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This is a Bill, not an Act. For current law, see the Acts databases.
1998-99
The Parliament of
the
Commonwealth of
Australia
HOUSE OF
REPRESENTATIVES
Presented and read a first
time
New Business
Tax System (Capital Allowances) Bill
1999
No. ,
1999
(Treasury)
A Bill
for an Act to implement the New Business Tax System by amending the law relating
to taxation, and for related purposes
ISBN: 0642 418527
Contents
Income Tax Assessment Act
1997 3
Income Tax Assessment Act
1997 10
Income Tax Assessment Act
1997 18
Income Tax Assessment Act
1936 22
Income Tax Assessment Act
1997 23
Income Tax Assessment Act
1997 29
Income Tax Assessment Act
1997 32
A Bill for an Act to implement the New Business Tax
System by amending the law relating to taxation, and for related
purposes
The Parliament of Australia enacts:
This Act may be cited as the New Business Tax System (Capital
Allowances) Act 1999.
(1) Subject to this section, this Act commences on the day on which it
receives the Royal Assent.
(2) Items 17 and 18 of Schedule 2 commence on
the day on which the Taxation Laws Amendment Act (No. 5) 1999 receives
the Royal Assent.
Subject to section 2, each Act that is specified in a Schedule to this
Act is amended or repealed as set out in the applicable items in the Schedule
concerned, and any other item in a Schedule to this Act has effect according to
its terms.
Income
Tax Assessment Act 1997
1 Subsection 40-25(5)
(note)
Omit “Note”, substitute “Note 1”.
2 At the end of subsection
40-25(5)
Add:
Note 2: In the case of plant that has been
depreciated:
• a further amount is included in your assessable
income if the termination value exceeds the written down value by more than the
sum of your depreciation deductions; or
• you can deduct a further amount in some cases where
the termination value is less than the plant’s undeducted cost.
A capital gain or loss from the plant is disregarded.
3 Section 42-5
Repeal the section, substitute:
4 Subsection 42-30(1) (note
2)
Omit “an amount” (wherever occurring), substitute “one or
more amounts”.
5 Section 42-180
Omit “an amount” (twice occurring), substitute “one or
more amounts”.
6 Section 42-182
Repeal the section, substitute:
7 After section 42-190
Insert:
(1) If the *plant’s
*termination value exceeds the total
of:
(a) the plant’s *written down
value; and
(b) the amount that section 42-190 includes in your assessable
income;
your assessable income also includes that excess.
For exceptions, see section
42-198.
For balancing adjustment relief, see sections
42-285, 42-290, 42-293 and 42-295.
(2) However, the amount that subsection (1) includes in your assessable
income is reduced if:
(a) you acquired the *plant at or before
11.45 am, by legal time in the Australian Capital Territory, on 21 September
1999; and
(b) the plant’s *cost base at the
time of the *balancing adjustment event exceeds
the total referred to in subsection (1).
The amount is reduced (but not below nil) by the excess of that cost base
over that total.
Note: The main reasons why the cost base would exceed that
total are:
• indexation of elements of the cost base (up to 30
September 1999);
• amounts being included in the cost base that are not
part of the cost.
8 After section 42-195
Insert:
If:
(a) you can deduct an amount under section 42-195; and
(b) the plant’s *undeducted cost is
less than its *reduced cost base;
you can also deduct the difference between the undeducted cost and the
reduced cost base.
For exceptions, see section
42-198.
CGT exemptions
(1) Section 42-192 or 42-197 or subsection 42-390(2A) does not apply if a
*capital gain or
*capital loss from the
*plant would be disregarded, because of a
provision listed in the table in this subsection, if:
(a) you had made the gain or loss from
*CGT event A1; and
(b) that CGT event had happened at the time of the
*balancing adjustment event.
|
Plant to which this section does not apply |
||
|---|---|---|
|
Item |
Provision |
Subject matter |
|
1 |
section 118-5 |
cars, motor cycles and valour decorations |
|
2 |
section 118-10 |
collectables and personal use assets |
|
3 |
section 118-12 |
plant used to produce exempt income |
(2) Section 42-192 or 42-197 or subsection 42-390(2A) does not apply if
the *plant was a
*pre-CGT asset at the time of the
*balancing adjustment event.
Profit assessable under another provision
(3) Section 42-192 or subsection 42-390(2A) does not apply if a provision
of this Act (outside this Division) includes in your assessable income an amount
in respect of a profit you make because of the
*balancing adjustment event.
9 After subsection
42-390(2)
Insert:
(2A) If the *termination value exceeds
the *cost, your assessable income also includes
that excess.
For exceptions, see section
42-198.
For balancing adjustment relief, see sections
42-285, 42-290 and 42-293.
(2B) However, the amount that subsection (2A) includes in your assessable
income is reduced if:
(a) you acquired the *plant at or before
11.45 am, by legal time in the Australian Capital Territory, on 21 September
1999; and
(b) the plant’s *cost base at the
time of the *balancing adjustment event exceeds
its *cost.
The amount is reduced (but not below nil) by the excess of that cost base
over that cost.
Note: The main reasons why the cost base would exceed the
cost are:
• indexation of elements of the cost base (up to 30
September 1999);
• amounts being included in the cost base that are not
part of the cost.
10 After section 118-22
Insert:
A *capital gain or
*capital loss you make from a
*CGT asset is disregarded if, at the time of
the *CGT event, the asset is:
(a) your *plant; or
(b) if you are a partner, plant of the partnership; or
(c) if you are absolutely entitled to the asset as against the trustee of
a trust (disregarding any legal disability), plant of the trustee.
11 Application of
amendments
(1) The amendments made by items 1 to 9 apply to a balancing adjustment
event happening after 11.45 am, by legal time in the Australian Capital
Territory, on 21 September 1999.
(2) The amendment made by item 10 applies to a CGT event happening after
11.45 am, by legal time in the Australian Capital Territory, on 21 September
1999.
(3) The amendment made by item 10 also applies to a CGT event happening at
or before 11.45 am, by legal time in the Australian Capital Territory, on 21
September 1999, if:
(a) the event is CGT event A1 (disposal of a CGT asset); and
(b) the time of the event is when you entered into the contract for the
disposal of the CGT asset; and
(c) the change of ownership constituting the disposal occurred after 11.45
am, by legal time in the Australian Capital Territory, on 21 September
1999.
Income
Tax Assessment Act 1997
1 Subsection 42-30(1) (note
2)
After “42-290”, insert “, 42-293”.
2 Paragraph 42-50(2)(b)
Omit “or 42-290”, substitute “, 42-290 or
42-293”.
3 Paragraph 42-90(2)(c)
Omit “or 42-290 (later year relief)”, substitute “,
42-290 (later year relief) or 42-293 (involuntary disposals)”.
4 Paragraph 42-165(3)(a)
Omit “or 42-290”, substitute “, 42-290 or
42-293”.
5 Subsection 42-190(2)
(note)
After “42-290”, insert “, 42-293”.
6 Subsection 42-240(3)
(note)
After “42-290”, insert “, 42-293”.
7 At the end of section
42-285
Add:
(5) Unless subsection (6) applies to you, you can only make a choice under
this section for a *balancing adjustment event
that occurred at or before 11.45 am, by legal time in the Australian Capital
Territory, on 21 September 1999.
(6) However, you can make a choice under this section for any
*balancing adjustment event if you are a
*small business taxpayer for the income year in
which the event occurred.
8 Paragraph 42-290(2)(d)
After “42-285”, insert “or 42-293”.
9 At the end of section
42-290
Add:
(4) Unless subsection (5) applies to you, you can only make a choice under
this section for a *balancing adjustment event
that occurred at or before 11.45 am, by legal time in the Australian Capital
Territory, on 21 September 1999.
(5) However, you can make a choice under this section for any
*balancing adjustment event if you are a
*small business taxpayer for the income year in
which the event occurred.
10 After section 42-290
Insert:
(1) You may exclude an amount that has been included in your assessable
income for *plant (the original
plant) as a result of a balancing adjustment calculation for a
*balancing adjustment event that occurs after
11.45 am, by legal time in the Australian Capital Territory, on 21 September
1999, to the extent that you choose to treat that amount as an amount you have
deducted for depreciation of an item or items of replacement plant.
(2) You can only make this choice if the balancing adjustment event is one
of these:
(a) the original plant is compulsorily acquired by an
*Australian government agency;
(b) the original plant is lost or destroyed;
(c) you dispose of the original plant to an Australian government agency
after a notice was served on you by or on behalf of the agency:
(i) inviting you to negotiate with the agency with a view to the agency
acquiring it by agreement; and
(ii) informing you that, if the negotiations are unsuccessful, it will be
compulsorily acquired by the agency.
(3) You can only make this choice for replacement
*plant if you incur the expenditure on the
replacement plant, or you acquire it:
(a) no earlier than one year, or within a further period the Commissioner
allows, before the *balancing adjustment event
occurred; and
` (b) no later than one year, or within a further period the Commissioner
allows, after the end of the income year in which the balancing adjustment event
occurred.
(4) You can only make this choice for replacement
*plant if:
(a) 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
(b) you can deduct an amount for depreciation of it; and
(c) you have not made a choice under section 42-285 or 42-290 for the
*balancing adjustment event.
(5) The amount covered by the choice is taken to be an amount you have
deducted for depreciation of the replacement
*plant as at the first day of the income year
in which you acquired it.
(6) If you are making the choice for 2 or more items of replacement
*plant, you apportion the amount covered by the
choice between those items in proportion to their
*cost.
Note: Therefore, the amount must be taken into account for
the plant under paragraph (a) of the definition of undeducted cost
in section 42-175. Also, because the amount is taken to have been deducted as at
the first day of the income year, it will reduce the opening undeducted cost of
the plant if you are using the diminishing value method.
11 Paragraph 42-295(3)(e)
Omit “or 42-290 (later year relief)”, substitute “,
42-290 (later year relief) or 42-293 (involuntary disposals)”.
12 Subsection 42-390(2)
(note)
Omit “and 42-290”, substitute “, 42-290 and
42-293”.
13 Subsection 110-45(2) (table item
2)
Omit “or 42-290”, substitute “, 42-290 or
42-293”.
14 Subparagraph
110-55(3)(b)(i)
Omit “or 42-290”, substitute “, 42-290 or
42-293”.
15 Subparagraph
110-60(1)(b)(i)
Omit “or 42-290”, substitute “, 42-290 or
42-293”.
16 Paragraph 123-60(3)(a)
After “roll-over”, insert “under this Division or the
entity working out its *group turnover for the
purposes of Subdivision 960-Q”.
17 Subparagraph
240-90(5)(a)(iii)
Omit “or 42-290”, substitute “, 42-290 or
42-293”.
18 Paragraph 243-35(3)(b)
Omit “or 42-290”, substitute “, 42-290 or
42-293”.
19 Paragraph 387-475(3)(c)
Omit “or 42-290”, substitute “, 42-290 or
42-293”.
20 Paragraph 387-475(3)(c)
Omit “both of”.
21 Section 960-280 (link
note)
Repeal the link note, substitute:
[The next Subdivision is Subdivision 960-Q.]
22 After Subdivision 960-M
Insert:
There are a number of provisions in this Act that provide exceptions or
special rules for small business taxpayers.
This Subdivision specifies what a small business taxpayer is. It provides
an average annual turnover test (excluding GST).
Table of sections
960-335 Meaning of small business
taxpayer
960-340 Meaning of average turnover
960-345 Meaning of group turnover
960-350 Recalculating average turnover for opening
years
960-355 Winding up a business
[This is the end of the Guide.]
You are a small business taxpayer for an income year
if:
(a) you carry on a *business in that
year; and
(b) either:
(i) your *average turnover for that year
is less than $1,000,000; or
(ii) you choose to recalculate that turnover for an income year before the
2001-02 income year under section 960-350 and it is less than $1,000,000 as
recalculated.
Note: You are treated as carrying on a business if you are
winding up a business and you were previously a small business taxpayer: see
section 960-355.
Your average turnover for an income year (the current
year) is:
where:
number of averaging years is:
(a) 3; or
(b) if you 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 you carried on a business.
Note: You are treated as carrying on a business if you are
winding up a business and you were previously a small business taxpayer: see
section 960-355.
sum of relevant group turnovers is the sum of:
(a) your *group turnover for the current
year; and
(b) your group turnover (if any) for the 2 preceding income
years.
(1) 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 made in 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.
(2) 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 made during the year in the ordinary 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 made during the year in the ordinary
course of carrying on a business—the prices (as defined by section 9-75 of
the GST Act) of the supplies.
(1) You may choose to recalculate your
*average turnover for an income year before the
2001-02 income year (the calculation year) under this section if
you would not be a *small business taxpayer for
that year because your average turnover for that year is not less than
$1,000,000.
(2) You make the recalculation in this way:
Method statement
Step 1. Ignore your *group turnover
(if any) for each of the 2 income years preceding the calculation
year.
Step 2. Make a reasonable estimate of your
*group turnover for each of the 2 income years
following the calculation year (ignoring either or both of those years if you do
not expect to be carrying on a *business at any
time in that year).
Step 3. Work out the average of your
*group turnover for the calculation year and
the estimates you made for the 2 following years (if any).
Step 4. If the amount from step 3 is less than $1,000,000, you are a
small business taxpayer for the calculation year.
This Subdivision applies to you as if you carried on a
*business in an income year if:
(a) in that year you were winding up a business you previously carried on;
and
(b) you were a *small business taxpayer
for the income year in which you stopped carrying on that business.
[The next Division is Division 975.]
23 Application of
amendments
(1) The amendments made by this Schedule (other than by items 17 and 18)
apply to assessments for the income year in which 21 September 1999 occurred and
later income years.
(2) The amendment made by item 17 applies to arrangements entered into
after 27 February 1998.
(3) The amendment made by item 18 applies to debts that are terminated
after 27 February 1998.
Income
Tax Assessment Act 1997
1 Subsection 42-25(2)
Repeal the subsection.
2 Before section 42-120
Insert:
(1) The rates set out in this Subdivision do not apply to
*plant if:
(a) you became its owner or *quasi-owner
under a contract entered into after 11.45 am, by legal time in the Australian
Capital Territory, on 21 September 1999; or
(b) you constructed it and the construction started after that time;
or
(c) you acquired it in some other way after that time.
Note: Instead, a rate worked out using the effective life of
plant is used: see subsections 42-160(3) and 42-165(2A).
(2) However, those rates continue to apply to that
*plant if the conditions set out in Subdivision
42-K are met.
Note: That Subdivision deals with certain small business
taxpayers.
3 Section 42-130
Repeal the section.
4 At the end of section
42-160
Add:
(2) Subsection (1) does not apply to
*plant if:
(a) you became its owner or *quasi-owner
under a contract entered into after 11.45 am, by legal time in the Australian
Capital Territory, on 21 September 1999; or
(b) you constructed it and the construction started after that time;
or
(c) you acquired it in some other way after that time;
unless the conditions set out in Subdivision 42-K are met.
Note: That Subdivision deals with certain small business
taxpayers.
(3) Instead, you use this formula:
5 Subsection 42-165(2)
Repeal the subsection, substitute:
(2) Subsection (1) does not apply to
*plant if:
(a) you became its owner or *quasi-owner
under a contract entered into after 11.45 am, by legal time in the Australian
Capital Territory, on 21 September 1999; or
(b) you constructed it and the construction started after that time;
or
(c) you acquired it in some other way after that time;
unless the conditions set out in Subdivision 42-K are met.
Note: That Subdivision deals with certain small business
taxpayers.
(2A) Instead, you use this formula:
6 After section 42-165
Insert:
Despite sections 42-160 and 42-165, your deduction is the
*plant’s
*cost for the income year in which you become
its owner or *quasi-owner if that cost does not
exceed $300.
7 Subparagraphs 42-175(1)(b)(ii) and
(c)(ii)
Omit “the same rate and method”, substitute “the same
calculation formula”.
8 At the end of section
42-280
Add:
Acquisition time
(6) If the transferor:
(a) became the *plant’s owner or
*quasi-owner 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) constructed it and the construction started at or before that time;
or
(c) acquired it in some other way at or before that time;
the transferee is taken to have become the plant’s owner or
quasi-owner before that time.
9 After Subdivision 42-J
Insert:
This Subdivision sets out the conditions that small business taxpayers must
comply with in order to obtain access to accelerated rates of
depreciation.
(1) An entity that:
(a) became the owner or *quasi-owner of
*plant under a contract entered into after
11.45 am, by legal time in the Australian Capital Territory, on 21 September
1999; or
(b) constructed it and the construction started after that time;
or
(c) acquired it in some other way after that time;
can use the rates set out in Subdivision 42-D, and the calculation formula
in subsection 42-160(1) or 42-165(1), if the conditions set out in this table
are satisfied:
|
Conditions for small business taxpayers retaining accelerated
depreciation |
|
|---|---|
|
Item |
Condition |
|
1 |
The entity 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 entity’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: (b) the plant is being or is intended to be let predominantly on a
*plant lease. |
(2) A plant lease of *plant
is an agreement (including a renewal of an agreement) under which the owner or
*quasi-owner of the plant grants a right to use
the plant to another entity. However, a plant lease does not
include a *hire purchase agreement or a
*short-term hire agreement.
(3) A short-term hire agreement is an agreement for the
intermittent hire of an asset on an hourly, daily, weekly or monthly
basis.
(4) However, an agreement for the hire of an asset is not a
short-term hire agreement if, having regard to any other
agreements for the hire of the same asset to the same entity or an
*associate of that entity, there is a
substantial continuity of hiring so that the agreements together are for longer
than a short-term basis.
(5) For the purposes of item 2 in the table in subsection (1), 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.
10 Subsection 46-35(2)
Repeal the subsection, substitute:
(2) However, section 42-167 does not apply.
Note: Section 42-167 allows you to deduct the full cost of a
unit of plant if its cost does not exceed $300.
Income
Tax Assessment Act 1936
11 At the end of paragraph
82AM(3)(b)
Add “, or the taxpayer could calculate their deduction under section
42-167 of that Act”.
12 At the end of paragraph
632(3)(b)
Add “, or the taxpayer could calculate their deduction under section
42-167 of that Act”.
13 At the end of paragraph
642(3)(b)
Add “, or the taxpayer could calculate their deduction under section
42-167 of that Act”.
14 Application of
amendments
The amendments made by this Schedule apply to plant if:
(a) you became its owner or quasi-owner under a contract entered into
after 11.45 am, by legal time in the Australian Capital Territory, on 21
September 1999; or
(b) you constructed it and the construction
started after that time; or
(c) you acquired it in some other way after that time.
Income
Tax Assessment Act 1997
1 Section 12-5 (after table item headed
“investment company”)
Insert:
|
IRUs |
|
|
see depreciation |
|
2 Subsection 20-30(1) (after table item
1.7C)
Insert:
|
1.7D |
Division 42 (as it applies to *IRUs
because of Division 44) |
Expenditure on IRUs |
3 Section 40-30 (before the table item dealing
with landcare operations)
Insert:
|
IRUs |
Capital expenditure on IRUs |
Entity incurring expenditure |
Effective life of cable |
Balancing adjustment required on full disposal. Special rules for partial
disposal |
Division 44 |
4 Section 41-5 (before the table item dealing
with landcare operations)
Insert:
|
IRUs |
Applies as modified by section 44-35 |
Applies without modification |
Does not apply |
5 Subsection 41-23(1)
Omit “Note”, substitute “Note 1”.
6 At the end of subsection
41-23(1)
Add:
Note 2: You cannot elect for roll-over relief for an IRU:
see section 44-40.
7 At the end of section
42-55
Add:
IRUs
(9) Division 44 has special rules about depreciation of IRUs.
8 Subsection 42-335(3)
(note)
Omit “Note”, substitute “Note 1”.
9 At the end of subsection
42-335(3)
Add:
Note 2: You cannot elect for roll-over relief for an IRU:
see section 44-40.
10 Section 43-260 (link
note)
Repeal the link note.
11 After Division 43
Insert:
This Division allows you to deduct expenditure you incur on acquiring an
indefeasible right to use an international telecommunications submarine cable
system (an IRU) as if it were plant.
It modifies some of the depreciation provisions for IRUs.
It also provides special rules for part disposals of IRUs and submarine
cable systems.
Table of sections
44-5 Depreciating IRUs
44-10 When you start deducting for an IRU
44-15 Rate
44-20 Part disposals
44-25 Calculating later depreciation
deductions
44-30 Application of part disposal rules to
cables
44-35 Acquiring additional capacity
44-40 Application of Division 41 Common
rules
[This is the end of the Guide.]
(1) The provisions of this Part apply to
*IRUs as if they were units of
*plant that you own, but with the modifications
set out in this Division.
Note: If an amount of expenditure on IRUs is recouped, the
amount may be included in your assessable income: see Subdivision
20-A.
(2) An IRU is an indefeasible right to use an international
telecommunications submarine cable system.
(3) To avoid doubt, the treatment of
*IRUs as if they were units of
*plant is not intended to affect the nature of
expenditure on IRUs for the purposes of provisions of this Act outside this
Part.
You can start to deduct an amount for depreciation of an
*IRU for the income year in which you first use
it for the *purpose of producing assessable
income.
(1) The rate you use depends on whether you use the
*diminishing value method or the
*prime cost method.
Rate using the diminishing value method
(2) Your rate using the *diminishing
value method is:
where:
cable’s effective life is the period, in years, that
you work out, under Division 42, to be the
*effective life of the international
telecommunications submarine cable over which the IRU has been
granted.
Rate using the prime cost method
(3) Your rate using the *prime cost
method is:
(1) This section and section 44-25 apply to you if:
(a) you own an *IRU (the original
plant) and you dispose of part of it; and
(b) you have deducted or can deduct an amount for depreciation of the
original plant.
(2) This Part applies to you as if, just before the disposal happened, you
had split the original plant into 2 items of
*plant:
(a) the part you stopped owning; and
(b) the part you continue to own (your new plant).
(3) You are taken to have disposed of an asset (the part you stopped
owning) and to have acquired your new plant at the time of the
disposal.
(4) The *written down value of the part
you stopped owning is that part of the written down value of the original plant
just before it was split as is reasonably attributable to the part you stopped
owning.
Note: You must make a balancing adjustment calculation under
Subdivision 42-F for the asset representing the part you stopped
owning.
(5) Subdivision 42-J does not apply to the disposal mentioned in paragraph
(1)(a).
(1) You must work out the *undeducted
cost of the original plant just before it was split and apportion that amount on
a reasonable basis between each of the assets into which it was split.
(2) You can deduct amounts for depreciation of your new plant for the
remainder of the income year in which the event happened and for later years.
The part of the *undeducted cost you
apportioned to your new plant under subsection (1) is its
*cost.
(3) If you were using the *diminishing
value method, you must continue to do so. If you were using the
*prime cost method, you must continue to do
so.
(4) You must also adjust the rate if you are using the
*prime cost rate.
(5) You work out the rate adjustment in this way:
where:
remaining effective life is the cable’s remaining
*effective life, in years (including the income
year in which the disposal occurred).
(1) Sections 44-20 and 44-25 apply also to the granting of an
*IRU over an international telecommunications
submarine cable system in the same way that they apply to the part disposal of
an IRU.
(2) For the cable system:
(a) the granting of the *IRU is a part
disposal of the system; and
(b) the cable system before you granted the IRU is the original plant;
and
(c) the residue of the cable system after you granted the IRU is the new
plant; and
(d) the part you stop owning is the part of the cable system applicable to
the IRU you granted.
(1) If, after you start to use an *IRU
for the *purpose of producing assessable
income, you pay an amount that increases the capacity of the IRU, you add that
amount to the IRU’s *cost and to its
opening undeducted cost for the income year in which you paid the
amount.
(2) You must also adjust the rate if you are using the
*prime cost rate. Use subsection 44-25(5) to
make the adjustment.
(1) Common rules 1 (roll-over relief for related entities) and 2
(non-arm’s length transactions) apply to this Division.
(2) However, the transferor and transferee cannot jointly elect for
roll-over relief under subsection 42-335(3).
12 Application of
amendments
(1) The amendments made by this Schedule relating to IRUs apply to IRUs
acquired under contracts entered into after 11.45 am, by legal time in the
Australian Capital Territory, on 21 September 1999.
(2) The amendments made by this Schedule relating to part disposals of a
cable system apply to the granting of IRUs over the system under contracts
entered into after 11.45 am, by legal time in the Australian Capital Territory,
on 21 September 1999.
(3) Those amendments do not apply to an international telecommunications
submarine cable system, or an IRU over the system, if the system had been used
for telecommunications purposes at or before 11.45 am, by legal time in the
Australian Capital Territory, on 21 September 1999.
Income
Tax Assessment Act 1997
1 Paragraph 42-105(2)(a)
Repeal the paragraph.
2 Subsection 42-105(3)
Omit “This conclusion is also to be made on the assumption that the
plant is new.”.
3 After section 42-110
Insert:
(1) You can choose to work out a new
*effective life of
*plant if, after the end of the first income
year for which you can deduct an amount for depreciation of the plant, you
conclude that the effective life you have been using is no longer accurate
because of changed circumstances.
Note 1: This means that the choice is not available for
working out notional depreciation deductions for a transition entity under
Division 58.
Note 2: However, a transition entity can make the choice for
an income year after the one in which depreciation deductions first become
available to it for the plant: see subsection 58-85(3A).
(2) The new effective life starts to apply for the income year for which
you make the choice.
(3) However, you cannot do so if a rate under Subdivision 42-D, and the
calculation formula in subsection 42-160(1) or 42-165(1), applies to
depreciation of the *plant.
Note: Those rates and calculation formulas can apply to
small business taxpayers who satisfy certain conditions.
(4) Some examples of changes in circumstances that may result in your
working out a new effective life are:
(a) your use of the *plant turns out to
be more or less rigorous than you expected (or was anticipated by the
Commissioner’s determination);
(b) there is a downturn in demand for the goods or services the plant is
used to produce that will result in the plant being scrapped;
(c) legislation prevents the plant’s continued use;
(d) changes in technology make the plant redundant.
(5) You must work out how long (in years) the
*plant can be used by any entity for income
producing purposes as from the start of the income year for which you make the
choice:
(a) having regard to the wear and tear on the plant that will result from
your expected circumstances of use; and
(b) assuming that it will be maintained in reasonably good order and
condition; and
(c) having regard to when you would be likely to scrap the plant, sell it
for scrap or abandon it.
That period is the new *effective life of
the plant.
(6) You will need to work out your depreciation deductions under
subsection 42-160(3) or 42-165(2A) using the plant’s
*effective life worked out under subsection (5)
of this section, in years (including the income year for which the choice is
made).
(7) If you are using the *prime cost
rate, you use the *plant’s
*undeducted cost as at the start of the income
year for which the choice is made as its *cost
for the purposes of calculating your depreciation deductions.
(8) This section applies despite the rule in section 42-40 about
choices.
4 At the end of section
42-175
Add:
(3) However, subparagraphs (1)(b)(ii) and (1)(c)(ii) apply differently if
you have chosen to work out a new *effective
life for the *plant under section
42-112.
(4) You work out the amount applicable under that subparagraph before the
income year (the start year) in which the new
*effective life started to apply, and add to
that amount the amounts worked out under that subparagraph for the start year
and later income years as if the start year were the first one for which a
depreciation deduction were allowable to you for the plant.
5 After subsection 58-85(3)
Insert:
(3A) Despite subsection (3), the
*transition entity can work out a new
*effective life for the unit under section
42-112 for an income year after the *transition
year. It would then use the formula in subsection 42-160(3) or 42-165(2A) in
calculating its deductions for depreciation of the unit.
6 Application of amendments
The amendments made by this Schedule apply to plant if:
(a) you became its owner or quasi-owner under a contract entered into
after 11.45 am, by legal time in the Australian Capital Territory, on 21
September 1999; or
(b) you constructed it and the construction started after that time;
or
(c) you acquired it in some other way after that time.
Income
Tax Assessment Act 1997
1 Subsection 995-1(1)
Insert:
average turnover has the meaning given by section
960-340.
2 Subsection 995-1(1)
Insert:
group turnover has the meaning given by section
960-345.
3 Subsection 995-1(1)
Insert:
IRU has the meaning given by section 44-5.
4 Subsection 995-1(1)
Insert:
plant lease has the meaning given by section
42-345.
5 Subsection 995-1(1)
Insert:
short-term hire agreement has the meaning given by section
42-345.
6 Subsection 995-1(1)
Insert:
small business taxpayer has the meaning given by sections
960-335 and 960-350.
7 Subsection 995-1(1)
Insert:
taxable supply has the meaning given by the
*GST Act.
8 Subsection 995-1(1)
Insert:
value of the business supplies of an entity has the meaning
given by section 960-345.