Commonwealth Consolidated Acts Commonwealth Consolidated Acts
Income Tax Assessment Act 1997
1 Subsection 4 0 - 35(1)
Omit "and Divisions 41, 328 and 775", substitute "and the provisions referred to in subsection ( 3)".
2 At the end of section 4 0 - 35
Add:
(3) The provisions are:
(a) Divisions 41, 328 and 775 of this Act; and
(b) Divisions 40 and 328 of the Income Tax (Transitional Provisions) Act 1997 .
3 At the end of sub section 4 0 - 65(1) (after the notes)
Add:
Note 4: An accelerated decline in value applies to certain assets you start to hold between 12 March 2020 and 30 June 2021: see Subdivision 40 - BA of the Income Tax (Transitional Provisions) Act 1997.
4 At the end of sub section 4 0 - 75(2) (after the notes)
Add:
Note 3: You must also adjust the formula if an accelerated decline in value applied to the asset under Subdivision 40 - BA of the Income Tax (Transitional Provisions) Act 1997 : see sub section 4 0 - 135(3) of that Act.
5 Section 705 - 45
Before "If:", insert "(1)".
6 At the end of section 7 05 - 45 (after the notes)
Add:
(2) If:
(a) an asset of the joining entity is a * depreciating asset to which Division 4 0 applies; and
(b) either of the following has applied before the joining entity became a * subsidiary member for the purposes of working out the asset's decline in value under Division 4 0:
(i) section 4 0 - 82;
(ii) Subdivision 40 - BA of the Income Tax (Transitional Provisions) Act 1997 ; and
(c) the asset's * tax cost setting amount would be greater than the joining entity's * terminating value for the asset;
the asset's tax cost setting amount is reduced so that it equals the terminating value.
Note 1: The provisions referred to in paragraph ( b) provide for an accelerated decline in value of certain assets.
Note 2: Unlike the position with a reduction in tax cost setting amount under section 7 05 - 40, the amount of the reduction is not re - allocated among other assets.
Income Tax (Transitional Provisions) Act 1997
7 After Subdivision 40 - B
Insert:
40 - BA -- Backing business investment
Table of sections
40 - 120 Backing business investment--accelerated decline in value for businesses with turnover less than $500 million
40 - 125 Backing business investment--when an asset of yours qualifies
40 - 130 Method for working out accelerated decline in value
40 - 135 Division 4 0 of the Income Tax Assessment Act 1997 applies to later years
(1) For the purposes of Division 4 0 of the Income Tax Assessment Act 1997 , the decline in value of a depreciating asset for an income year is the amount worked out under section 4 0 - 130 if:
(a) the income year is the year in which you start to use the asset, or have it installed ready for use, for a taxable purpose; and
(b) subsection ( 2) (about businesses with turnover less than $500 million) applies to you for the year and for the income year in which you started to hold the asset (if that was an earlier year); and
(c) you are covered by section 4 0 - 125 for the asset.
Note: An effect of paragraph ( 1)(a) is that this Subdivision only applies to one income year per asset. See also sub section 4 0 - 135(1).
Businesses with turnover less than $500 million
(2) This subsection applies to you for an income year if you:
(a) are a small business entity; or
(b) would be a small business entity if:
(i) each reference in Subdivision 328 - C of the Income Tax Assessment Act 1997 (about what is a small business entity) to $10 million were instead a reference to $500 million; and
(ii) the reference in paragraph 328 - 110(5)(b) of that Act to a small business entity were instead a reference to an entity covered by this subsection.
Exception--assets for which the decline in value is worked out under section 4 0 - 82 or Subdivision 40 - E or 40 - F of the Income Tax Assessment Act 1997
(3) However, this section does not apply to a depreciating asset for an income year if you work out the decline in value of the asset for the income year under any of the following:
(a) section 4 0 - 82 of the Income Tax Assessment Act 1997 ;
(b) Subdivision 40 - E or 40 - F of that Act .
40 - 125 Backing business investment--when an asset of yours qualifies
(1) For the purposes of paragraph 40 - 120(1)(c) and section 328 - 182, you are covered by this section for a depreciating asset if, in the period beginning on 12 March 2020 and ending on 30 June 2021, you:
(a) start to hold the asset; and
(b) start to use it, or have it installed ready for use, for a taxable purpose.
Note: Section 328 - 182 provides similar accelerated depreciation for small business entities that choose to use Subdivision 328 - D of the Income Tax Assessment Act 1997 .
Exception--commitments already entered into
(2) Despite subsection ( 1), you are not covered by this section for the asset if, before 12 March 2020, you:
(a) entered into a contract under which you would hold the asset; or
(b) started to construct the asset; or
(c) started to hold the asset in some other way.
(3) Despite subsection ( 1), you are not covered by this section for an asset (the post - 12 March 2020 asset ) if:
(a) on a day before 12 March 2020, you:
(i) enter into a contract under which you hold an asset on that day, or will hold the asset on a later day; or
(ii) start to construct an asset; or
(iii) start to hold an asset in some other way; and
(b) on a day on or after 12 March 2020 (the conduct day ), you engage in conduct that results in you:
(i) entering into a contract under which you hold the post - 12 March 2020 asset on the conduct day, or will hold that asset on an even later day; or
(ii) starting to construct the post - 12 March 2020 asset; or
(iii) starting to hold the post - 12 March 2020 asset in some other way; and
(c) the post - 12 March 2020 asset is the asset mentioned in paragraph ( a), or an identical or substantially similar asset; and
(d) you engage in that conduct for the purpose, or for purposes that include the purpose, of becoming covered by this section for the post - 12 March 2020 asset.
(4) For the purposes of subsections ( 2) and (3), treat yourself as having started to construct an asset at a time if you first incur expenditure in respect of the construction of the asset at that time.
(5) To avoid doubt, for the purposes of this section, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract.
(6) For the purposes of subsections ( 2), (3), (4) and (5), if a partner in a partnership does any of the following things, treat the partnership (instead of the partner) as having done the thing:
(a) entering into a contract under which the partnership would hold the asset;
(b) starting to construct the asset;
(c) acquiring an option to enter into such a contract.
Exception--second hand assets
(7) Despite subsection ( 1), you are not covered by this section for the asset if:
(a) another entity held the asset when it was first used, or first installed ready for use, other than:
(i) as trading stock; or
(ii) merely for the purposes of reasonable testing or trialling; or
(b) you started holding the asset under section 4 0 - 115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 4 0 - 125 of that Act (about merging depreciating assets); or
(c) you were already covered by this section for the asset as a member of a consolidated group or a MEC group of which you are no longer a member.
(8) However, paragraph ( 7)(a) does not apply in relation to an intangible asset unless the asset was used for the purpose of producing ordinary income before you first used it, or had it installed ready for use, for any purpose. In applying this subsection, disregard ordinary income that arises as a result of the disposal of the asset to you.
Exception--assets to which Division 4 0 does not apply
(9) Despite subsection ( 1), you are not covered by this section for the asset if Division 4 0 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 4 0 - 45 of that Act.
Exception--assets not located in Australia
(10) Despite subsection ( 1), you are not covered by this section for the asset if, at the time you first use the asset, or have it installed ready for use, for a taxable purpose:
(a) it is not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or
(b) it is reasonable to conclude that the asset will never be located in Australia.
40 - 130 Method for working out accelerated decline in value
(1) For the purposes of section 4 0 - 120, the decline in value for the income year in which paragraph 40 - 120(1)(a) is satisfied (the current year ) is:
(a) if the asset's start time occurs in the current year--the amount worked out under subsection ( 2); or
(b) if the asset's start time occurred in an earlier year--the amount worked out under subsection ( 4).
Note 1: The asset's start time is when you first use it, or have it installed ready for use, for any purpose (including a non - taxable purpose): see sub section 4 0 - 60(2) of the Income Tax Assessment Act 1997 .
Note 2: A case covered by paragraph ( b) is where you start to hold the asset in the period 12 March 2020 to 30 June 2020 and use it for only non - taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2020 to 30 June 2021.
Current year is the year the asset starts to decline in value
(2) If this subsection applies, the amount for the current year is the sum of the following amounts:
(a) 50% of the asset's cost as at the end of the current year, disregarding any amount included in the second element of the asset's cost after 30 June 2021;
(b) the amount that would be the asset's decline in value for the current year under Division 4 0 of the Income Tax Assessment Act 1997 , assuming its cost were reduced by the amount worked out under paragraph ( a).
Note: Paragraph ( a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021.
(3) However, the amount worked out under subsection ( 2) for an income year cannot be more than the amount that is the asset's cost for the year.
Asset had declined in value before the start of the current year
(4) If this subsection applies, the amount for the current year is the sum of the following amounts:
(a) 50% of the sum of the asset's opening adjustable value for the current year and any amount included in the second element of its cost for that year, disregarding any amount included in that second element after 30 June 2021;
(b) the amount that would be the asset's decline in value for the current year under Division 4 0 of the Income Tax Assessment Act 1997 assuming:
(i) for the diminishing value method--its base value were reduced by the amount worked out under paragraph ( a); or
(ii) for the prime cost method--the component "Asset's * cost" in the formula in sub section 4 0 - 75(1) of that Act (as adjusted under that section) were reduced by the amount worked out under paragraph ( a).
Note: Paragraph ( a) effectively only requires you to disregard an amount included in the second element of cost if you have a substituted accounting period that ends after 30 June 2021.
(5) However, the amount worked out under subsection ( 4) for an income year cannot be more than:
(a) for the diminishing value method--the asset's base value for the year; or
(b) for the prime cost method--the sum of its opening adjustable value for the income year and any amount included in the second element of its cost for that year.
40 - 135 Division 4 0 of the Income Tax Assessment Act 1997 applies to later years
(1) The decline in value of a depreciating asset is not worked out under this Subdivision for an income year if this Subdivision already applied in working out the decline in value of the asset for an income year.
(2) For an income year later than the year in which the decline in value is worked out under this Subdivision, the decline in value is worked out under the other provisions of Division 4 0 of the Income Tax Assessment Act 1997 .
Adjustment required for prime cost method
(3) If you use the prime cost method for the asset, you must adjust the formula in sub section 4 0 - 75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in sub section 4 0 - 75(3) of that Act. The later year is the change year referred to in that subsection.
Balancing adjustment provisions
(4) Subdivision 40 - D of the Income Tax Assessment Act 1997 has effect as if the decline in value worked out under this Subdivision had been worked out under Subdivision 40 - B of that Act.
8 After section 328 - 180
Insert:
328 - 182 Backing business investment
Subsection 328 - 190(2) of the Income Tax Assessment Act 1997 applies to a depreciating asset as if a reference in that subsection to 15% were a reference to 57.5% if you are covered by section 4 0 - 125 for the asset (which is about backing business investment).