  


Section 70-20 (Non-arm's length transactions) of the Income Tax Assessment Act applies to purchases that take place on or after 1 July 1997.

SECTION 70-35   70-35   Transitional provision for partnerships with live stock  
(Repealed by No 101 of 2006)

SECTION 70-40   70-40   Value of trading stock at the start of the 1997-98 income year  
(Repealed by No 101 of 2006)

SECTION 70-41   70-41   Value of trading stock at the start of the 2001-2002 income year - oysters acquired by using the traditional stick farming method  
(Repealed by No 101 of 2006)

SECTION 70-55   Cost of live stock acquired by natural increase  

70-55(1)  
Section 70-55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997-98 income year.

70-55(2)  


For the purposes of Subdivision 70-C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997-98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936.

70-55(3)  
For the purposes of Subdivision 70-C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997-98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership's net income or partnership loss for an earlier income year:


(a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners;


(b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal's actual cost price if no minimum was prescribed.

Note 1:

Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner's share of the partnership's net income or partnership loss for income years before the 1997-98 income year.

Note 2:

Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997-98 income year.

SECTION 70-70   Valuing interests in FIFs on hand at the start of 1991-92  

70-70(1)  


If:


(a) an interest in a FIF was an item of your trading stock on hand at the start of the 1991-92 income year; and


(b) that interest was also an item of your trading stock on hand at the end of the 1997-98 income year or a later income year;

the value of the item at the end of the 1997-98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991-92 income year.

70-70(2)  
This section has effect despite section 70-45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70-70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. Effect of election under former subsection 31(5) of the Income Tax Assessment Act 1936 on valuation of interests in FIFs

70-70(3)  


If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70-70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70-70(2).

SECTION 70-90   70-90   Application of sections 70-90 and 70-95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business  


Sections 70-90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70-95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997.

SECTION 70-100   Application of section 70-100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business  

Basic application

70-100(1)  
Section 70-100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. Transitional provision if that section affects an assessment for 1996-97

70-100(2)  
The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70-C of the Income Tax Assessment Act 1997) if:


(a) that section affects an assessment for the 1996-97 year of income under the Income Tax Assessment Act 1936; and


(b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity.

Note:

Section 70-100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996-97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996-97 income year ending on or after 1 July 1997.

SECTION 70-105   Application of section 70-105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997  

70-105(1)  
Section 70-105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. Transitional provision if that section affects an assessment for 1996-97

70-105(2)  
The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70-C of the Income Tax Assessment Act 1997) if:


(a) that section affects an assessment for the 1996-97 year of income under the Income Tax Assessment Act 1936; and


(b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value.

Note:

Section 70-105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996-97 income year if an entity on which the item devolves has a 1996-97 income year ending on or after 1 July 1997.

SECTION 70-115   70-115   Application of section 70-115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997-98 and later income years  


Section 70-115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997-98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997-98 income year.
View history note View history note

PART 2-40 - RULES AFFECTING EMPLOYEES AND OTHER TAXPAYERS RECEIVING PAYG WITHHOLDING PAYMENTS  

Division 82 - Pre-10 May 2006 entitlements to life benefit termination payments  

Subdivision 82-A - Application of Division  

SECTION 82-10   Pre-10 May 2006 entitlements - transitional termination payments  

82-10(1)  
This Division applies in relation to a life benefit termination payment received by you on or after 1 July 2007 if:


(a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and


(b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006.

82-10(2)  
However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82-E).

82-10(3)  
This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment.

82-10(4)  
For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following:


(a) by a method or formula for working out the amount;


(b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection.

Example:

For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company.

Note:

Section 80-15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given).

82-10(5)  
To the extent that this Division applies to a life benefit termination payment, Subdivision 82-A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82-E of this Act).

82-10(6)  
In this Division:

transitional termination payment
means:


(a) a life benefit termination payment to which this Division applies; or


(b) if this Division applies to only part of a life benefit termination payment - that part of the payment.

Subdivision 82-B - Transitional termination payments: general  

SECTION 82-10A   Recipient has reached preservation age  

Application

82-10A(1)  
This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment.

Note 1:

You do not pay income tax on directed termination payments: see section 82-10G.

Note 2:

Under section 82-10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age.

Tax free component

82-10A(2)  
The tax free component of the payment is not assessable income and is not exempt income. Taxable component

82-10A(3)  
The taxable component of the payment is assessable income.

82-10A(4)  
You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part ) does not exceed 15%.

82-10A(5)  
You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part ) does not exceed 30%.

Note:

The remaining part is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

82-10A(6)  
The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82-10B.

82-10A(7)  
The middle rate part is so much of the taxable component of the payment as:


(a) exceeds your low rate part (if any); and


(b) does not exceed the amount worked out as follows:


Your upper cap amount under
section 82-10D
- Your lower cap amount under
section 82-10B

Note:

If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82-10 of the Income Tax Assessment Act 1997).

SECTION 82-10B   Lower cap amount  

Initial lower cap amount is the ETP cap for the income year

82-10B(1)  
Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section.

Note:

For the ETP cap amount, see section 82-160 of the Income Tax Assessment Act 1997.

Reduction of lower cap amount in relation to each payment

82-10B(2)  
Reduce your lower cap amount in relation to the payment (but not below zero):


(a) by the amount (if any) (the cap excess ) worked out under subsection (3); and


(b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82-10A(4).

82-10B(3)  
For paragraph (2)(a), the cap excess is worked out using this method: Method statement


Step 1.

Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age.


Step 2.

Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later.


Step 3.

Work out the amount (the cap difference ) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies.


Step 4.

The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3.

Directed termination payments - time of receipt when received by entity to which they are directed

82-10B(4)  
For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. ETP cap not to be reduced under section 82-10 of the Income Tax Assessment Act 1997

82-10B(5)  
For the purposes of this section, disregard any reduction of the ETP cap amount under section 82-10 of the Income Tax Assessment Act 1997.

SECTION 82-10C   Recipient under preservation age  

Application

82-10C(1)  
This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment.

Note:

You do not pay income tax on directed termination payments: see section 82-10G.

Tax free component

82-10C(2)  
The tax free component of the payment is not assessable income and is not exempt income. Taxable component

82-10C(3)  
The taxable component of the payment is assessable income.

82-10C(4)  
You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%.

Note:

The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

82-10C(5)  
The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82-10D.

Note:

If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82-10 of the Income Tax Assessment Act 1997).

SECTION 82-10D   Upper cap amount  

Initial upper cap amount is $1,000,000

82-10D(1)  
Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. Reduction of upper cap amount for each payment

82-10D(2)  
Reduce your upper cap amount in relation to the payment (but not below zero):


(a) by the total of all the amounts (if any) included in your assessable income under subsection 82-10C(3) and subsection 82-10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and


(b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year).

Directed termination payments - time of receipt when received by entity to which they are directed

82-10D(3)  
For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment.

Subdivision 82-C - Pre-payment statements  

SECTION 82-10E   Transitional termination payments - pre-payment statements  

82-10E(1)  
This section applies if an entity (the payer ) proposes to pay a transitional termination payment to an individual.

82-10E(2)  
The payer must give the individual a statement (a pre-payment statement ) meeting the requirements of this section.

82-10E(3)  
The statement must include the following information:


(a) the amount (if any) that would be the tax free component of the transitional termination payment;


(b) the amount (if any) that would be the taxable component of the transitional termination payment;


(c) any other information specified in the regulations.

82-10E(4)  
The statement must also include details of the opportunity to make a choice in accordance with section 82-10F.

Subdivision 82-D - Directed termination payments made to superannuation and other entities  

SECTION 82-10F   Directed termination payments  

82-10F(1)  
A transitional termination payment (or part of such a payment) is a directed termination payment if:


(a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and


(b) the payment (or part of the payment) is made on the individual's behalf as directed. Choice to make payment

82-10F(2)  
An individual may choose, within 30 days after a pre-payment statement about a transitional termination payment is given to the individual under section 82-10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual:


(a) to a complying superannuation plan; or


(b) to purchase a superannuation annuity.

82-10F(3)  
To make the choice, the individual must:


(a) make it in the approved form; and


(b) give the completed form to the payer.

82-10F(4)  
The payer must, immediately after receiving a completed form under subsection (3):


(a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and


(b) comply with the direction (or directions) in the form.

SECTION 82-10G   82-10G   Directed termination payments not assessable income and not exempt income  


A directed termination payment made on your behalf, that you are taken to receive under section 80-20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income.
Note 1:

Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82-10F.

Note 2:

The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295-190 of the Income Tax Assessment Act 1997.

Note 3:

In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301 to 307 of the Income Tax Assessment Act 1997.

Subdivision 82-E - Pre-10 May 2006 entitlements and employment termination payments made after 1 July 2012  

SECTION 82-10H   Transitional termination payments may reduce ETP cap amount for payments under section 82-10 after 1 July 2012  

82-10H(1)  
This section deals with the application of paragraph 82-10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012.

82-10H(2)  
For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount ) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies.

82-10H(3)  
The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82-10A or 82-10C of this Act.

Division 83A - Employee share schemes  

Subdivision 83A-A - Application of Division 83A of the Income Tax Assessment Act 1997  

SECTION 83A-5   Application of Division 83A of the Income Tax Assessment Act 1997  

83A-5(1)  
Division 83A of the Income Tax Assessment Act 1997 applies in relation to an ESS interest if:


(a) the interest was acquired on or after 1 July 2009; and


(b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre-Division 83A time ) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No 2) Act 2009 commenced, ( former Division 13A ) was not acquired (within the meaning of former Division 13A) before 1 July 2009.

83A-5(2)  
Furthermore, Subdivision 83A-C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if:


(a) all of the following subparagraphs apply:


(i) at the pre-Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest;

(ii) the interest was acquired (within the meaning of former Division 13A) before 1 July 2009;

(iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre-Division 83A time, for the interest did not occur before 1 July 2009; or


(b) all of the following subparagraphs apply:


(i) at the pre-Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, ( former section 26AAC ) applied in relation to the interest;

(ii) the interest was acquired (within the meaning of former section 26AAC) before 1 July 2009;

(iii) an amount has not been included in a person's assessable income under former section 26AAC in relation to the interest before 1 July 2009.

83A-5(2A)  


To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre-Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre-Division 83A time.
Note:

Section 139CDA was about shares or rights acquired while engaged in foreign service.

83A-5(3)  
Subsection (2) applies despite section 83A-105 of the Income Tax Assessment Act 1997.

83A-5(4)  
If Subdivision 83A-C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2):


(a) do not include an amount in your assessable income under subsection 83A-110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and


(b) subject to subsection 83A-115(3) or 83A-120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being:


(i) if paragraph (2)(a) of this section applies - the cessation time mentioned in subparagraph (2)(a)(iii); or

(ii) if paragraph (2)(b) applies - the earliest time at which an amount is included in a person's assessable income under former section 26AAC in relation to the interest; and


(c) treat the reference in subsection 83A-115(3) or 83A-120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A-115(2) or 83A-120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and


(d) treat the requirements in paragraphs 83A-310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if:


(i) if paragraph (2)(a) applies - the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre-Division 83A time) are satisfied in relation to the interest; or

(ii) if paragraph (2)(b) applies - the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and


(e) Subdivision 14-C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and


(f) if paragraph (2)(a) applies:


(i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts' net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and

(ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and


(g) if paragraph (2)(b) applies - paragraph 82-135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest.

Subdivision 83A-B - Application of former provisions of the Income Tax Assessment Act 1936  

SECTION 83A-10   Savings - continued operation of former provisions  

83A-10(1)  
This section applies if:


(a) at the time (the pre-Division 83A time ) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No 2) Act 2009 commenced:


(i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, ( former Division 13A ) applied in relation to a share or right (within the meaning of former Division 13A); or

(ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and


(b) if there is a beneficial interest in the share or right that is an ESS interest - Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A-5.

83A-10(2)  
If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right.

83A-10(3)  
If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre-Division 83A time, continue to apply (in spite of their repeal) to the share or right.

SECTION 83A-15   Indeterminate rights  

83A-15(1)  
This section applies if:


(a) you acquired a beneficial interest in a right before 1 July 2009; and


(b) on or after 1 July 2009, the right becomes a right to acquire a beneficial interest in a share.

83A-15(2)  
Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. Amendment of assessments

83A-15(3)  
Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section.

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 102 - Application of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997  

SECTION 102-1   102-1   Application of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997  
Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998-99 income year and later income years.

SECTION 102-5   Working out capital gains and capital losses   General rule

102-5(1)  
In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998-99 income year or a later income year, you use only the provisions of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3-3 of this Act also requires you to use another provision.

Note 1:

This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998-99 income year (except where this Act requires you to use another provision).

Note 2:

In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936).

Note 3:

Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997.

Roll-overs

102-5(2)  
If:


(a) an entity acquired a CGT asset before the start of the 1998-99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll-over under the Income Tax Assessment Act 1936; and


(b) the entity owned the asset just before the start of that income year; and


(c) a CGT event happens in relation to the asset in that income year or a later one;

the provisions of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll-over happened except that the first element of the cost base and reduced cost base of the asset (when the roll-over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936.

SECTION 102-15   Applying net capital losses  

102-15(1)  
In working out whether you have a net capital gain for the 1998-99 income year, the amount of any net capital loss for the 1997-98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936.

102-15(2)  


If you had a net capital loss for the 1997-98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997.
Note:

The way in which capital losses can be applied may be affected by other provisions: see section 102-30 of the Income Tax Assessment Act 1997.

102-15(3)  


If you had a net listed personal-use asset loss for the 1997-98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year.

SECTION 102-20   102-20   Net capital gains, capital gains and capital losses for income years before 1998-99  


For the 1997-98 income year or an earlier income year:

capital gain
has the meaning given by former Part IIIA of the Income Tax Assessment Act 1936.

capital loss
has the meaning given by former Part IIIA of the Income Tax Assessment Act 1936.

net capital gain
has the meaning given by former Part IIIA of the Income Tax Assessment Act 1936.

SECTION 102-25   Transitional capital gains tax provisions for certain Cocos (Keeling) Islands and Norfolk Island assets  

102-25(1)  
If:


(a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and


(b) the entity acquired a CGT asset on or before that day; and


(c) the asset is not a pre-CGT asset; and


(d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person;

then, for the purposes of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997:


(e) the asset is taken to have been acquired by the entity on 30 June 1991; and


(f) the first element of the asset's cost base in the hands of the entity (at the end of that day) is its market value at that time.

Note:

A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936.

102-25(2)  


If:


(a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and


(b) the entity acquired a CGT asset on or before that day; and


(c) the asset is not a pre-CGT asset; and


(d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person;


(e)-(f) (Repealed by No 20 of 2016)

then Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015.

102-25(3)  


Despite Division 121 of the Income Tax Assessment Act 1997, the entity is not required to keep records of:


(a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or


(b) the date of acquisition of an asset in relation to which subsection (2) of this section applies.

102-25(4)  


However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if:


(a) a CGT event happens in relation to the asset; and


(b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset.

Division 104 - CGT events  

Subdivision 104-C - End of a CGT asset  

SECTION 104-25   104-25   Cancellation, surrender and similar endings  


The capital proceeds from an ending referred to in subsection 104-25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997-98 income year or an earlier income year.

Subdivision 104-D - Bringing into existence a CGT asset  

SECTION 104-40   104-40   Granting an option  


A capital gain or capital loss is disregarded if:


(a) you made the capital gain or capital loss for the 1997-98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and


(b) the other entity exercises the option in the 1998-99 income year or a later income year.

Subdivision 104-E - Trusts  

SECTION 104-70   Capital payment before 18 December 1986 for trust interest  

104-70(1)  


Section 104-70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied:


(a) CGT event E4 happens in relation to the unit; and


(b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and


(c) some or all of the payment (the non-assessable part ) was not included in your assessable income; and


(d) some or all of the non-assessable part (the attributable part ) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works).

104-70(2)  
The cost base of the unit or interest is also reduced by the attributable part.

104-70(3)  


Subsection 104-70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936.