Income Tax Assessment Act 1997
Note: A Commissioner ' s Remedial Power (CRP 2017/2) is relevant to this part of the tax law. Taxation Administration (Remedial Power - Small Business Restructure Roll-over) Determination 2017 (F2017L01687) modifies the operation of s 40-340 of the Income Tax Assessment Act 1997 and any other provisions of a taxation law whose operation is affected by the modified operation of s 40-340 in relation to an asset transferred under a small business restructure roll-over (item 8 of the table in s 40-340(1) ).
The operation of the relevant provisions is modified as follows:
If s 40-340 of ITAA 1997 provides for rollover relief in relation to a disposal of a depreciating asset because the condition in item 8 of the table in s 40-340(1) of ITAA 1997 is satisfied in relation to the asset, that section has effect as if it also provided that the disposal of the asset has no direct consequences under the income tax law (other than Div 40 of ITAA 1997).
The modification applies in respect of transfers on or after 8 May 2018.
An entity must treat a modification as not applying to it or any other entity if the modification would produce a less favourable result for it. The Commissioner is empowered by s 370-5 of Sch 1 to the Taxation Administration Act 1953 to make modifications, by legislative instrument, to ensure the law is administered to achieve its intended purpose or object.
You may choose to recalculate the * effective life of a * depreciating asset from a later income year if the effective life you have been using is no longer accurate because of changed circumstances relating to the nature of the use of the asset.
Some examples of changes in circumstances that may result in your recalculating the effective life of a depreciating asset are:
· your use of the asset turns out to be more or less rigorous than you expected (or was anticipated by the Commissioner ' s determination); · there is a downturn in demand for the goods or services the asset is used to produce that will result in the asset being scrapped; · legislation prevents the asset ' s continued use; · changes in technology make the asset redundant; · there is an unexpected demand, or lack of success, for a film.
You must recalculate a * depreciating asset ' s * effective life from a later income year if:
(i) self-assessed its effective life; or
(ii) are using an effective life worked out under section 40-100 (about the Commissioner ' s determination), or 40-102 (about the capped life of certain depreciating assets), and the * prime cost method; or
(iii) are using an effective life because of subsection 40-95(4), (4B), (4C), (5), (5B) or (5C) ; and
(b) its * cost is increased in that year by at least 10%.
You may conclude that the effective life is the same.
For the elements of the cost of a depreciating asset, see Subdivision 40-C .
Paul purchases a photocopier and self-assesses its effective life at 6 years. In a later year he incurs expenditure to increase the quality of the reproductions it makes. He recalculates its effective life, but concludes that it remains the same.
Fiona also purchases a photocopier and self-assesses its effective life at 6 years. In a later year she incurs expenditure to incorporate a more robust paper handling system. She recalculates its effective life, and concludes that it is increased to 7 years.
You must recalculate a * depreciating asset ' s * effective life for the income year in which you started to * hold it if:
(a) you are using an effective life because of subsection 40-95(4) , (4B), (4C), (5), (5B) or (5C); and
(b) the asset ' s * cost is increased after you started to hold it in that year by at least 10%.
Subsections (1), (2) and (3) do not apply to a *depreciating asset that is a *mining, quarrying or prospecting right or *mining, quarrying or prospecting information.
You may choose to recalculate the *effective life of a *mining, quarrying or prospecting right, or *mining, quarrying or prospecting information, from a later income year if the effective life you have been using is no longer accurate:
(a) because of changed circumstances relating to an existing or proposed mine, petroleum field or quarry to which that right or information relates; or
(b) because that right or information now relates to an existing or proposed mine, petroleum field or quarry; or
(c) because that right or information no longer relates to an existing or proposed mine, petroleum field or quarry.
A recalculation under this section must be done using:
(a) if paragraph (b) does not apply - section 40-105 (about self-assessing effective life); or
(b) if the *depreciating asset is a *mining, quarrying or prospecting right or *mining, quarrying or prospecting information:
(i) subsections 40-95(10) and (11) (if the right or information relates to an existing or proposed mine, petroleum field or quarry); or
(ii) subsection 40-95(12) (if the right or information no longer relates to an existing or proposed mine, petroleum field or quarry).
This section does not apply to an intangible * depreciating asset to which an item in the table in subsection 40-95(7) applies.
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