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Income Tax Assessment Act 1997

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Income Tax Assessment Act 1997

    Income Tax Assessment Act 1997Act No. 38 of 1997 as amended

    This compilation was prepared on 28 March 2008taking into account amendments up to Act No. 13 of 2008Volume 2 includes:Table of Contents

    Sections 40-1 to 55-10

    The text of any of those amendments not in forceon that date is appended in the Notes sectionThe operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section

    Chapter 2—Liability rules of general

    application

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    Contents

    Chapter 2—Liability rules of general application........................i

    Chapter 2—Liability rules of general application........i

    Part 2-10—Capital allowances: rules about deductibility of

    capital expenditure...........................................................1

    Part 2-10—Capital allowances: rules about deductibility of

    capital expenditure...........................................................1Division 40—Capital allowances....................................................1Division 40—Capital allowances....................................................1

    Guide to Division 40............................................................................1

    Guide to Division 40............................................................................1

    40-1 What this Division is about.........................................................1

    40-1 What this Division is about.........................................................1

    40-10 Simplified outline of this Division............................................2

    40-10 Simplified outline of this Division............................................2

    Subdivision 40-A—Objects of Division.............................................4

    Subdivision 40-A—Objects of Division.............................................4

    40-15 Objects of Division...................................................................4

    40-15 Objects of Division...................................................................4

    Subdivision 40-B—Core provisions...................................................4

    Subdivision 40-B—Core provisions...................................................4

    Guide to Subdivision 40-B..................................................................4

    Guide to Subdivision 40-B..................................................................4

    40-20 What this Subdivision is about.................................................4

    40-20 What this Subdivision is about.................................................4

    Operative provisions...........................................................................6

    Operative provisions...........................................................................6

    40-25 Deducting amounts for depreciating assets...............................6

    40-25 Deducting amounts for depreciating assets...............................6

    40-30 What a depreciating asset is......................................................8

    40-30 What a depreciating asset is......................................................8

    40-35 Jointly held depreciating assets.................................................9

    40-35 Jointly held depreciating assets.................................................9

    40-40 Meaning of hold a depreciating asset........................................9

    40-40 Meaning of hold a depreciating asset........................................9

    40-45 Assets to which this Division does not apply..........................12

    Income Tax Assessment Act 1997 iii

    40-45 Assets to which this Division does not apply..........................1240-50 Assets for which you deduct under another Subdivision.........13

    40-50 Assets for which you deduct under another Subdivision.........13

    40-53 Alterations etc. to certain depreciating assets..........................1340-53 Alterations etc. to certain depreciating assets..........................1340-55 Use of certain car methods.....................................................1440-55 Use of certain car methods.....................................................1440-60 When a depreciating asset starts to decline in value................1440-60 When a depreciating asset starts to decline in value................1440-65 Choice of methods to work out the decline in value...............1440-65 Choice of methods to work out the decline in value...............1440-70 Diminishing value method......................................................1640-70 Diminishing value method......................................................1640-72 Diminishing value method for post-9 May 2006 assets..........17

    40-72 Diminishing value method for post-9 May 2006 assets..........17

    40-75 Prime cost method..................................................................1840-75 Prime cost method..................................................................1840-80 When you can deduct the asset’s cost.....................................2040-80 When you can deduct the asset’s cost.....................................2040-85 Meaning of adjustable value and opening adjustable value of a

    depreciating asset................................................................2140-85 Meaning of adjustable value and opening adjustable value of a

    depreciating asset................................................................2140-90 Debt forgiveness.....................................................................2240-90 Debt forgiveness.....................................................................2240-95 Choice of determining effective life.......................................2240-95 Choice of determining effective life.......................................2240-100 Commissioner’s determination of effective life....................2940-100 Commissioner’s determination of effective life....................2940-102 Capped life of certain depreciating assets.............................3040-102 Capped life of certain depreciating assets.............................3040-105 Self-assessing effective life..................................................3340-105 Self-assessing effective life..................................................3340-110 Recalculating effective life...................................................3340-110 Recalculating effective life...................................................3340-115 Splitting a depreciating asset................................................3540-115 Splitting a depreciating asset................................................3540-120 Replacement spectrum licences............................................3640-120 Replacement spectrum licences............................................3640-125 Merging depreciating assets..................................................3640-125 Merging depreciating assets..................................................3640-130 Choices.................................................................................3740-130 Choices.................................................................................37

    iv Income Tax Assessment Act 1997

    40-135 Certain anti-avoidance provisions.........................................37

    40-135 Certain anti-avoidance provisions.........................................37

    40-140 Getting tax information from associates...............................37

    40-140 Getting tax information from associates...............................37Subdivision 40-C—Cost....................................................................39Subdivision 40-C—Cost....................................................................39Guide to Subdivision 40-C................................................................39Guide to Subdivision 40-C................................................................39

    40-170 What this Subdivision is about.............................................39

    40-170 What this Subdivision is about.............................................39Operative provisions.........................................................................39Operative provisions.........................................................................39

    40-175 Cost......................................................................................39

    40-175 Cost......................................................................................39

    40-180 First element of cost.............................................................40

    40-180 First element of cost.............................................................40

    40-185 Amount you are taken to have paid to hold a depreciating

    asset or to receive a benefit.................................................42

    40-185 Amount you are taken to have paid to hold a depreciating

    asset or to receive a benefit.................................................42

    40-190 Second element of cost.........................................................44

    40-190 Second element of cost.........................................................44

    40-195 Apportionment of cost..........................................................45

    40-195 Apportionment of cost..........................................................45

    40-200 Exclusion from cost..............................................................46

    40-200 Exclusion from cost..............................................................46

    40-205 Cost of a split depreciating asset...........................................46

    40-205 Cost of a split depreciating asset...........................................46

    40-210 Cost of merged depreciating assets.......................................46

    40-210 Cost of merged depreciating assets.......................................46

    40-215 Adjustment: double deduction..............................................47

    40-215 Adjustment: double deduction..............................................47

    40-220 Cost reduced by amounts not of a capital nature...................47

    40-220 Cost reduced by amounts not of a capital nature...................47

    40-225 Adjustment: acquiring a car at a discount.............................47

    40-225 Adjustment: acquiring a car at a discount.............................47

    40-230 Adjustment: car limit............................................................48

    40-230 Adjustment: car limit............................................................48Subdivision 40-D—Balancing adjustments.....................................48Subdivision 40-D—Balancing adjustments.....................................48Guide to Subdivision 40-D................................................................48

    Income Tax Assessment Act 1997 v

    Guide to Subdivision 40-D................................................................4840-280 What this Subdivision is about.............................................4840-280 What this Subdivision is about.............................................48

    Operative provisions.........................................................................49

    Operative provisions.........................................................................4940-285 Balancing adjustments..........................................................4940-285 Balancing adjustments..........................................................4940-290 Reduction for non-taxable use..............................................5140-290 Reduction for non-taxable use..............................................5140-292 Adjustments where deductions for decline in value also

    allowable under section 73BA or 73BH of Income Tax

    Assessment Act 1936..........................................................5240-292 Adjustments where deductions for decline in value also

    allowable under section 73BA or 73BH of Income Tax

    Assessment Act 1936..........................................................5240-295 Meaning of balancing adjustment event...............................5440-295 Meaning of balancing adjustment event...............................5440-300 Meaning of termination value...............................................5540-300 Meaning of termination value...............................................5540-305 Amount you are taken to have received under a balancing

    adjustment event.................................................................5740-305 Amount you are taken to have received under a balancing

    adjustment event.................................................................5740-310 Apportionment of termination value.....................................5840-310 Apportionment of termination value.....................................5840-320 Car to which section 40-225 applies.....................................5840-320 Car to which section 40-225 applies.....................................5840-325 Adjustment: car limit............................................................5940-325 Adjustment: car limit............................................................5940-335 Deduction for in-house software where you will never use it

    ............................................................................................5940-335 Deduction for in-house software where you will never use it

    ............................................................................................5940-340 Roll-over relief.....................................................................6040-340 Roll-over relief.....................................................................6040-345 What the roll-over relief is....................................................6240-345 What the roll-over relief is....................................................6240-350 Additional consequences......................................................6240-350 Additional consequences......................................................6240-360 Notice to allow transferee to work out how this Division

    applies.................................................................................6340-360 Notice to allow transferee to work out how this Division

    applies.................................................................................6340-365 Involuntary disposals............................................................63

    vi Income Tax Assessment Act 1997

    40-365 Involuntary disposals............................................................63

    40-370 Balancing adjustments where there has been use of different

    car expense methods...........................................................65

    40-370 Balancing adjustments where there has been use of different

    car expense methods...........................................................65Subdivision 40-E—Low-value and software development pools..67

    Subdivision 40-E—Low-value and software development pools..67

    Guide to Subdivision 40-E................................................................67Guide to Subdivision 40-E................................................................67

    40-420 What this Subdivision is about.............................................67

    40-420 What this Subdivision is about.............................................67Operative provisions.........................................................................68Operative provisions.........................................................................68

    40-425 Allocating assets to a low-value pool....................................68

    40-425 Allocating assets to a low-value pool....................................68

    40-430 Rules for assets in low-value pools.......................................69

    40-430 Rules for assets in low-value pools.......................................69

    40-435 Private or exempt use of assets.............................................70

    40-435 Private or exempt use of assets.............................................70

    40-440 How you work out the decline in value of assets in low-value

    pools...................................................................................70

    40-440 How you work out the decline in value of assets in low-value

    pools...................................................................................70

    40-445 Balancing adjustment events................................................71

    40-445 Balancing adjustment events................................................71

    40-450 Software development pools.................................................72

    40-450 Software development pools.................................................72

    40-455 How to work out your deduction..........................................72

    40-455 How to work out your deduction..........................................72

    40-460 Your assessable income includes consideration for pooled

    software..............................................................................73

    40-460 Your assessable income includes consideration for pooled

    software..............................................................................73Subdivision 40-F—Primary production depreciating assets.........73

    Subdivision 40-F—Primary production depreciating assets.........73

    Guide to Subdivision 40-F................................................................73Guide to Subdivision 40-F................................................................73

    40-510 What this Subdivision is about.............................................73

    40-510 What this Subdivision is about.............................................73Operative provisions.........................................................................74Operative provisions.........................................................................74

    Income Tax Assessment Act 1997 vii

    40-515 Water facilities and horticultural plants.................................7440-515 Water facilities and horticultural plants.................................7440-520 Meaning of water facility and horticultural plant..................7540-520 Meaning of water facility and horticultural plant..................7540-525 Conditions............................................................................7540-525 Conditions............................................................................7540-530 When a water facility or horticultural plant starts to decline in

    value...................................................................................7740-530 When a water facility or horticultural plant starts to decline in

    value...................................................................................7740-535 Meaning of horticulture and commercial horticulture...........77

    40-535 Meaning of horticulture and commercial horticulture...........77

    40-540 How you work out the decline in value for water facilities...77

    40-540 How you work out the decline in value for water facilities...77

    40-545 How you work out the decline in value for horticultural plants

    ............................................................................................7840-545 How you work out the decline in value for horticultural plants

    ............................................................................................7840-555 Amounts you cannot deduct..................................................7940-555 Amounts you cannot deduct..................................................7940-560 Non-arm’s length transactions..............................................8040-560 Non-arm’s length transactions..............................................8040-565 Extra deduction for destruction of a horticultural plant.........80

    40-565 Extra deduction for destruction of a horticultural plant.........80

    40-570 How this Subdivision applies to partners and partnerships...81

    40-570 How this Subdivision applies to partners and partnerships...81

    40-575 Getting tax information if you acquire a horticultural plant..81

    40-575 Getting tax information if you acquire a horticultural plant..81

    Subdivision 40-G—Capital expenditure of primary producers and

    other landholders....................................................83Subdivision 40-G—Capital expenditure of primary producers and

    other landholders....................................................83Guide to Subdivision 40-G................................................................83Guide to Subdivision 40-G................................................................8340-625 What this Subdivision is about.............................................8340-625 What this Subdivision is about.............................................83Operative provisions.........................................................................83Operative provisions.........................................................................8340-630 Landcare operations..............................................................8340-630 Landcare operations..............................................................8340-635 Meaning of landcare operation.............................................8640-635 Meaning of landcare operation.............................................86

    viii Income Tax Assessment Act 1997

    40-640 Meaning of approved management plan...............................8740-640 Meaning of approved management plan...............................8740-645 Electricity and telephone lines..............................................8740-645 Electricity and telephone lines..............................................8740-650 Amounts you cannot deduct under this Subdivision.............8840-650 Amounts you cannot deduct under this Subdivision.............8840-655 Meaning of connecting power to land or upgrading the

    connection and metering point............................................9040-655 Meaning of connecting power to land or upgrading the

    connection and metering point............................................9040-660 Non-arm’s length transactions..............................................9140-660 Non-arm’s length transactions..............................................9140-665 How this Subdivision applies to partners and partnerships...91

    40-665 How this Subdivision applies to partners and partnerships...91

    40-670 Approval of persons as farm consultants..............................9140-670 Approval of persons as farm consultants..............................9140-675 Review of decisions relating to approvals.............................9240-675 Review of decisions relating to approvals.............................92

    Subdivision 40-H—Capital expenditure that is immediately

    deductible................................................................92

    Subdivision 40-H—Capital expenditure that is immediately

    deductible................................................................92

    Guide to Subdivision 40-H................................................................92

    Guide to Subdivision 40-H................................................................9240-725 What this Subdivision is about.............................................9240-725 What this Subdivision is about.............................................92

    Operative provisions.........................................................................93

    Operative provisions.........................................................................9340-730 Deduction for expenditure on exploration or prospecting.....93

    40-730 Deduction for expenditure on exploration or prospecting.....93

    40-735 Deduction for expenditure on mining site rehabilitation.......9540-735 Deduction for expenditure on mining site rehabilitation.......9540-740 Meaning of ancillary mining activities and mining building

    site......................................................................................9640-740 Meaning of ancillary mining activities and mining building

    site......................................................................................9640-745 No deduction for certain expenditure....................................9740-745 No deduction for certain expenditure....................................9740-750 Deduction for payments of petroleum resource rent tax.......97

    40-750 Deduction for payments of petroleum resource rent tax.......97

    40-755 Environmental protection activities......................................9840-755 Environmental protection activities......................................98

    Income Tax Assessment Act 1997 ix

40-760 Limits on deductions from environmental protection activities

    ............................................................................................9940-760 Limits on deductions from environmental protection activities

    ............................................................................................9940-765 Non-arm’s length transactions............................................10040-765 Non-arm’s length transactions............................................100Subdivision 40-I—Capital expenditure that is deductible over time

    ................................................................................100Subdivision 40-I—Capital expenditure that is deductible over time

    ................................................................................100Guide to Subdivision 40-I...............................................................100Guide to Subdivision 40-I...............................................................10040-825 What this Subdivision is about...........................................10040-825 What this Subdivision is about...........................................100Operative provisions.......................................................................101Operative provisions.......................................................................10140-830 Project pools.......................................................................10140-830 Project pools.......................................................................10140-832 Project pools for post-9 May 2006 projects........................102

    40-832 Project pools for post-9 May 2006 projects........................102

    40-835 Reduction of deduction.......................................................10340-835 Reduction of deduction.......................................................10340-840 Meaning of project amount.................................................10340-840 Meaning of project amount.................................................10340-845 Project life..........................................................................10540-845 Project life..........................................................................10540-855 When you start to deduct amounts for a project pool..........105

    40-855 When you start to deduct amounts for a project pool..........105

    40-860 Meaning of mining capital expenditure..............................10540-860 Meaning of mining capital expenditure..............................10540-865 Meaning of transport capital expenditure............................10640-865 Meaning of transport capital expenditure............................10640-870 Meaning of transport facility..............................................10740-870 Meaning of transport facility..............................................10740-875 Meaning of processed minerals and minerals treatment......108

    40-875 Meaning of processed minerals and minerals treatment......108

    40-880 Business related costs.........................................................10840-880 Business related costs.........................................................10840-885 Non-arm’s length transactions.............................................11140-885 Non-arm’s length transactions.............................................111

    x Income Tax Assessment Act 1997

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