Capital Allowances

Of the amendments to take effect from 1 July 2001, the key points to note are:

• There are three technical amendments to the treatment of mining rights.  Specifically, the amendments consider the expiry or surrender of mining rights, the disposal of mining rights acquired prior to the introduction of the Uniform Capital Allowances rules (1 July 2001), and transfers of mining rights acquired prior to the introduction of the Uniform Capital Allowances rules.
• There will be an amendment to the definition of plant in Section 45-40 to ensure all items which should be defined as plant, including additions to plant, qualify for the Uniform Capital Allowances provisions.

Of the amendments to take effect from 1 July 2009, the key points to note are:

•  To amend the project pool provisions in relation to: 

                o non cash consideration received on the disposal of items contained with the pool are taken into

                   account in calculating the balancing adjustment;
                o reduce the balancing adjustment included in assessable income where the asset was not wholly

                   used for income producing purposes;

                o exclude from the deductible costs of the assets any amounts which would otherwise be non

                   deductible under other provisions of the income tax legislation; and
                o prevent taxpayers claiming certain expenditure as a project pool cost, and subsequently

                   including those costs in the value of a separate depreciable asset.

• To amend the definition of holder in Section 40-40 as they relate to leased assets (items 5 and 6 of the table).  In addition, the interaction between Division 40 and Division 240 (hire purchase) will be amended.
• To amend Section 40-95 to ensure it only applies to "proper" sale and leaseback arrangements.  The provision will also be amended to ensure parties in an arm's length arrangement may be entitled to an accelerated write-off or a reassessment of the effective life of the asset (presently, where the lessee of the asset does not change, any new owners of the leased asset are not entitled to refresh their claims for write off and review the asset's effective life).
• The prime cost provisions will be amended to allow the new holder of an asset which had already exhausted its effective life to reassess the effective life of the asset.
• To amend the one-third of actual expenses method of deducting car expenses to ensure the holder of the car can claim their full entitlement to depreciation on the car.
• To amend the luxury car limit provisions, as they apply to the 12% method of deducting car expenses, to apply the luxury car limit as determined in the year in which the car is acquired, not the year when the car is actually used (the provisions currently apply to the year of first use which could result in a higher car limit where that is later than the year in which the car was acquired).
• To amend the provisions which determine the cost of a replacement asset where an asset has been lost or destroyed.  The cost of the replacement asset will be at its market value.
• To amend the provisions which determine the cost and terminating value of assets where the proceeds are paid in instalments.  There is currently no adjustment made to the cost or terminating value of the asset where instalments are subsequently not paid.
• To amend the overlap rules between the Uniform Capital Allowances provisions and the capital gains tax provisions to ensure there are no instances of double taxation.