36Capital costs and operating costs

36 Capital costs and operating costs

(1) For the purposes of step 5 of the residual pricing method, an included cost for a participant in an integrated operation is a capital cost if: (a) it is not a personal cost; and (b) any of the following subparagraphs apply: (i) it was incurred before the production date; (ii) the unit of property for which it was incurred is a depreciating asset for the purposes of section 40–30 of the Income Tax Assessment Act 1997; (iii) it is a project amount within the meaning of section 40‑840 of the Income Tax Assessment Act 1997.

Note: Subparagraph (b)(i) applies if, for example, a person incurs operating expenses before the production date. Those expenses will be capital costs for the purposes of this instrument.

(2) A cost that is a capital cost only because of subparagraph (1)(b)(i) is taken to have been incurred on 1 January in the financial year in which it was incurred.

Note: Costs that relate to a unit of property that is constructed over several years of tax are dealt with in section 39.

(3) For the purposes of step 5 of the residual pricing method, an included cost for a participant in an integrated operation is an operating cost if: (a) it is not a personal cost; and (b) it is not a capital cost.