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Module 4 (Part A: General depreciation rules (Holder of depreciating asset…
Module 4
Part A: General depreciation rules
Definition of depreciating asset
Holder of depreciating asset
economic owner:
access the asset’s economic benefits while stopping other entities from doing the same
legal owner
Most of cases, economic owner = legal owner, but some exceptions (i.e. hire purchase)
jointly held
- several economic owners
if interest in assets =<$300 , can jointly owner can claim the whole interest, even if the total cost of asset > $300
if interest in assets =<$1,000 , can jointly owner can allocate the whole interest to a low-value pool, even if the total cost of asset > $1,000
When a depreciating asset start to decline
Figure 4.1 - p.278
before and after 10 May 2016
365 days even in leap years
Non-business depreciating assets costing $300 or less
Low value pool
Example 4.4 and Figure 4.2
Software development pool
Other depreciating assets
Selection of depreciation method
Formulas for calculating decline in value
Diminishing value formula (p.284)
Prime cost formula (p.285)
Meaning of the terms in each formula
Base value
Original cost in 1st year
Later years,
opening adjustable value
= original cost - decline in value + 2nd elements
Day s held
number of days that a taxpayer has held
366 days for a leap year
Cost (p.286)
First element of cost
Second element of ‘cost’
Amount not included in 'cost'
Effective life
Recalculating effective life
Remaining effective life
Adjustable value
Part D: Special capital allowance rules
Project expenditure pools
Blackhole expenditure
Business related cost
capital expenditure that can be deductible (p.312)
post-business expenditure
pre-business expenditure
claimed over 5 yrs - 20% each yr
Limitations and exeptions
Part E: Deduction for capital
expenditure on capital works
Types of capital
non-residential income-producing buildings
buildings used for research and development activities
buildings used for industrial activities;
buildings used for other income-producing activities
Table 4.2: Deduction for income-producing buildings and structural improvements
residential building
residences providing short-term traveller
accommodation
at least 10 rooms
other income-producing residential buildings
significant features of Division 43
Part B: Balancing adjustments and
rollover relief
Balancing adjustment events
Determining termination value
reduction for non-taxable use
Relief for involuntary disposals
Balancing adjustment events in a low-value pool
transferred between certain related entities
Table 4.1
Part C: SBE capital allowance rules
Taxpayers eligible for the SBE concessions
$2 million aggregated turnover test
aggregated turnover of the business for the current tax year likely < $2 million; and previous two tax years < $2 million per year
actual aggregated turnover worked out at the end of that year < $2 million
aggregated turnover in the previous tax year < $2 million
Exceptions to the SBE capital allowance concessions
Some exceptions (p.301)
Development pool
Immediate deduction for low-cost assets
Depreciation in the general small business pool
Applying the SBE pooling rules
4 steps
Rollover relief on disposal of a depreciating asset
Figure 4.3 - p.302