Commonwealth Consolidated Acts

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Simplified outline of this Division

                   The key concepts about depreciating assets and certain other capital expenditure are outlined below (in bold italics ).


Simplified outline of this Division


Major topic
Subordinate topics



Rules about depreciating assets



Core provisions

Depreciating assets are assets with a limited effective life that are reasonably expected to decline in value.

Broadly, the effective life of a depreciating asset is the period it can be used to produce income.

The decline in value is based on the cost and effective life of the depreciating asset, not its actual change in value. It begins at start time , when you begin to use the asset (or when you have it installed ready for use). It continues while you use the asset (or have it installed).

Usually, the owner of a depreciating asset holds the asset and can therefore claim deductions for its decline in value. Sometimes the economic owner will be different to the legal owner and the economic owner will be the holder.

Subdivision 40-B



The cost of a depreciating asset includes both:

*          expenses you incur to start holding the asset; and

*          additional expenses that contribute to its present condition and location (e.g. improvements).

Subdivision 40-C


Balancing adjustments

When you stop holding a depreciating asset you may have to include an amount in your assessable income, or deduct an amount under a balancing adjustment . The adjustment reconciles the decline with the actual change in value.

Subdivision 40-D


Low-value and software development pools

Low-cost assets and assets depreciated to a low value may be placed in a low value pool , which is treated as a single depreciating asset. You can also pool in-house software expenditure in a software development pool .

Subdivision 40-E


Primary production depreciating assets

You can deduct amounts for capital expenditure on:

*          water facilities immediately; or

*          horticultural plants over a period that relates to the effective life of the plant; or

*          fodder storage assets immediately; or

*          fencing assets immediately.

Subdivision 40-F


Rules about other capital expenditure



Capital expenditure of primary producers and other landholders

You can deduct amounts for capital expenditure on:

*          landcare operations immediately; or

*          electricity and telephone lines over 10 income years.

Subdivision 40-G


Capital expenditure that is immediately deductible

You can get an immediate deduction for certain capital expenditure on:

*          exploration or prospecting ; and

*          rehabilitation of mine and quarry sites ; and

*          paying petroleum taxes ; and

*          environmental protection activities .

Subdivision 40-H


Capital expenditure that is deductible over time

You can deduct amounts for certain capital expenditure associated with projects you carry on. You deduct the amount over the life of the project using a project pool .

You can also deduct amounts for certain business related costs over 5 years where the amounts are not otherwise taken into account and are not denied a deduction.

Subdivision 40-I


Capital expenditure for establishing trees in carbon sink forests

You can deduct amounts for capital expenditure for the establishment of trees in carbon sink forests.

Subdivision 40-J

Table of sections

40-15        Objects of Division

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