Guide to depreciating assets 2013 - Australian Taxation Office

You must also keep:n details of how you worked out the effective life of adepreciating asset where you have not adopted theeffective life determined by the Commissionern if you have recalculated the effective life of an asset, the dateof the recalculation, the recalculated effective life, the reasonfor the recalculation and details of how you worked out therecalculated effective life, andn original documents such as suppliers’ invoices and receiptsfor expenditure on the depreciating asset.Additional record-keeping requirements apply if you acquire anasset from an associate or if you acquire a depreciating assetbut the user is the same or is an associate of the former user;see Depreciating asset acquired from an associate and Saleand leaseback arrangements, both on page 9.Failure to keep proper records will attract penalties.Record keeping for low-value poolsFor depreciating assets in a low-value pool, you need to keepthe following details (some details relate to the assets andsome to the pool):n the start time of assets in the pool and the date you startedholding themn the closing pool balance at the end of the previousincome yearn any second elements of cost incurred for the income yearfor assets in the pool at the end of the previous income yearn the opening adjustable value of any low-value assets youhave allocated to the pool for the income yearn the first element of cost of any low-cost assets allocated tothe pool for the income yearn the second element of cost of low-cost assets andlow‐value assets allocated to the pool for the income yearn the taxable use percentage of each amount added tothe pool for the income yearn the termination value and taxable use percentage forany assets in the pool in respect of which a balancingadjustment event occurred during the income year andthe date of the balancing adjustment eventn the closing pool balancen the decline in valuen any amount included in assessable income because thetaxable use percentage of the termination value exceedsthe closing pool balance, andn any recoupment of cost you have included inassessable income.Because a capital gain or capital loss may arise when abalancing adjustment event occurs:n for a depreciating asset which you expect to use for a nontaxablepurpose, orn for a depreciating asset which you have allocated to a lowvaluepool and expect to use for a non-taxable purposethen you must keep the following information:n the first and second elements of costn the termination value, andn the taxable use percentage.Generally, records relating to a depreciating asset allocatedto a low-value pool must be retained for a period of five yearsstarting from the end of the income year in which the asset isallocated to the pool. However, there are two exceptions.1 If an amount is included in the second element of an asset’scost after the asset is allocated to a low-value pool, therecords of the cost must be retained for a period of fiveyears from the time the expenditure is incurred.2 Records of acquisitions relating to delayed claims for GSTinput tax credits must be retained for at least five years afterlodgment. Therefore, if a claim for input tax credits relatesto a depreciating asset in a low-value pool, the record ofacquisition may need to be retained for a period of five yearswhich begins later than the end of the income year in whichthe asset is allocated to the pool.Record keeping for rollover reliefIf automatic rollover relief applies (see Rollover relief onpage 21) the transferor must give the transferee a noticecontaining enough information for the transferee to workout how the UCA rules apply to the transferee’s holding of thedepreciating asset. Generally, this needs to be done within sixmonths after the end of the transferee’s income year in whichthe balancing adjustment event occurred. The transferee mustkeep a copy of the notice for five years after the asset is:n disposed of, orn lost or destroyedwhichever happens earlier.If a transferor and transferee jointly choose rollover relief, thedecision must be in writing and must contain enough informationfor the transferee to work out how the UCA rules apply to thetransferee’s holding of the depreciating asset. Generally, thechoice needs to be made within six months after the end ofthe transferee’s income year in which the balancing adjustmentevent occurred. The transferor must keep a copy of theagreement for five years after the balancing adjustment eventoccurred. The transferee must keep a copy for five years afterthe next balancing adjustment event that occurs for the asset.DEFINITIONSThe most commonly used UCA terms are explained here.A comparison of some of the UCA terms with those used inthe former depreciation rules is provided in the table below:Former depreciation rulesPlantOwnCostLuxury car limitIncome-producing useDepreciationUndeducted costUCADepreciating assetHoldFirst and second elementsof costCar limitTaxable purposeDecline in valueAdjustable valueAdjustable value: A depreciating asset’s adjustable value ata particular time is its cost (first and second elements) less anydecline in value up to that time.GUIDE TO DEPRECIATING ASSETS 2013 ato.gov.au 35