20 (Capital Write-Offs and Allowances)[1]

Foundations of taxation law 203 cch australia limited

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Foundations of Taxation Law [¶20.3] © CCH Australia Limited Business related “black hole” capital  Business related “black hole” capital  expenditure expenditure S 40-880 ITAA97 allows certain capital expenditure to  be deducted in equal proportions over 5 years The expenditure must:  Relate to a business that the taxpayer carries on for  a “taxable purpose”  Not be excluded by s 40-880, eg: Must not otherwise be deductible Must not form cost of land Must not form cost of depreciating asset Must not be taken into account in working out  capital gain or loss
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Foundations of Taxation Law [¶20.4](a) © CCH Australia Limited Investment allowance (Div 41  Investment allowance (Div 41  ITAA97) ITAA97) Div 41 ITAA97 provides an additional (“bonus”)  deduction at the rate of 10%, 30% or 50% for eligible  new business investment Deduction available if the: Asset is a tangible “depreciating asset” Taxpayer can deduct an amount under the capital  allowance regime  Income year is between 2008/09 and 2011/12, and Total of the “recognised new investment amounts”   the “new investment threshold” for the year
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Foundations of Taxation Law [¶20.4](b) © CCH Australia Limited Recognised new investment amount Recognised new investment amount The main conditions for being a “recognised new  investment amount” are: The amount must be included in the first or second  element of the asset’s cost under the capital  allowance regime The taxpayer must have committed to investing in  the asset during the period 13 December 2008 to 31  December 2009 It must be reasonable to conclude that the asset will  be used principally in Australia for the purpose of  carrying on a business
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