Guide to depreciating assets 2013 - Australian Taxation Office

A recoupment of the expenditure may be included in yourassessable income.Note that expenditure incurred on or after 19 August 1992 oncertain earthworks constructed as a result of carrying out EPAcan be written off at a rate of 2.5% under the provisions forcapital works expenditure.Mining and quarrying, and minerals transportFrom 1 July 2001, you work out deductions for the decline invalue of depreciating assets used in mining and quarrying andin minerals transport using the general rules; see Working outdecline in value on page 5.However, the decline in value of a depreciating asset that youfirst use for exploration or prospecting for minerals (includingpetroleum), or quarry materials, obtainable by activities carriedon for the purpose of producing assessable income, can be itscost. This means you can deduct the cost of the asset in theyear in which you start to use it for such activities to the extentthat the asset is used for a taxable purpose.An immediate deduction is available for payments of petroleumand mineral resource rent tax and for capital expenditure thatdoes not form part of the cost of a depreciating asset and isincurred on:n exploration or prospecting for minerals (including petroleum),or quarry materials, obtainable by activities carried on for thepurpose of producing assessable income, orn rehabilitation of your mining or quarrying sites.If the expenditure arises from a non-arm’s length dealing andis more than the market value of what the expenditure wasfor, the amount of the expenditure is taken to be that marketvalue instead.A recoupment of the expenditure may be included inassessable income.Expenditure incurred after 30 June 2001 which does not formpart of the cost of a depreciating asset and is not otherwisedeductible may be a project amount that you can allocateto a project pool for which deductions are available. To be aproject amount, mining capital expenditure or transport capitalexpenditure must be directly connected with carrying on themining operations or business, respectively.Mining capital expenditure is capital expenditure youincur on:n carrying out eligible mining or quarrying operationsn site preparation for those operationsn necessary buildings and improvements for those operationsn providing or contributing to the cost of providing water,light, power, access or communications to the site of thoseoperationsn buildings used directly for operating or maintaining plant fortreating minerals or quarry materialsn buildings and improvements for storing minerals or quarrymaterials before or after their treatmentn certain housing and welfare (except for quarrying operations).Transport capital expenditure includes capital expenditure on:n a railway, road, pipeline, port or other facility usedprincipally for transporting minerals, quarry materials orprocessed minerals (other than wholly within the siteof mining operations) or the transport of petroleum incertain circumstancesn obtaining a right to construct or install such a facilityn compensation for damage or loss caused by constructingor installing such a facilityn earthworks, bridges, tunnels or cuttings necessary for sucha facilityn contributions you make in carrying on business to someoneelse’s expenditure on the above items.For information on how to work out deductions using a projectpool, see Project pools below.Special transitional rules ensure that amounts of undeductedexpenditure as at 30 June 2001 incurred under the formerspecial provisions for the mining and quarrying and mineraltransport industries remain deductible over the former statutorywrite-off periods, for example, over the lesser of 10 years andthe life of the mine.Similarly, the former statutory write-off continues to applyto expenditure you incurred after 30 June 2001 if:n it would have qualified for deduction under the formerspecial provisionsand either:n it is a cost of a depreciating asset that you started to holdunder a contract entered into before 1 July 2001 or otherwisestarted to hold or began to construct before that day, orn your expenditure was incurred under a contract enteredinto before 1 July 2001 and the expenditure does not relateto a depreciating asset.Eligible exploration or prospecting expenditure incurred after30 June 2001 that is a cost of a depreciating asset thatyou started to hold under a contract entered into before1 July 2001, or otherwise started to hold or began to constructbefore that day, is deductible at the time it is incurred.Project poolsUnder the UCA, you can allocate to a project pool certaincapital expenditure incurred after 30 June 2001 that is directlyconnected with a project you carry on (or propose to carry on)for a taxable purpose, and write it off over the project life. Eachproject has a separate project pool.The project must be of sufficient substance and be sufficientlyidentified that it can be shown that the capital expenditure saidto be a ‘project amount’ is directly connected with the project.A project is carried on if it involves some form of continuingactivity. The holding of a passive investment such as a rentalproperty would not have sufficient activity to constitute thecarrying on of a project.The capital expenditure is known as a ‘project amount’ andis expenditure incurred:n to create or upgrade community infrastructure for acommunity associated with the project; this expendituremust be paid (not just incurred) to be a project amountn for site preparation costs for depreciating assets (otherthan draining swamp or low-lying land, or clearing landfor horticultural plants)n for feasibility studies or environmental assessments forthe projectn to obtain information associated with the projectn in seeking to obtain a right to intellectual property30 ato.gov.au GUIDE TO DEPRECIATING ASSETS 2013