Income Tax Assessment Act 1997



Division 40 - Capital allowances  

Subdivision 40-C - Cost  

Operative provisions

SECTION 40-190   Second element of cost  

The second element is worked out after you start to * hold the * depreciating asset.


The second element is:

(a) the amount you are taken to have paid under section 40-185 for each economic benefit that has contributed to bringing the asset to its present condition and location from time to time since you started to * hold the asset; and

(b) expenditure you incur that is reasonably attributable to a * balancing adjustment event occurring for the asset.

Example 1:

Andrew adds a new tray and canopy to his ute. The materials and labour that go into the addition are economic benefits that Andrew received and that contribute to the ute ' s present condition.

The payments he makes for those economic benefits are included in the second element of the ute ' s cost.

Example 2:

Leonie needed to replace one of her old depreciating assets that was fixed to her land with a new, more efficient one. Leonie paid a contractor a fee to demolish and remove the old asset. This resulted in a balancing adjustment event occurring for the old asset, and the fee forms part of the second element of the cost of the old asset that was demolished.


The second element of the cost may be modified by a later provision in this Subdivision.


Paragraph (2)(b) does not apply to a * balancing adjustment event referred to in item 6 or 11 of the table in subsection 40-300(2) .

However, the second element is worked out using this table if an item in it applies. Use the last applicable item.

Second element of the cost of a depreciating asset
Item In this case: The second element of cost is:
1 You received the benefit under an *arrangement and: The market value of the benefit when you received it
(a) there is at least one other party to the arrangement with whom you did not deal at *arm ' s length; and
(b) apart from this item, the second element of cost for the benefit would exceed its *market value
2 You received the benefit under an *arrangement that was private or domestic in nature to you The *market value of the benefit when you received it


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