Div 40of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001.

Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001. (a) you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or (b) you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership; the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act. (3) An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that: (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act. (a) after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and (b) because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act. (6) Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243. (7) An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if: (a) you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and (8) The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section. ## 40‑80 Other expenditure incurred after 1 40‑80 Other expenditure incurred after 1 July 2001 on a depreciating asset (c) if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act. (2) Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001. ## 40‑100 Commissioner’s determination of e 40‑100 Commissioner’s determination of effective life A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act. ## 40‑105 Calculations of effective life 40‑105 Calculations of effective life if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011. (2) The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011. ## Subdivision 40 ‑BA—Backing business investment ## 40‑120 Backing business investment—accel 40‑120 Backing business investment—accelerated decline in value for businesses with turnover less than $500 million (1) For the purposes of Division 40 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 40‑130 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 > Note 1: An effect of paragraph (1)(a) is that this Subdivision only applies to one income year per asset. See also subsection 40‑135(1). (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 40‑82 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: ## 40‑125 Backing business investment—when 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: > 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. (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 (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: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 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. (9) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (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 ## 40‑130 Method for working out accelerate 40‑130 Method for working out accelerated decline in value (1) For the purposes of section 40‑120, the decline in value for the income year in which paragraph 40‑120(1)(a) is satisfied (the current year) is: > 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 subsection 40‑60(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. (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 40 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. (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 40 of the Income Tax Assessment Act 1997 assuming: (ii) for the prime cost method—the component “Asset’s \*cost” in the formula in subsection 40‑75(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. (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 40 of the Income Tax Ass 40‑135 Division 40 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 40 of the Income Tax Assessment Act 1997. (3) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (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. ## 40‑137 Choice to not apply this Subdivis 40‑137 Choice to not apply this Subdivision to an asset (1) You may choose that the decline in value of a particular depreciating asset for an income year, and subsequent income years, is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the first income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. ## Subdivision 40 ‑BB—Temporary full expensing of depreciating assets ## 40‑140 Definitions 40‑140 Definitions ## 40‑145 Interaction with other provisions 40‑145 Interaction with other provisions If this Subdivision applies to work out the decline in value of a depreciating asset you hold for an income year, no other provision of this Act or the Income Tax Assessment Act 1997 applies to work out that decline in value. ## 40‑150 When an asset of yours qualifies 40‑150 When an asset of yours qualifies for full expensing (1) For the purposes of this Subdivision, you are covered by this section for a depreciating asset if, on or before 30 June 2023: (2) Despite subsection (1), you are not covered by this section for the asset if Division 40 of the Income Tax Assessment Act 1997 does not apply to the asset because of section 40‑45 of that Act. (3) 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 Exception—assets for which the decline in value is worked out under Subdivision 40‑E or 40‑F of the Income Tax Assessment Act 1997 (a) the asset is allocated to a low‑value pool, or expenditure on the asset is allocated to a software development pool (see Subdivision 40‑E of the Income Tax Assessment Act 1997); or (b) you or another taxpayer has deducted or can deduct amounts for the asset under Subdivision 40‑F of the Income Tax Assessment Act 1997 (about primary production depreciating assets). ## 40‑155 Businesses with turnover under $5 40‑155 Businesses with turnover under $5 billion (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 $5 billion; 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 section. ## 40‑157 Corporate tax entities with incom 40‑157 Corporate tax entities with income under $5 billion (ii) if the 2019‑20 income year ends on or before 6 October 2020—the sum of your ordinary income (if any) and statutory income (if any) for the 2019‑20 income year; and (c) the sum of the amounts worked out under subsection (3) for the 2016‑17, 2017‑18 and 2018‑19 income years exceeds $100 million. (b) next, work out the cost of each of those assets (including any amounts included in the second element of the asset’s cost at a time that is in the income year); (4) For the purposes of subsection (3), disregard an asset if, at the time you first used the asset, or had it installed ready for use, for a taxable purpose: (a) it was not reasonable to conclude that you would use the asset principally in Australia for the principal purpose of carrying on a business; or (5) For the purposes of paragraph (3)(b), to work out the cost of a depreciating asset that is capital works (see section 43‑20 of the Income Tax Assessment Act 1997): (a) disregard section 40‑45 of that Act and work out the cost of the capital works using Subdivision 40‑C of that Act; and ## 40‑160 Full expensing of first and secon 40‑160 Full expensing of first and second element of cost for post‑2020 budget assets (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under subsection (3) if: (a) where section 40‑155 covers you for the current year (regardless whether section 40‑157 also covers you for the current year)—an exclusion applies to you and the asset for the current year under section 40‑165 (about exclusions for businesses with turnover of $50 million or more); or (ii) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s start time occurs in the current year—the asset’s cost as at the end of the current year, disregarding any amount included in the asset’s cost after 30 June 2023; or (b) if the asset’s start time occurred in an earlier year—the sum of its opening adjustable value for the current year and any amount included in the second element of its cost for the current year, disregarding any amount included in the asset’s cost after 30 June 2023. > 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 subsection 40‑60(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 6 October 2020 to 30 June 2021 and use it for only non‑taxable purposes in that period, then first use it for a taxable purpose in the period 1 July 2021 to 30 June 2022. ## 40‑165 Exclusions—entities covered by se 40‑165 Exclusions—entities covered by section 40‑155 or 40‑157 (a) where paragraph 40‑160(2)(a) applies—section 40‑155 would not cover you for the income year if the reference in that section to $5 billion were instead a reference to $50 million; and (i) entering into a contract under which you hold the post‑6 October 2020 asset on the conduct day, or will hold that asset on an even later day; or (c) the post‑6 October 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 satisfying paragraph 40‑160(1)(a) for the post‑6 October 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: (b) you started holding the asset under section 40‑115 of the Income Tax Assessment Act 1997 (about splitting a depreciating asset) or section 40‑125 of that Act (about merging depreciating assets); or (c) you already satisfied paragraph 40‑160(1)(a) of this Act for the asset as a member of a consolidated group or a MEC group of which you are no longer a member. (9) 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. ## 40‑167 Exclusions—entities covered by se 40‑167 Exclusions—entities covered by section 40‑157 (1) For the purposes of subsections 40‑160(2) and 40‑170(1A), an exclusion applies to you and an asset for an income year if any of the exclusions in this section applies in relation to the asset. (4) This exclusion applies in relation to the asset if the asset is available for use, at any time in the income year, by any of the following: ## 40‑170 Full expensing of eligible second 40‑170 Full expensing of eligible second element of cost (1) For the purposes of Division 40 of the Income Tax Assessment Act 1997, the decline in value of a depreciating asset you hold for an income year (the current year) is the amount worked out under this section if: (ii) you started to use the asset, or have it installed ready for use, for a taxable purpose in an earlier income year; and (b) an exclusion applies to you and the asset for the current year under section 40‑167 (about exclusions for corporate tax entities with income under $5 billion). (a) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under section 40‑82 of the Income Tax Assessment Act 1997—the amount worked out under subsection (3); or (b) if the asset’s decline in value for the year would, apart from section 40‑145, be worked out under Subdivision 40‑BA of this Act—the amount worked out under subsection (4); or Assets affected by section 40‑82 of the Income Tax Assessment Act 1997 (about assets costing less than $150,000, medium sized businesses) (a) the amount that would be the asset’s decline in value for the year under section 40‑82 of the Income Tax Assessment Act 1997, assuming the reference in subparagraph 40‑82(3A)(b)(ii) of that Act to 31 December 2020 were instead a reference to the 2020 budget time; and (a) the amount that would be worked out under paragraph 40‑130(2)(a) or (4)(a) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(a) and (4)(a) to 30 June 2021 were instead references to the 2020 budget time; and (c) the amount that would be worked out under paragraph 40‑130(2)(b) or (4)(b) (whichever is applicable) for the year, assuming the references in paragraphs 40‑130(2)(b) and (4)(b) to “the amount worked out under paragraph (a)” were instead references to “the amounts worked out under paragraphs 40‑170(4)(a) and (b)”. (a) the amount that would be the asset’s decline in value for the year under Division 40 of the Income Tax Assessment Act 1997, disregarding any amounts included in the eligible second element worked out under section 40‑175 of this Act for the asset for the year; and ## 40‑175 When is an amount included in the 40‑175 When is an amount included in the eligible second element The amount worked out under this section (the eligible second element) for a depreciating asset for an income year is the sum of any amounts included in the second element of the asset’s cost at a time that is in both of the following periods: ## 40‑180 Division 40 of the Income Tax Ass 40‑180 Division 40 of the Income Tax Assessment Act 1997 applies to later years (1) For an income year later than a 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 40 of the Income Tax Assessment Act 1997. (2) If you use the prime cost method for the asset, you must adjust the formula in subsection 40‑75(1) of the Income Tax Assessment Act 1997 for the later year in the manner set out in subsection 40‑75(3) of that Act. The later year is the change year referred to in that subsection. (3) 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. ## 40‑185 Balancing adjustment for assets n 40‑185 Balancing adjustment for assets not used or located in Australia (1) This section applies if the decline in value for a depreciating asset for an income year is worked out under this Subdivision, and at a time (the balancing adjustment time) in a later income year: (i) it becomes not reasonable to conclude that you will use the asset principally in Australia for the principal purpose of carrying on a business; or (b) none of the requirements in paragraphs 40‑295(1)(a), (b) or (c) of the Income Tax Assessment Act 1997 are satisfied in relation to the asset. (2) For the purposes of Subdivision 40‑D of the Income Tax Assessment Act 1997 assume that, at the balancing adjustment time, you stop using the asset, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use, again. (3) For the purposes of section 40‑180 of the Income Tax Assessment Act 1997 assume that the reference in item 3 of the table in subsection 40‑180(2) of that Act to “because you stop using it for any purpose expecting never to use it again” were instead a reference to “because of section 40‑185 of the Income Tax (Transitional Provisions) Act 1997”. (4) If a balancing adjustment event happens to a depreciating asset you hold because of this section, this Subdivision cannot apply to work out the decline in value of the asset for a later income year. ## 40‑190 Choice to not apply this Subdivis 40‑190 Choice to not apply this Subdivision to an asset for an income year (1) You may choose that the decline in value of a particular depreciating asset for an income year is not to be worked out under this Subdivision. (4) You must give the choice to the Commissioner by the day you lodge your income tax return for the income year to which the choice relates. > Note: The Commissioner may defer the time for giving the choice: see section 388‑55 in Schedule 1 to the Taxation Administration Act 1953. ## Subdivision 40 ‑C—Cost ## 40‑230 Car limit 40‑230 Car limit you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year. ## Subdivision 40 ‑D—Balancing adjustments ## 40‑285 Balancing adjustments 40‑285 Balancing adjustments (1) Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40. (a) you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset: (ii) to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and (4) Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day. (5) The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if: (i) a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or (ii) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and  > sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. (7) Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens: (a) if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b). ## 40‑287 Disposal of pre‑1 July 2001 minin 40‑287 Disposal of pre‑1 July 2001 mining depreciating asset to associate (i) an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and (ii) the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and (3) The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount. ## 40‑288 Disposal of pre‑1 July 2001 minin 40‑288 Disposal of pre‑1 July 2001 mining non‑depreciating asset to associate (a) on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and (c) apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and (ii) the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal; (2) There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal. (3) Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount. ## 40‑289 Surrendered firearms 40‑289 Surrendered firearms If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997. ## 40‑290 Reduction of deductions under for 40‑290 Reduction of deductions under former Act etc. (a) any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and (b) the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936. ## 40‑292 Balancing adjustment—assets used 40‑292 Balancing adjustment—assets used for both general tax purposes and R&D activities (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and: (i) the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset; (ii) the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, the R&D entity is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—a clawback amount under section 355‑447 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑466 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. (b) section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions. > Note 2: The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions. ## 40‑293 Balancing adjustment—partnership 40‑293 Balancing adjustment—partnership assets used for both general tax purposes and R&D activities (a) a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and: (i) the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or (ii) the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and (i) one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset; (ii) one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset. > Note: This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset. (2) In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for: (a) the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or (b) if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate. (a) that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or (b) that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions. (3A) In applying Division 355 of the new Act in relation to the asset for the income year, an R&D entity (the partner) that is a partner in the R&D partnership and is entitled to one or more new law deductions for one or more income years for the asset, is taken to have: (a) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—a clawback amount under section 355‑449 of the new Act for the income year; or (b) if the section 40‑285 amount is a deduction—a catch up amount under section 355‑468 of the new Act for the income year;  (b) if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value. > sum of new law deductions means the sum of each partner’s new law deductions mentioned in paragraph (2)(b) of this section. (4) Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event. > Note: Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions. ## 40‑295 Later year relief 40‑295 Later year relief (1) You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant. (b) 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 (3) The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it. ## 40‑340 Roll‑overs 40‑340 Roll‑overs (a) there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and (b) the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act. (2) The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (a) the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (d) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor. (3) The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if: (b) the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and <table cellspacing="0" cellpadding="0" style="width:364.2pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:353.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading" style="page-break-inside:avoid"><span>Conditions for small business taxpayers retaining accelerated rates</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Condition</span></p></td></tr></thead><tbody><tr><td style="width:21.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>1</span></p></td><td style="width:321.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>The transferee must have been a small business taxpayer for the income year (the </span><span style="font-weight:bold; font-style:italic">start year</span><span>) that includes the time when the entity first used the plant, or first had it installed ready for use.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>2</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span>At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.</span></p></td></tr><tr><td style="width:21.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:321.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>At that time, neither of these applies:</span></p><p class="Tablea"><span>(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;</span></p><p class="Tablea"><span>(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection</span><span> </span><span>(5).</span></p></td></tr></tbody></table> ``` (4) For the purposes of item 2 in the table in subsection (3), 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. (5) A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement. (a) for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or (i) replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and (ii) increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).  (b) if the entity 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 the entity carried on a business. > Note: An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11). (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. (a) for taxable supplies (if any) the entity makes during the year in the 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 makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies. ## 40‑345 Balancing adjustments for depreci 40‑345 Balancing adjustments for depreciating assets that retain CGT indexation (1) The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for: (a) plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (c) for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or (d) for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant. (3) There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115. (4) However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain. (5) Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee. (i) the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or (iv) the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or ## 40‑365 Involuntary disposals 40‑365 Involuntary disposals (a) a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and ## Subdivision 40 ‑E—Low‑value and software development pools ## 40‑420 Low‑value pools under Division 42 40‑420 Low‑value pools under Division 42 continue (1) A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act. (2) For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year. ## 40‑430 Allocating assets to low‑value po 40‑430 Allocating assets to low‑value pools For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if: ## 40‑450 Software development pools 40‑450 Software development pools Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act. ## Subdivision 40 ‑F—Primary production depreciating assets ## 40‑515 Water facilities, grapevines and 40‑515 Water facilities, grapevines and horticultural plants (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset): and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply. (i) for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or (ii) for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and (c) amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act. ## 40‑520 Special rule for water facilities 40‑520 Special rule for water facilities you no longer hold (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and (2) Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act. ## 40‑525 Amounts deducted for water facili 40‑525 Amounts deducted for water facilities The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under: ## Subdivision 40 ‑G—Capital expenditure of primary producers and other landholders ## 40‑645 Electricity supply and telephone 40‑645 Electricity supply and telephone lines (1) This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on: (2) You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act. (3) A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under: ## 40‑650 Special rule for land that you no 40‑650 Special rule for land that you no longer hold (a) you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and (2) Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act. ## 40‑670 Farm consultants 40‑670 Farm consultants A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act. ## Subdivision 40 ‑I—Capital expenditure that is deductible over time ## 40‑825 Genuine prospectors 40‑825 Genuine prospectors The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001. ## 40‑832 New method not to apply in some c 40‑832 New method not to apply in some cases If: (d) it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act; ## Subdivision 40 ‑J—Ships depreciated under section 57AM of the Income Tax Assessment Act 1936 ## 40‑840 Ships depreciated under section 5 40‑840 Ships depreciated under section 57AM of the Income Tax Assessment Act 1936 (a) you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and (a) the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and (b) the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and (c) paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997. ## Division 43 Deductions for capital works ## 43‑100 Application of Division 43 to qua 43‑100 Application of Division 43 to quasi‑ownership rights over land ## 43‑105 Application of subsections 43‑50( 43‑105 Application of subsections 43‑50(1) and (2) to hotel buildings and apartment buildings Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. ## 43‑110 Application of subsection 43‑75(3 43‑110 Application of subsection 43‑75(3) Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997. ## Division 45 Disposal of leases and leased plant ## 45‑1 Application of Division 45 of the I 45‑1 Application of Division 45 of the Income Tax Assessment Act 1997