Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (NO. 4) 2002 NO. 53, 2002 - SCHEDULE 4

Part 1—Amendments

Income Tax Assessment Act 1997

1 At the end of subsection 40-95(1)

Add:

Note: If you choose to use an effective life determined by the Commissioner for a depreciating asset, a capped life may apply to the asset under section 40-102.

2 After subsection 40-95(4)

Insert:

(4A)

Subsection (4) does not apply to a ^* depreciating asset if subsection (4B) or (4C) applies to the asset.

(4B)

For a ^* depreciating asset that you start to ^* hold if:

(a)

the former holder is an ^* associate of yours; and

(b)

the associate has deducted or can deduct an amount for the asset under this Division; and

(c)

section 40-102 applied to the asset immediately before you started to hold it because an item in the tables in subsections 40-102(4) and (5) applied to it at the relevant time (the relevant time for the associate ) that applied to the associate under subsection 40-102(3); and

(d)

a different item in the tables in subsections 40-102(4) and (5) applies to the asset when you start to hold it; and

(e)

the item referred to in paragraph (d) would have applied to the asset at the relevant time for the associate if the use to which the asset were put at that time were the use (the new use ) to which it is put when you start to hold it;

you must use:

(f)

if the associate was using the ^* diminishing value method for the asset—an ^* effective life equal to the ^* capped life that would have applied to the asset under subsection 40-102(4) or (5) at the relevant time for the associate if the use to which the asset were put at that time were the new use; or

(g)

if the associate was using the ^* prime cost method—an effective life equal to the capped life that:

(i)

would have applied to the asset under subsection 40-102(4) or (5) at the relevant time for the associate if the use to which the asset were put at that time were the new use; and

(ii)

is yet to elapse at the time you start to hold it.

Note 1: If paragraph (e) is not satisfied, subsection (4C) may apply to the depreciating asset.

Note 2: You can require the associate to tell you the relevant time that applied to the associate under subsection 40-102(3): see section 40-140.

(4C)

For a ^* depreciating asset that you start to ^* hold if:

(a)

the former holder is an ^* associate of yours; and

(b)

the associate has deducted or can deduct an amount for the asset under this Division; and

(c)

section 40-102 applied to the asset immediately before you started to hold it; and

(d)

one of the following applies:

(i)

no item in the tables in subsections 40-102(4) and (5) applies to the asset when you start to hold it;

(ii)

subsection (4B) would apply to the asset but for paragraph (e) of that subsection not being satisfied;

you must use:

(e)

if the associate was using the ^* diminishing value method for the asset—the ^* effective life determined by the Commissioner for the asset under section 40-100 that the associate would have used if section 40-102 had not applied to the asset; or

(f)

if the associate was using the ^* prime cost method—an effective life equal to any period of the effective life determined by the Commissioner for the asset under section 40-100 that:

(i)

the associate would have used if section 40-102 had not applied to the asset; and

(ii)

is yet to elapse at the time you start to hold it.

Note: You can require the associate to tell you which effective life the associate would have used if section 40-102 had not applied to the asset: see section 40-140.

3 After subsection 40-95(5)

Insert:

(5A)

Subsection (5) does not apply to a ^* depreciating asset if subsection (5B) or (5C) applies to the asset.

(5B)

For a ^* depreciating asset that you start to ^* hold if:

(a)

paragraphs (5)(a) and (b) apply; and

(b)

section 40-102 applied to the asset immediately before you started to hold it because an item in the tables in subsections 40-102(4) and (5) applied to it at the relevant time (the relevant time for the former holder ) that applied to the former holder under subsection 40-102(3); and

(c)

a different item in the tables in subsections 40-102(4) and (5) applies to the asset when you start to hold it; and

(d)

the item referred to in paragraph (c) would have applied to the asset at the relevant time for the former holder if the use to which the asset were put at that time were the use (the new use ) to which it is put when you start to hold it;

you must use:

(e)

if the former holder was using the ^* diminishing value method for the asset—an ^* effective life equal to the ^* capped life that would have applied to the asset under subsection 40-102(4) or (5) at the relevant time for the former holder if the use to which the asset were put at that time were the new use; or

(f)

if the former holder was using the ^* prime cost method—an effective life equal to the capped life that:

(i)

would have applied to the asset under subsection 40-102(4) or (5) at the relevant time for the former holder if the use to which the asset were put at that time were the new use; and

(ii)

is yet to elapse at the time you start to hold it.

Note: If paragraph (d) is not satisfied, subsection (5C) may apply to the depreciating asset.

(5C)

For a ^* depreciating asset that you start to ^* hold if:

(a)

paragraphs (5)(a) and (b) apply; and

(b)

section 40-102 applied to the asset immediately before you started to hold it; and

(c)

one of the following applies:

(i)

no item in the tables in subsections 40-102(4) and (5) applies to the asset when you start to hold it;

(ii)

subsection (5B) would apply to the asset but for paragraph (d) of that subsection not being satisfied;

you must use:

(d)

if the former holder was using the ^* diminishing value method for the asset—the ^* effective life determined by the Commissioner for the asset under section 40-100 that the former holder would have used if section 40-102 had not applied to the asset; or

(e)

if the former holder was using the ^* prime cost method—an effective life equal to any period of the effective life determined by the Commissioner for the asset under section 40-100 that:

(i)

the former holder would have used if section 40-102 had not applied to the asset; and

(ii)

is yet to elapse at the time you start to hold it.

4 Paragraph 40-95(6)(a)

Repeal the paragraph, substitute:

(a)

you do not know, and cannot readily find out, which effective life the former holder was using and, if subsection (5B) or (5C) applied to the asset, either of the following matters:

(i)

the effective life the former holder would have used if section 40-102 had not applied to the asset;

(ii)

the relevant time that applied to the former holder under subsection 40-102(3); or

5 After section 40-100

Insert:

40-102 Capped life of certain depreciating assets

(1)

If this section applies to a ^* depreciating asset, the effective life of the asset is the period (the capped life) that applies to the asset under subsection (4) or (5) at the relevant time (which is worked out using subsection (3)).

Working out if this section applies

(2)

This section applies to a ^* depreciating asset if:

(a)

you choose, under paragraph 40-95(1)(a), to use an ^* effective life determined by the Commissioner for the asset under section 40-100; and

(b)

your choice is limited to a determination in force at the time mentioned in paragraph 40-95(2)(a) or (c); and

(c)

a ^* capped life applies to the asset under subsection (4) or (5) at the relevant time (which is worked out using subsection (3)); and

(d)

the capped life is shorter than the effective life mentioned in paragraph (a).

(3)

For the purposes of this section, the relevant time is:

(a)

the ^* start time of the ^* depreciating asset if:

(i)

paragraph 40-95(2)(c) applies to you; or

(ii)

paragraph 40-95(2)(a) applies to you and a ^* capped life does not apply to the asset under subsection (4) or (5) at the time mentioned in that paragraph; or

(iii)

paragraph 40-95(2)(a) applies to you and the capped life that applies to the asset under subsection (4) or (5) at the time mentioned in that paragraph is longer than the capped life that applies to the asset at its start time; or

(b)

if paragraph (a) does not apply—the time mentioned in paragraph 40-95(2)(a).

Capped life

(4)

If the ^* depreciating asset corresponds exactly to the description in column 2 of the table, the capped life of the asset is the period specified in column 3 of the table.

(5)

If the ^* depreciating asset is of a kind described in column 2 of the table and is used in the industry specified in column 3 of the table for the asset, the capped life of the asset is the period specified in column 4 of the table.

6 Subparagraph 40-110(2)(a)(ii)

Before "and", insert ", or 40-102 (about the capped life of certain depreciating assets),".

7 Subparagraph 40-110(2)(a)(iii)

Omit "or (5)", insert ", (4B), (4C), (5), (5B) or (5C)".

8 Paragraph 40-110(3)(a)

Omit "or (5)", insert ", (4B), (4C), (5), (5B) or (5C)".

9 At the end of subsection 40-140(1)

Add:

; and (c) if section 40-102 applied to the asset at any time:

(i)

the effective life that the associate would have used if section 40-102 had not applied to the asset; and

(ii)

the relevant time that applied to the associate under subsection 40-102(3).

10 After subsection 58-75(5)

Insert:

(5A)

Assume that section 40-102 did not apply to a ^* privatised asset unless all of the following are satisfied:

(a)

it is an entity sale situation within the meaning of section 58-5;

(b)

a ^* capped life applies to the asset under subsection 40-102(4) or (5) at both the asset's ^* start time and the ^* transition time;

(c)

the ^* transition entity chooses, for the purposes of this section, to have section 40-102 apply to the asset.

If section 40-102 is to be applied to the asset, disregard paragraphs 40-102(2)(a) and (b) and assume that the relevant time for the purposes of the application of that section to the asset were the transition time.

11 At the end of subsection 58-80(6)

Add:

Note: Section 40-102 does not apply to a privatised asset for the purposes of this section.

12 At the end of section 58-90

Add:

(2)

In working out the decline in value of a ^* privatised asset held by a ^* transition entity:

(a)

if section 40-102 applied to the asset for the purposes of subsection 58-75(5A)—section 40-102 applies to the asset and applies as if the relevant time for the asset for the purposes of that section were the ^* transition time; or

(b)

if section 40-102 did not apply to the asset for the purposes of subsection 58-75(5A) or section 58-80—section 40-102 does not apply to the asset.

Note: The heading to section 58-90 is altered by inserting "and effective life" after "Method".

13 Subsection 995-1(1)

Insert: