Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 40.25

You deduct the decline in value

  (1)   You can deduct an amount equal to the decline in value for an income year (as worked out under this Division) of a * depreciating asset that you * held for any time during the year.

Note 1:   Sections   40 - 70, 40 - 72 and 40 - 75 show you how to work out the decline for most depreciating assets. There is a limit on the decline: see subsections   40 - 70(3), 40 - 72(3) and 40 - 75(7).

Note 2:   Small business entities can choose to both deduct and work out the amount they can deduct under Division   328.

Note 3:   Generally, only one taxpayer can deduct amounts for a depreciating asset. However, if you and another taxpayer jointly hold the asset, each of you deduct amounts for it: see section   40 - 35.

Reduction of deduction

  (2)   You must reduce your deduction by the part of the asset's decline in value that is attributable to your use of the asset, or your having it * installed ready for use, for a purpose other than a * taxable purpose.

Example:   Ben holds a depreciating asset that he uses for private purposes for 30% of his total use in the income year.

  If the asset declines by $1,000 for the year, Ben would have to reduce his deduction by $300 (30% of $1,000).

Note:   You may have to make a further reduction under subsections   (3) and (4) or section   40 - 27.

Further reduction: leisure facilities

  (3)   You may have to make a further reduction for a * depreciating asset that is a * leisure facility attributable to your use of it, or your having it * installed ready for use, for a * taxable purpose.

  (4)   That reduction is the part of the * leisure facility's decline in value that is attributable to your use of it, or your having it * installed ready for use, at a time when:

  (a)   its use did not constitute a * fringe benefit; or

  (b)   you did not use it or * hold it for use as mentioned in paragraph   26 - 50(3)(b) (about using it in the course of your business or for your employees).

Exception: low - value pools

  (5)   Subsections   (2), (3) and (4) do not apply to * depreciating assets allocated to a low - value pool.

Despite subsection   (1), you can continue to deduct an amount equal to the decline in value for an income year (as worked out under this Division) of such an asset even though you do not continue to * hold that asset.

Note:   See Subdivision   40 - E for low - value pools.

Meaning of taxable purpose

  (7)   Subject to subsection   (8), a taxable purpose is:

  (a)   the * purpose of producing assessable income; or

  (b)   the purpose of * exploration or prospecting; or

  (c)   the purpose of * mining site rehabilitation; or

  (d)   * environmental protection activities.

Note 1:   Where you have had a deduction under this Division an amount may be included in your assessable income if the expenditure was financed by limited recourse debt that has terminated: see Division   243.

Note 2:   When this Division notionally applies under section   355 - 310 (about depreciating assets used for R&D activities), the taxable purpose is sometimes only the purpose of conducting R&D activities.

  (8)   If Division   250 applies to you and an asset that is a * depreciating asset:

  (a)   if section   250 - 150 applies--you are taken not to be using the asset for a * taxable purpose to the extent of the * disallowed capital allowance percentage; or

  (b)   otherwise--you are taken not to be using the asset for such a purpose.