ta042180

Subdivision 42-F—Calculation of balancing adjustments

Guide to Subdivision 42-F

42-180 What this Subdivision is about

This Subdivision explains how to calculate your balancing adjustment when a balancing adjustment event occurs.

The calculation may result in:

· an amount being included in your assessable income; or

· you being able to deduct an amount; or

· no further action being required.

Table of sections

42-182 Diagram showing the application of this Subdivision

Operative provisions

sec42_185 When do you make a balancing adjustment calculation?

42-190 Including an amount in assessable income

42-195 Deducting an amount

42-200 Meaning of written down value

42-205 Meaning of termination value

42-210 Adjustment: non-arm’s length transactions

42-215 Adjustment: car depreciation limit

42-220 Plant used for research and development

42-182 Diagram showing the application of this Subdivision

Operative provisions

42-185 When do you make a balancing adjustment calculation?

You must make a balancing adjustment calculation for the income year in which a *balancing adjustment event occurs.

42-190 Including an amount in assessable income

(1) You include an amount in your assessable income if the *termination value of *plant exceeds its *written down value.

(2) You include the lesser of:

(a) the amounts you have deducted or can deduct for depreciation of the *plant; and

(b) the excess referred to in subsection (1).

For balancing adjustment relief, see sections 42-285, 42-290 and 42-295.

For plant used for research and development, see section 42-220.

(3) If Common rule 1 applied to your acquisition of the *plant, the amounts you have deducted or can deduct are taken to include amounts the transferor, and earlier successive transferors, deducted or can deduct for depreciation of it.

42-195 Deducting an amount

(1) You deduct an amount if the *termination value of *plant is less than its *undeducted cost.

(2) The amount you deduct is the difference between those amounts.

(3) However, you reduce that difference to reasonably reflect the extent (if any) to which you used the *plant, or had it *installed ready for use, other than for the *purpose of producing assessable income when you were its owner or *quasi-owner.

42-200 Meaning of written down value

The written down value of *plant is its *cost less the sum of:

(a) the amounts you have deducted or can deduct for depreciation of it; and

(b) if Common rule 1 applied to your acquisition of it—the amounts the transferor, and earlier successive transferors, deducted or can deduct for depreciation of it.

42-205 Meaning of termination value

Method statement

Step 1. Work out the termination value of the *plant using the following table. If more than one row applies, use the value under the last applicable row.

Step 2. The table indicates provisions which may adjust the value. Refer to them to see if an adjustment is necessary.

Step 3. If more than one provision adjusts the value, apply them in the order they appear in the table to:

(a) the termination value; or

(b) the adjusted termination value after applying the last applicable provision.

Step 4. The result is your termination value.

Termination value table
Item	For *plant ...	The termination value is:	May be adjusted by:
1	you sell for a specific price	the sale price less the reasonably attributable expenses of sale	• non-arm’s length (42-210) • car limit (42-215)
2	you sell with, or attached to, other assets without a specific price being allocated to it	the part of the total sale price that is reasonably attributable to the *plant less the part of the reasonably attributable expenses of the sale	• non-arm’s length (42-210) • car limit (42-215)
3	you sell as part of a transaction involving the acquisition of a car the cost of which has been increased under section 42-70	the sum of the sale price (less the reasonably attributable expenses of sale) and the discount portion referred to in section 42-70	• non-arm’s length (42-210) • car limit (42-215)
4	you dispose of other than by sale	the market value of the *plant immediately before its disposal	• car limit (42-215)
5	for which a *balancing adjustment event occurs because of subsection 42-330(1)	the market value of the plant immediately before the balancing adjustment event	• car limit (42-215)
6	attached to land over which you hold a *quasi-ownership right that you assign	so much of the consideration received for the assignment of the quasi-ownership right as is reasonably attributable to the plant
7	attached to land over which you hold a quasi-ownership right that you assign to an associate or an *associated government entity	the market value of the *plant immediately before the assignment, worked out as if you had held an estate in fee simple in the land
8	attached to land over which you hold a *quasi-ownership right that expires, is surrendered or is terminated	so much of the consideration received for the expiry, surrender or termination of the quasi-ownership right as is reasonably attributable to the plant
9	attached to land over which you hold a quasi-ownership right that expires, is surrendered or is terminated and a new right or an estate in fee simple is granted to an associate or an *associated government entity of yours	the market value of the *plant immediately before the expiry, surrender or termination, worked out as if you had held an estate in fee simple in the land
10	attached to land over which you hold a quasi-ownership right and for which a balancing adjustment event occurs because of subsection 42-330(2)	the market value of the plant immediately before the balancing adjustment event, worked out as if you had held an estate in fee simple in the land
11	you start holding as trading stock and you sell under section 70-30	the amount worked out under section 70-30	• car limit (42-215)
12	that is lost or destroyed	the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction	• car limit (42-215)

Note 1: Section 42-70 increases the cost of a car you acquire at a discount in certain circumstances.

Note 2: Section 42-330 sets out the circumstances in which a partial change of ownership results in a balancing adjustment event.

42-210 Adjustment: non-arm’s length transactions

(1) Common rule 2 applies for the purpose of working out the *termination value of *plant.

(2) However, that Common rule has a different application for depreciation purposes in 2 respects:

(a) it only applies to disposals by sale; and

(b) instead of requiring the party disposing of the property to have incurred capital expenditure, it is taken to require that party to have incurred a *cost.

42-215 Adjustment: car depreciation limit

For a *car the *cost of which was worked out by applying section 42-80 (Car depreciation limit), adjust the value by multiplying it by the fraction:

where:

CDL is the *car depreciation limit for the *car for the *financial year in which you first used it for any purpose.

original cost is the *cost of the *car (ignoring the *car depreciation limit).

42-220 Plant used for research and development

(1) The amounts referred to in paragraph 42-190(2)(a) are increased if you have deducted or can deduct an amount for the *plant under section 73B of the Income Tax Assessment Act 1936. However, this subsection does not apply if subsection (3) applies.

(2) The increase for *plant to which subsection (1) applies is the difference between:

(a) its cost under section 73B, ignoring subsection 73B(6); and

(b) its written down value under that section.

Note: Subsection 73B(6) imposed a ceiling of $10,000,000 on the cost of certain pilot plant for research and development purposes.

(3) The amounts referred to in paragraph 42-190(2)(a) are increased if you acquired the *plant under a disposal to which Common rule 1 or section 73E of the Income Tax Assessment Act 1936 (roll-over relief) applied and:

(a) the transferor had deducted or could deduct an amount for the plant under section 73B of that Act; or

(b) your acquisition of the plant was the last of 2 or more successive transfers to which Common rule 1 or section 73E applied and any of the prior transferors had deducted or could deduct an amount for the plant under section 73B.

(4) The increase for *plant to which subsection (3) applies is worked out using the formula:

Transferors original cost - modified written down value

where:

transferor’s original cost means:

(a) the *plant’s cost; or

(b) if paragraph (3)(b) applies—the plant’s cost to the earliest successive transferor;

under section 73B, ignoring subsection 73B(6).

modified written down value means the written down value under section 73B worked out as though:

(a) the transferor's original cost were your cost; and

(b) the amount mentioned in paragraph (3)(a) or (b) had been deducted or deductible by you.

Subdivision 42-G—Calculation of balancing adjustments for some cars

Guide to Subdivision 42-G

42-225 What this Subdivision is about

This Subdivision explains how to calculate your balancing adjustment when a balancing adjustment event occurs for a car for which you have:

· deducted depreciation; and

· chosen the "cents per kilometre" method or the "12% of original value" method for deducting your car expenses.

Table of sections

42-230 Explanatory material

42-232 Diagram showing the operation of this Subdivision

Operative provisions

42-235 When do you use this Subdivision for a car?

42-240 Including an amount in assessable income

42-245 Deducting an amount

42-250 Reduction to take account of days when depreciation not claimed

42-255 Meaning of notional depreciation amount

42-260 Meaning of notional written down value

42-230 Explanatory material

(1) This Subdivision has limited application because:

(a) if you have used only the "cents per kilometre" method or the "12% of original value" method since you began using the car, you will not have been able to deduct depreciation and so balancing adjustments are not relevant; and

(b) if you have used only the "log book" method or the
"one-third of actual expenses" method since you began using the car, balancing adjustments are calculated under Subdivision 42-F.

(2) If this Subdivision applies, you have to reduce your balancing adjustment to reflect the extent to which you have chosen the "cents per kilometre" method or the "12% of original value" method: see section 42-250.

42-232 Diagram showing the operation of this Subdivision

Operative provisions

42-235 When do you use this Subdivision for a car?

(1) A balancing adjustment for a *car is calculated under this Subdivision if, for the period you were its owner:

(a) you deducted or can deduct an amount for depreciation of the car in one or more income years; and

(b) you chose:

(i) the "cents per kilometre" method in
Subdivision 28-C; or

(ii) the "12% of original value" method in
Subdivision 28-D;

for deducting your *car expenses for the car for one or more other income years.

(2) You must make that calculation for the income year in which a *balancing adjustment event occurs for the *car.

42-240 Including an amount in assessable income

(1) You include an amount in your assessable income if the *termination value of the *car exceeds its *notional written down value.

(2) First, work out the lesser of:

(a) the sum of the *notional depreciation amount and the amounts you have deducted or can deduct for depreciation of the *car; and

(b) the excess referred to in subsection (1).

(3) Then apply the reduction rule in section 42-250 and include the result in your assessable income.

For balancing adjustment relief, see sections 42-285, 42-290 and 42-295.

(4) If Common rule 1 applied to your acquisition of the *car, the amounts you have deducted or can deduct are taken to include amounts the transferor, and earlier successive transferors, deducted or can deduct for depreciation of it.

42-245 Deducting an amount

(1) You deduct an amount if the *termination value of the *car is less than its *undeducted cost.

(2) Work out the difference between those amounts.

(3) Reduce that difference to reasonably reflect the extent (if any) to which you used the *car, or had it *installed ready for use, other than for the *purpose of producing assessable income when you were its owner. In working out the reduction for the income years for which you chose the "cents per kilometre" method or the "12% of original value" method for the car, you apply the assumptions in section 42-255.

(4) Then apply the reduction rule in section 42-250 and deduct the result.

42-250 Reduction to take account of days when depreciation not claimed

Multiply the amount from subsection 42-240(2) or 42-245(3) by the fraction calculated using the formula:

Depreciation days

--------------------------------------------------------

Depreciation days + non depreciation days

where:

depreciation days is the total number of days you were the owner of the *car in each income year for which you have deducted or can deduct an amount for depreciation of it.

non-depreciation days is the total number of days you were the owner of the *car in each income year for which you chose the "cents per kilometre" method or the "12% of original value" method for deducting your *car expenses.

42-255 Meaning of notional depreciation amount

The notional depreciation amount for a *car is the sum of the amounts you could have deducted for depreciation of the car for the income years for which you chose the "cents per kilometre" method or the "12% of original value" method for the car assuming that:

(a) you had not chosen either of those methods for the car; and

(b) Division 28 (car expenses) had not applied to the car; and

(i) to the extent of 20% if you used the "cents per kilometre" method; or

(ii) to the extent of one-third if you used the "12% of original value" method.

42-260 Meaning of notional written down value

The notional written down value of a *car is its *written down value less its *notional depreciation amount.

Subdivision 42-H—Balancing adjustment relief

Guide to Subdivision 42-H

42-265 What this Subdivision is about

This Subdivision explains how to apply the various forms of relief that may be available when a balancing adjustment event occurs.

Table of sections

42-270 Explanatory material

Roll-over relief

42-275 Modifications of Common rule 1

42-280 Additional consequences

Offsetting

42-285 Same year relief

42-290 Later year relief

Concessional rate

42-295 Concessional rate

42-300 Working out notional income and abnormal income for the concessional rate

42-270 Explanatory material

(1) There are 3 forms of balancing adjustment relief.

(2) The first is in Common rule 1. If it applies, you do not have to make a balancing adjustment calculation.

(3) The second is an alternative, or partial alternative, to including an amount in your assessable income.

(4) The third may reduce your income tax payable in certain circumstances where a balancing adjustment amount is included in your assessable income.

Roll-over relief

42-275 Modifications of Common rule 1

(1) The following provisions of Common rule 1 do not apply for the purposes of this Division:

(a) section 41-40;

(b) section 41-45.

(2) Despite section 41-30, the transferor and the transferee must
pro-rate their depreciation deductions for the income year in which the *roll-over event occurred on the basis of the number of days in the income year each of them was its owner or *quasi-owner.

(3) The obligation in subsection 41-50(4) applies to the transferee as if the period for keeping the notice referred to in subsection 41-50(2) were until the end of 5 years after the next *balancing adjustment event occurs for the *plant.

(4) The obligation in subsection 41-55(5) applies to the transferee as if the period for keeping the election referred to in subsection 41-55(2) or a copy of it were until the end of 5 years after the next *balancing adjustment event occurs for the *plant.

42-280 Additional consequences

(1) In addition to the consequences of the roll-over set out in
section 41-30 (about the transferor’s and transferee’s right to a deduction), the roll-over has the consequences set out in this section for the purposes of this Division.

Note: For other consequences of the roll-over, see the definitions of written down value in section 42-200 and undeducted cost in section 42-175 and the provisions dealing with balancing adjustments.

Cost

(2) The *cost of the *plant is the same for the transferee as it is for the transferor.

Method

(3) The transferee must use the same method for calculating depreciation deductions for the *plant as the transferor was using for the income year in which the *roll-over event occurred.

Effective life

(4) The *effective life of the *plant in the hands of the transferee is the same as that worked out by the transferor, or the earliest successive transferor, under Subdivision 42-C.

Scientific research

(5) If the transferor was deducting amounts for depreciation of the *plant using the special rate for plant used for scientific research in the fields of natural or applied science—the transferee is taken to have acquired the plant before 1 July 1995.

Note: This subsection allows the transferee to satisfy the condition of the special rate about date of acquisition, but the transferee will still have to satisfy the other conditions of the special rate in order to use it.

Offsetting

42-285 Same year relief

(1) You do not have to include an amount in your assessable income for *plant as a result of a balancing adjustment calculation to the extent that you choose to treat that amount as an amount you have deducted for depreciation of other *plant.

(2) You make the choice, for the same income year in which the *balancing adjustment event occurred, successively for:

(a) any replacement *plant you acquire in that year; and

(b) other *plant you acquire in that year; and

(3) You can only make this choice if:

(a) at the end of the income year in which the *balancing adjustment event occurred, you used the replacement or other *plant, or had it *installed ready for use, wholly for the *purpose of producing assessable income; and

(b) you can deduct an amount for depreciation of that plant.

(4) The amount covered by the choice is taken to be an amount you have deducted for depreciation of the replacement or other *plant as at the first day of the income year in which the *balancing adjustment event occurred.

Note: Therefore, the amount must be taken into account for the plant under paragraph (a) of the definition of undeducted cost in section 42-175. Also, because the amount is taken to have been deducted as at the first day of the income year, it will reduce the opening undeducted cost of the plant if you are using the diminishing value method.

42-290 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 calculation to the extent that you choose to treat that amount as an amount you have deducted for depreciation of replacement *plant.

(2) You can only make this choice for the replacement *plant if:

(a) you acquire it within 2 income years after the end of the income year in which the *balancing adjustment event occurred; and

(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

(d) you have not made a choice under section 42-285 for the balancing adjustment event.

(3) The amount covered by the choice is taken to be an amount you have deducted for depreciation of the replacement *plant as at the first day of the income year in which you acquired it.

Concessional rate

42-295 Concessional rate

(1) If this section applies, you may choose to request, in writing, the Commissioner to determine a *notional income under section 42-300 that is less than your taxable income. That notional income must be used for the purposes of any Act that fixes an income tax rate by reference to a notional income.

(2) This section applies if:

(a) a *balancing adjustment event causes the cessation of a *business carried on by:

(i) you; or

(ii) a partnership of which you are a partner; or

(iii) the trustee of a trust in which you have a present entitlement to a share of the net income and are not under a legal disability; and

(b) as a result of the following balancing adjustment calculation, an amount is included in your assessable income or the assessable income of the partnership or trust.

(3) This section does not apply if, for the income year in which the *balancing adjustment event occurred:

(a) you are a company, other than a corporate trustee; or

(b) you are the trustee of a trust and are liable to be assessed under section 99A of the Income Tax Assessment Act 1936 (Certain trust income to be taxed at special rate); or

(d) Division 16 of Part III of that Act (averaging of income) applies to your assessment; or

(e) you chose balancing adjustment relief under section 42-285 (same year relief) or 42-290 (later year relief) for the balancing adjustment event.

42-300 Working out notional income and abnormal income for the concessional rate

(1) Your notional income for the income year in which the *balancing adjustment event occurred is:

(a) if your taxable income is greater than your *abnormal income—your taxable income less 2/3 of your abnormal income;

(b) if your taxable income is equal to or less than your abnormal income—1/3 of your taxable income;

(c) if section 86 of the Income Tax Assessment Act 1936 (Notional income of a taxpayer deriving a premium) applies to you and your notional income under that section is:

(i) greater than your abnormal income—your notional income under that section less 2/3 of your abnormal income;

(ii) equal to or less than your abnormal income—1/3 of your notional income under that section.

(2) Your abnormal income is worked out using the following table.

Abnormal income table
Item	If the balancing adjustment event referred to in section 42-295 relates to assets of a business carried on ...	And the balancing adjustment calculation causes an amount to be included in assessable income, your abnormal income is ...
1	by you, other than in partnership or as trustee of a trust	that amount
2	by a partnership of which you were a partner	the part of the amount included in your individual interest in the net income of the partnership
3	by you as trustee of a trust and you are being assessed as trustee under Division 6 of Part III of the Income Tax Assessment Act 1936	the part of the amount included in the net income of the trust to which the assessment relates
4	by a trustee of a trust and you were a beneficiary in the trust	the part of the amount that is included in the share of the net income of the trust to which you are presently entitled and on which you are assessed

Subdivision 42-I—Quasi-ownership

Guide to Subdivision 42-I

42-305 What this Subdivision is about

This Subdivision explains the circumstances in which you are the quasi-owner of plant.

Table of sections

Operative provisions

42-310 Meaning of quasi-owner

42-315 Grant of new quasi-ownership right

42-320 Only one entity can deduct

Operative provisions

42-310 Meaning of quasi-owner

(1) You are a quasi-owner of *plant if:

(a) it is attached to land you hold under a *quasi-ownership right granted by an *exempt Australian government agency or an *exempt foreign government agency; and

(b) you either:

(i) attached the plant to the land after you acquired the right; or

(ii) acquired the right from the entity that attached the plant or from a later successive holder of the right; and

(2) You are not a *quasi-owner under subsection (1) if, when you would otherwise have become a quasi-owner, you had entered into a *scheme:

(a) under which an entity, other than the grantor of the right or that person’s successor, would become the owner of the *plant at a later time; or

(b) that has a purpose of providing finance to enable an entity, other than you, the grantor of the right or that person’s successor, to become the end-user of the plant:

(i) if you attached the plant to the land—for the whole, or a substantial part, of the *effective life of the plant as worked out or adopted by you; or

(ii) if the plant was already attached to the land when you acquired the *quasi-ownership right—for the whole, or a substantial part, of the remainder of the *effective life of the plant as worked out or adopted by the person who first attached the plant to the land.

42-315 Grant of new quasi-ownership right

If your *quasi-ownership right over land expires, is surrendered or is terminated and that event is followed by a grant of a new *quasi-ownership right over the land to you:

(a) the new right is taken to be a continuation of the original right; and

(b) you are taken not to have ceased to be the *quasi-owner of *plant attached to the land.

42-320 Only one entity can deduct

If there is both an owner and a *quasi-owner of *plant, only the quasi-owner can deduct an amount for depreciation.

Subdivision 42-J—Partial change of ownership

Guide to Subdivision 42-J

42-325 What this Subdivision is about

This Subdivision sets out when a partial change of ownership will result in a balancing adjustment event.

Table of sections

Operative provisions

42-330 Partial change of ownership

42-335 Acquisition and roll-over relief

Operative provisions

42-330 Partial change of ownership

(1) This subsection applies if:

(a) for any reason, a change occurs in the ownership of, or in the interests of entities in, *plant; and

(b) the entity or one of the entities that owned the plant before the change has an interest in it after the change.

(2) This subsection applies if:

(a) there is a *quasi-owner of *plant; and

(b) for any reason, a change occurs in the quasi-ownership of, or in the interests of quasi-owners in, the plant; and

(c) the entity or one of the entities that was a quasi-owner of the plant before the change has an interest in it after the change.

Note: If subsection (1) or (2) applies, a balancing adjustment event occurs for the plant, see subsection 42-30(3).

(3) However, subsection (1) or (2) applies only if a *balancing adjustment event does not otherwise occur for the *plant.

(4) The reasons for the change occurring include:

(a) the formation or dissolution of a partnership; and

(b) a variation in the constitution of a partnership, or in the interests of the partners.

42-335 Acquisition and roll-over relief

(1) If subsection 42-330(1) applies, the owners of the *plant after the change (the transferee) are taken to have acquired it from its owners before the change (the transferor).

(2) If subsection 42-330(2) applies, the *quasi-owners of the *plant after the change (the transferee) are taken to have acquired it from its *quasi-owners before the change (the transferor).

(3) Common rule 1 applies if the transferor and transferee jointly elect for roll-over relief.

Note: For the conditions relating to the election, see section 41-55.

Subdivision 42-K—Car depreciation limit

Guide to Subdivision 42-K

42-340 What this Subdivision is about

This Subdivision explains how to calculate the car depreciation limit referred to in section 42-80.

Table of sections

Operative provisions

42-345 Calculation of limit

Operative provisions

42-345 Calculation of limit

(1) The car depreciation limit for the 1996-97 *financial year is $55,134.

(2) The car depreciation limit for a later *financial year is the amount calculated using the formula:

depreciation limit * indexation factor

where:

depreciation limit is the *car depreciation limit for the *financial year immediately before the financial year for which the limit is being calculated.

indexation factor is the number calculated, to 3 decimal places, under subsection (3) for the *financial year for which the limit is being calculated.

(3) The indexation factor for a *financial year is the number calculated using the formula:

Sum of index numbers for quarter in first March year

---------------------------------------------------------------------------

Sum of index numbers for quarter in second March year

where:

index number, for a quarter, means the index number for the motor vehicle purchase sub-group of the Consumer Price Index, being the weighted average of the 8 capital cities, first published by the Australian Statistician for the quarter.

first March year means the period of 12 months ending on
31 March immediately before the *financial year for which the limit is being calculated.

second March year means the period of 12 months immediately before the first March year.

(4) If the Australian Statistician changes the reference base for the motor vehicle purchase sub-group of the Consumer Price Index, only index numbers published in terms of the new base are to be used after the change.

(5) The Commissioner must publish before the beginning of each *financial year the indexation factor and the *car depreciation limit for that financial year.

Subdivision 42-L—Pooling

Guide to Subdivision 42-L

42-350 What this Subdivision is about

You can reduce the number of depreciation calculations you have to make by allocating a number of units of plant that have the same depreciation rate to a pool. One calculation is made for all plant in the pool.

You cannot pool plant for the year you acquire it.

Table of sections

Operative provisions

42-355 Creating a pool

42-360 Allocating plant to a pool

42-365 What plant is eligible for allocation to a pool?

42-370 Removal of plant from a pool

42-375 Calculating depreciation deductions for pooled plant

42-380 Meaning of opening balance

42-385 Meaning of closing balance

42-390 Calculation of balancing adjustments for pooled plant

42-395 Application of CGT to pooled plant

Operative provisions

42-355 Creating a pool

You may choose to create a pool by recording in writing:

(a) the first income year for which *plant may be allocated to it; and

(b) the pool percentage.

42-360 Allocating plant to a pool

You may choose to allocate *plant to a *pool by recording in writing:

(a) the pool to which you are allocating it; and

(b) the income year for which it is allocated.

42-365 What plant is eligible for allocation to a pool?

You can only allocate *plant to a *pool for an income year if:

(a) you can deduct an amount for depreciation of it for that year; and

(b) the *diminishing value rate for the plant matches the pool percentage; and

(c) during the period you were its owner or *quasi-owner before that year, you used it, or had it *installed ready for use, wholly for the *purpose of producing assessable income; and

(d) you were its owner or *quasi-owner immediately after the beginning of that year; and

(e) it has not been allocated to another *pool for that year.

42-370 Removal of plant from a pool

(1) *Plant is removed from a *pool if you choose to remove it and you record the removal and the date of removal in writing.

Note: You may re-allocate the plant to a pool under section 42-360.

(2) *Plant is automatically removed from a *pool if:

(a) you cease to use it, or to have it *installed ready for use, wholly for the *purpose of producing assessable income and the cessation was not caused by a *balancing adjustment event; or

(b) the *diminishing value rate for the plant no longer matches the pool percentage; or

Note: Property removed from a pool because of paragraph (b) can be allocated to another pool under section 42-360.

(3) If *plant is removed from a *pool:

(a) it is taken not to have been in the pool for the income year in which it is removed; and

(b) you are taken to have deducted amounts for depreciation of it for the period it was in the pool as if you had used the pool percentage as your rate and the *diminishing value method; and

42-375 Calculating depreciation deductions for pooled plant

Calculate your deduction for a *pool using the formula:

opening balance * pool percentage

42-380 Meaning of opening balance

The opening balance of a *pool for an income year is worked out using the formula:

closing balance for last year

undeducted cost of new plant

reduction for removed plant

where:

closing balance for last year means the *closing balance for the *pool for the preceding income year worked out under section 42-385.

undeducted cost of new plant means the sum of the *undeducted costs, as at the beginning of the income year, of *plant allocated to the *pool for that year that was not in the pool for the preceding year.

reduction for removed plant means the sum of the *undeducted costs, as at the beginning of the income year, of any *plant removed for that year that was in the *pool for the preceding year. You work out those undeducted costs as if you had deducted amounts for depreciation of it for the period it was in the pool using the pool percentage as your rate and the *diminishing value method.

42-385 Meaning of closing balance

The closing balance of a *pool for an income year is worked out using the formula:

opening balance - total depreciation

where:

total depreciation means the total amount you have deducted for depreciation for the income year for all *plant in the *pool for that year.

42-390 Calculation of balancing adjustments for pooled plant

(1) You must make a balancing adjustment calculation under this section for *plant if it is in a *pool for the income year in which a *balancing adjustment event occurs for it.

Note: However, if the plant is removed from the pool for the year in which the balancing adjustment event occurred, your balancing adjustment is calculated under Subdivision 42-F or 42-G.

(2) You include in your assessable income the lesser of:

(a) the *termination value of the *plant; and

(b) its *cost.

For balancing adjustment relief, see sections 42-285 and 42-290.

(3) If a balancing adjustment calculation is made under this section, you can continue to deduct amounts for depreciation of the *plant as part of the *pool.

42-395 Application of CGT to pooled plant

(1) This section applies if *plant that is in a *pool for an income year is disposed of within the meaning of Part IIIA of the Income Tax Assessment Act 1936 (Capital gains and capital losses).

(2) Section 160ZK of that Act (Reduction of amounts for purposes of reduced cost base) applies to the disposal as if you had deducted amounts for depreciation of it for the period it was in the *pool using the pool percentage as your rate and the *diminishing value method.

Income Tax Assessment Act| Apprentice Tax Practitioner Program