S8 Capital work - Summary - Taxation 1 PDF

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S8 Capital work (DIV 43) Legislation List  你可以 deduct capital work——43-10(1)  Deduct 的三个条件——43-10(2)  Construction expenditure——include 43-70(1) ——not include 43-70(2)(a)(b)(d)(e)  Definition of Plant——45-40(在笔记最后)  Your construction expenditure——43-115(2)  Amount can deduct——43-15(1)  Formular——43-210(after 1992)/215  Definition of Capital Works——Building 43-20(1) ——Structure Improvement 43-20(2)  Deduct Rate——2.5% (43-25(1)(2)+43-140) 4% (43-25(1)+43-145)  【Timing of deduction】 】——43-30  Timing of Capital Works ——43-80  Pool of Construction Expenditure ——43-85(1)  Your Area——43-115(1) 43-120 especially 43-120(1)(b)  Use to produce assessable income——43-140  买别人的 capital work 怎么 deduct——110-45(4)  Disposal Capital Works——43-40 【Timing of deduction】 】 1. 43-30——no deduction until completion 2. But 如果实在 complete 之后的一段时间才开始用，那就从开始用的日子算起（ Eg in handouts p46） 一．要 Deduct 必须满足的条件 43-10(2):You (1) can Deduct an Amount (7) for Capital Works (2) if: (a) The Capital Works (2) have a Construction Expenditure Area (3); and (b) There is a Pool of Construction Expenditure (4) for the Area; and (c) You Use Your Area (5) in the Income Year in the Way Set Out in Table 43-140 (6) in s 43140(current year) 1. You Includes Individuals, Companies, Partnerships and a Trust (i.e. Trust Estate): ss 4-5 and 960-100(1). 2.

【Capital Works】 　 1Definition  43-20(1) a. A Building, or an Extension, Alteration or Improvement to a Building; and b. The Building commenced to be constructed in Australia after 21 August 1979 (or outside Australia after 21 August 1990)

 43-20(2)(3) (2)Structural Improvements, or Extensions, Alterations or Improvements to Structural Improvements; and The Structural Improvements commenced to be constructed (whether in or outside Australia) after 26 February 1992 (3)Examples of Structural Improvements are set out in s 43-20(3) (e.g. sealed roads, sealed driveways, sealed car parks, bridges, retaining walls, fences). 　Timing 2 of Capital Works 43-80. Commencement of construction occurs when the first step in the construction phase starts (e.g. pouring of foundations for a building)

3.

Construction Expenditure Area=【 【Construction Expenditure】 】 1) 43-70(1) Capital Expenditure Incurred in Respect of the Construction of the Capital Works 2) 43-70(2) does not include (a) Expenditure on acquiring land (b) Expenditure on demolishing existing structures (d) Expenditure on landscaping (e) Expenditure on “plant” 3) 【What’s plant?】 】——45-40 (在这个 Notes 最后) 　This 1 is a inclusive definition(即只说了包括了哪些东西，不包括在 45-40 里的也可能是 plant) 　 2Case Wangaratta Woolen Mills v FCT (染坊是 plant) *FCT v Faichney (科学家 study 里的 article) *Carpentaria Transport Pty Ltd v FCT (仓库的 roller doors 属于 plant 中的 machinery) 4) Your construction expenditure 43-115(2)——your construction expenditure is the portion of the pool of construction expenditure that

is attributable to your area 4.

Pool of Construction Expenditure 43-85(1) This is the Construction Expenditure incurred by an Entity on the Capital Works as is attributable to the Construction Expenditure Area 5.

Your Area 1) Owner (43-115(1))——Your Area is the part of the Construction Expenditure Area that you Own (e.g. Freehold owner 不动产所有者 of building) Importantly, note that the taxpayer/entity need not have incurred the construction expenditure. 2) Lessee (43-120)

1　43-120(1)(b)——continuously leased or held since the construction was completed 　provided 2 certain conditions are satisfied, a Lessee (i.e. Tenant) can also have “Your Area” (i.e. Your Area is the part of the Construction Expenditure Area that you Lease) 6. 【Table 43-140】 】Use Your Area in the Income Year in the Way Set Out in Table 43-140 就是 produce assessable income!——一般出题不会出到 97 年之前的啦 7. 【Calculation of Deduction】 】  Capital work 用的是 straight line 所以 Cost 是一直一样的，不需要减掉上年的 depreciation 1) 【Formular】 】——43-210(after 1992)/215 Eg: before 27 February 1992. Accordingly, the formula in s 43-215 applies. It is: Your CE (a) x Days Used (b) x Applicable Rate (c) / 365 (d) (a) Your Construction Expenditure (b) This is: (1) The number of days in the income year that you owned (or leased) your area and (2) Used your area in a way for producing assessable income (d) Days in Income Year (should be 366 in a Leap Year)

2) 【Deduct Rate】 】——2.5% (43-25(1)(2)+43-140) 4% (43-25(1)+43-145) 　you 1 can assume that most expenditure on capital works to which Division 43 apply are deducted at a rate of 2.5% per annue over 40 years 　Rate 2 table a. Non-residential income producing 是指非出租获得收入的 building b. Residential income producing 是指出租的 c. Eligible industrial buildings 指的一般是 hotel

3) 【Apportion】 】 1　Attention! No deduction until construction is complete(43-30), so need to apportion deduction in 1st year 　如果只有一部分是用来 2 assessable income 只能 deduct 一部分 (eg in text p723) 8. 【Subsequent owner】 1) A subsequent owner——the original owner does some capital works which are later sold to another entity 2) can also claim capital works deductions based on the

3) original construction expenditure of capital works 4) the purchase price of the capital works is not relevant 5) 110-45(4)——capital expenditure by a previous owner that you can deduct after acquisition 二．Disposal Capital Works 1. no Balancing Adjustment Event when a taxpayer disposes of Division 43 Capital Works. 2. s43-40 provides (may provide) a deduction where the Capital Works (Your Area) is “Destroyed” 3. ”Undeducted Construction Expenditure” ——Construction Expenditure less Deductions Allowed under (43-10: ss 43-230 and 43-235) exceeds the Amount Received for the Destruction (e.g. Insurance Proceeds, Scrap Sale Value): s 43250. 4. If the Amount Received for the Destruction ＞ the Undeducted Construction Expenditure, there is no Assessable Income Inclusion under Division 43. Wangaratta Woolen Mills v FCT 69 ATC 4095 (casebook p1213) 染坊里面有很多很专业的设备，是 plant——the TP’s dyehouse was in the nature of a tool in the TP’s trade which played a part in its manufacturing process, as opposed to merely being a setting for its operations *FCT v Faichney 72 ATC 4245 (casebook p422) 1) 45-40 ——Plant includes: (a)articles, machinery, tools and rolling stock 2) 这个 case 主要讲”article”  Fact:就是一个科学家需要在家做研究，所以在家弄了一个 study，这个 study 对法官来说还是 part of home 所 以是 private 的，但是科学家还 claimed deduction for depreciation in carpet, curtains, desks and bookshelves.  Conclusion: 法官认为这些是可以 deduct  Article 的 定 义 — — “ the word article according to its normal and ordinary meaning includes carpets and curtains”(casebook p424)  没有说 article 只 有在 赚钱 的时 候才能 depreciate——”there was not toome for implying in s54(1) that articles must be “predominantly” used to produce assessable income (casebook p424) *Carpentaria Transport Pty Ltd v FCT 90 ATC 4590 (casebook p182) 1) 45-40 ——Plant includes: (a)articles, machinery, tools and rolling stock  Fact:就是 transport operator 有一个仓库 for sorage of freight 然后里面有 20 个 roller doors, TP claim for deductions for the depreciation incurred on the toller doors 然 后 ATO 认为 roller doors are not “plant”  Conclusion: Roller doors 属于 machinery，而 45-40 中的 plant 包括了 machinery 所以可以 deduct depreciate 【Plant】 SECT 45.40 Meaning of plant and written down value (1) Plant includes: (a)articles, machinery, tools and rolling stock; and

(b)animals used as beasts of burden or working beasts in a * business, other than a * primary production business; and (c)fences, dams and other structural improvements, other than those used for domestic or residential purposes, on land that is used for agricultural or pastoral operations; and (d)structural improvements, other than a * forestry road or structural improvements used for domestic or residential purposes, on land used in abusiness involving: (i) planting or tending trees in a plantation or forest that are intended to be felled; or (ii) felling trees in a plantation or forest; or (iii) transporting trees, or parts of trees, that you felled in a plantation or forest to the place where they are first to be milled or processed, or from which they are to be transported to the place where they are first to be milled or processed; and (e)structural improvements, other than those used for domestic or residential purposes, that are used wholly for operations (carried out in the course of a business) relating directly to: (i) taking or culturing pearls or pearl shell; or (ii) taking or catching trochus, b 锚 che-de-mer or green snails; and that are situated at or near a port or harbour from which the business is conducted; and (f) structural improvements that are excluded from paragraph (c), (d) or (e) because they are used for domestic or residential purposes if they are provided for the accommodation of employees, tenants or sharefarmers who are engaged in or in connection with the activities referred to in that paragraph. (2) Plant also includes plumbing fixtures and fittings (including wall and floor tiles) provided by an entity mainly for: (a) either or both: (i) employees in a * business carried on by the entity for the * purpose of producing assessable income; or (ii)employees in a business carried on for that purpose by a company that is a member of the same * wholly-owned group of which theentity is a member; or (b) * children of any of those employees. (3) The written down value of a * depreciating asset is its * cost less the sum of: (a) the amounts you have deducted or can deduct for its decline in value; and (b) if section 40-340 applied to your acquisition of it--the amounts the transferor, and earlier successive transferors, deducted or can deductfor its decline in value....