31Capital and operating costs

## 31 Capital and operating costs (1) For Step 5 of the residual pricing method, an included cost for a participant in an integrated operation is a capital cost if: (ii) the unit of property for which it was incurred is a depreciating asset for section 40–30 of the Income Tax Assessment Act 1997; or > Note: If a person incurs operating expenses before the production date, they are treated as capital costs for the purposes of these Regulations. (2) For Step 5 of the residual pricing method, an included cost for a participant in an integrated operation is an operating cost if: (3) A cost which 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 regulation 33.