Private ruling: Income tax - Capital allowances and depreciating asset
Date of advice: 16 April 2019
Published: May 2019
Ruling period: Income tax years ended 30 June XX to 30 June XX.

Ruling: Q1: Should Asset 1 be regarded as a depreciating asset for which deductions are available under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes | Q2: Should Asset 2 be regarded as a depreciating asset for which deductions are available under Division 40 of the ITAA 1997? | A2: No.

Relevant facts and circumstances: The Company carries on business in Australia and along with its wholly owned subsidiaries forms a consolidated group. During the income year, the Company acquired all of the membership interests in another company carrying on a business and, at that time, the acquired company joined the consolidated group. The acquired company, at the time it was acquired, held assets that it used in its business. Those assets include substantial, permanent and highly engineered structures. The structures do not have a character which is identical to or similar to any of the examples given in subsection 43-20(3) of the ITAA 1997. The structures are separate components that are identified as Asset A and Asset B. Asset A and Asset B are separately identifiable structures that serve distinct and different functions. Asset 1 and Asset 2 are each assets which have a limited effective life and can reasonably be expected to decline in value over time. Asset 1 is specially engineered to be used in the business operations and is an integral part of undertaking the business activity and as such is subject to wear caused by the use of the asset in the business operations and must be maintained through a regular maintenance schedule. Asset B has walls and a roof and is part of the setting in which the business activities are conducted. It is engineered to provide protection for the other assets of the business and is subject to wear caused by exposure to the elements.


Reasons for decision: Summary: Asset A is a depreciating asset for which deductions are available under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997). | Detailed Reasoning - Detailed reasoning: Division 40 of the ITAA 1997 allows a deduction for the decline in value of a depreciating asset that is held for any time during a year of income. Section 40-30 of the ITAA 1997 specifies what assets are capable of being a depreciating asset for the purposes of Division 40. Section 40-30 of the ITAA 1997 relevantly states: (1) A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used, except: (a) land; or (b) an item of trading stock; or (c) an intangible asset, unless it is mentioned in subsection (2). (2) … (3) This Division applies to an improvement to land, or a fixture on land, whether the improvement or fixture is removable or not, as if it were an asset separate from the land. (4) Whether a particular composite item is itself a depreciating asset or whether its components are separate depreciating assets is a question of fact and degree which can only be determined in the light of all the circumstances of the particular case. (5) … (6) … A number of assets are specifically excluded from Division 40 of the ITAA 1997 by section 40-45 of the ITAA 1997. Those exclusions will be considered separately below. Is Asset A separate from Asset B? It is necessary to identify the specific assets which may be subject to Division 40 of the ITAA 1997. As such, consideration must be given to whether Asset A is a separate asset to Asset B. Whether a number of assets that could each be viewed as a separate depreciating asset should be viewed as a composite item which is itself a depreciating asset is determined by subsection 40-30(4) of the ITAA 1997. The Explanatory Memorandum which accompanied the New Business Tax System (Capital Allowances) Bill 2001 that introduced subsection 40-30(4) of the ITAA 1997 stated at paragraph 1.15: Taxpayers will be required to exercise judgement in identifying the depreciating asset where the asset itself is made up of different parts and components. In doing this, the "functionality" test that is used as a basis of identifying a "unit of plant" in the existing plant depreciation rules can be used. (Specific reference to a "unit" or an "item" is not necessary to attract the test, as the definition of a depreciating asset is based on a life in effective use, and the depreciating asset must be identifiable as having its own life in such use.) The function test has also been applied in a number of decisions in ascertaining whether an asset is a single asset or part of a larger asset: Ready Mixed Concrete (Vic) Pty Ltd v FC of T 69 ATC 4038; (1969) 1 ATR 123, FC of T v Tully Co-operative Sugar Milling Assoc Ltd 83 ATC 4495; (1983) 14 ATR 495, Monier Colourtile Pty Ltd v FC of T 84 ATC 4846; (1984) 15 ATR 1256, Case S51 85 ATC 380; 28 CTBR (NS) Case 57, and Case T33 86 ATC 293; 29 CTBR (NS) Case 35. Draft Taxation Ruling TR 2017/D1: Income tax: composite items and identifying the depreciating asset for the purposes of working out capital allowances considers how to determine whether a composite item is itself a depreciating asset or whether its components are separate depreciating assets for the purposes of Division 40 of the ITAA 1997. Despite being in draft form TR 2017/D1 usefully summarises the main principles which have been developed in applying the function test in paragraph 6: 6. Purpose or function is generally a useful guide to the identification of an item. The main principles that are taken into account in determining whether a composite item is a single depreciating asset, or more than one depreciating asset, are: (a) 'Identifiable': the depreciating asset will tend to be the item that performs a separate identifiable function, having regard to the purpose or function it serves in its business context. (b) 'Use': a depreciating asset will tend to be an item that performs a discrete function. However, the item need not be self-contained or able to be used on a stand-alone basis. (c) 'Degree of integration': the depreciating asset will tend to be the composite item where there is a high degree of physical integration of the components. (d) 'Effect of attachment': the item, when attached to another asset having its own independent function, varies the performance of that asset. (e) 'System': a depreciating asset will tend to be the multiple components that are purchased as a system to function together as a whole and which are necessarily connected in their operation. Applying the principles identified in paragraph 6 of Draft TR 2017/D1 we consider that Asset 1 is functionally separate from Asset 2. Asset 1 and Asset 2 are separately identifiable. Additionally, Asset 1 performs a specific function that is different and distinct from the function performed by Asset 2. Therefore, Asset 1 and Asset 2 are each separate identifiable assets and will not be part of a composite asset for the purposes of subsection 40-30(4) of the ITAA 1997. As such, they are each separately identifiable assets which can be subject to Division 40 of the ITAA 1997. Is Asset 1 a depreciating asset for the purposes of Division 40 of the ITAA 1997? Asset 1 is an asset which has a limited effective life and can reasonably be expected to decline in value over the time it is used. Asset 1 is subject to wear caused by the use of the asset in the conduct of the business activities and must be maintained through a regular maintenance schedule. Therefore, Asset 1 meets the requirements of being a depreciating asset for the purposes of subsection 40-30(1) of the ITAA 1997. Is Asset 1 excluded from being a depreciating asset by section 40-45 of the ITAA 1997? As indicated above, a number of assets are specifically excluded from being depreciating assets for the purposes of Division 40 of the ITAA 1997 by section 40-45 of the ITAA 1997. In the present context the only exclusion of relevance is subsection 40-45(2) of the ITAA 1997. Subsection 40-45(2) relevantly states: (2) This Division does not apply to capital works for which you can deduct amounts under Division 43, or for which you could deduct amounts under that Division: (a) But for expenditure being incurred, or capital works being started, before a particular day; or (b) Had you used the capital works for a purpose relevant to those capital works under section 43-140. Determining whether or not Asset 1 falls within subsection 40-45(2) of the ITAA requires a consideration of whether it is capital works for which amounts could be deducted under Division 43 of the ITAA 1997. Division 43 of the ITAA 1997 A deduction can be claimed for capital works under Division 43 of the ITAA 1997. Section 43-10 of the ITAA 1997 states: (1) You can deduct an amount for capital works for an income year. (2) You can only deduct the amount if: (a) the capital works have a construction expenditure area; and (b) there is a pool of construction expenditure for that area; and (c) you use your area in the income year in the way set out in Table 43-140 (Current year use). Section 43-20 of the ITAA 1997 identifies the capital works for which a deduction can be claimed under Division 43 of the ITAA 1997: Buildings (1) This Division applies to capital works being a building, or an extension, alteration or improvement to a building (a) begun in Australia after 21 August 1979; or (b) begun outside Australia after 21 August 1990. Structural improvements (2) This Division also applies to capital works (other than capital works referred to in subsection (1)) begun after 26 February 1992 that are structural improvements, or extensions, alterations or improvements to structural improvements, whether they are in or outside Australia. (3) Some examples of structural improvements are: (a) sealed roads, sealed driveways, sealed car parks, sealed airport runways, bridges, pipelines, lined road tunnels, retaining walls, fences, concrete or rock dams and artificial sports fields; and (b) earthworks that are integral to the construction of a structural improvement (other than a structural improvement described in subsection (4)), for example, embankments, culverts and tunnels associated with a runway, road or railway. In the circumstances we do not consider Asset 1 is a structural improvement for the purposes of subsection 43-20(2) of the ITAA 1997. It does not have a character which is identical to or similar to any of the examples given in subsection 43-20(3) of the ITAA 1997. It is therefore necessary to consider whether it is a building for the purposes of subsection 43-20(1) of the ITAA 1997. Is Asset 1 a building for the purposes of subsection 43-20(1) of the ITAA 1997? The word ‘building’ is not defined in the ITAA 1997 for the purposes of subsection 43-20(2) of the ITAA 1997. The word ‘building’ therefore takes its ordinary meaning appropriate to the context in which the term is used. The Macquarie Dictionary defines a building as follows: …a substantial structure with a roof and walls, as a shed, house, department store, etc. The term ‘building’ has been considered in a number of authorities, including Stevens v Gourley (1859) 7 CBNS 99, Moir v Williams [1892] 1 QB 264; Hilderbrandt v Stephen [1964] NSWR 740; Australian Building Construction Employees’ & Builders Labourers’ Federation v Dillingham Australia Ltd (1982) 58 FLR 170. These authorities anticipate that a building is a substantial or permanent structure which has a roof and walls which form an enclosure. A number of authorities have also considered that it is appropriate to have regard to what an ordinary person would consider to be a building, including: Harris v. De Pinna (1886) LR 33 Ch D 238 ( Harris ); Re St Peter the Great, Chichester [1961] 1 WLR 907 ( Re St Peter ); Metals & Alloys Co v. Ontario Regional Assessment Commissioner (1985) 36 RPR 163 ( Metals & Alloys ). In Harris , Chitty J proposed that it was appropriate to have regard to what a reasonable person would consider to be a building at p 249: The proposition I am about to put again is not a decisive one, but I will put it. Would an ordinary man, with a reasonable knowledge of the English language, passing this structure speak of it as a building? I agree that, it is only putting it in a somewhat different form. The question in substance is one of fact and viewing it as a whole and having regard particularly to the model, and by no means disregarding the photographs which I have seen, I have come to the conclusion that this is a structure, but not a building within sect. 3 of the Prescription Act. In Re St Peter , Buckle J accepted that there were three tests to determine what constituted a building at page 912: 1. Would the ordinary man think this was a building? 2. Has the relevant structure four walls and a roof? 3. Can one say that the structure is built? In Metals & Alloys Co a similar approach was taken to that in Harris . The Court commented at paragraph 50: “Building”, however, is an ordinary English word, and in this statute should be given the meaning an ordinary person would attribute to it. What we have in this case looks like a building. It is almost identical to its neighbouring structure, which is admittedly a building. It is built like a building. It is used like a building. … The only reasonable conclusion, in my view, is that it is a building. In Australian Building Construction Employees’ & Builders Labourers’ Federation v Dillingham Australia Ltd (1982) 58 FLR 170 Shepherd J at 175 made the following observation with respect to considering whether something is a building: Each case must depend upon its own facts and circumstances. The most important of these will be the context in which the word is used and the nature of the structure which is in question. Given the authorities above it is appropriate when looking at whether something is a building to consider, in addition to whether it has walls and a roof, whether a reasonable person would consider that it was a building. Asset 1 is built, it is a substantial structure with a high degree of permanence, capable of providing shelter and a reasonable person observing the structure would likely describe it as a building within the ordinary meaning of the word ‘building’. We consider in the circumstances that Asset 1 is a building for the purposes of subsection 43-20(2) of the ITAA 1997. As such, Asset 1 is capital works to which Division 43 of the ITAA 1997 applies. Could amounts be claimed for Asset 1 under Division 43 of the ITAA 1997? The amount that can be deducted for capital works under section 43-10 of the ITAA 1997 is determined by section 43-15 of the ITAA 1997. Section 43-15 of the ITAA 1997 states: (1) The amount you can deduct is a portion of your construction expenditure. However, it cannot exceed the amount of undeducted construction expenditure for your area. (2) Your deduction is calculated under section 43- 210 or 43- 215. The term ‘construction expenditure’ as used in section 43-15 of the ITAA 1997 is defined in section 995-1 of the ITAA 1997 as having the meaning given by section 43-70 of the ITAA 1997. Section 43-70 of the ITAA 1997 states: (1) Construction expenditure is capital expenditure incurred in respect of the construction of capital works. Paragraphs 43-70(2)(a) – (i) of the ITAA 1997 list a number of things which are not included in the meaning of ‘construction expenditure’ under subsection 43-70(1) of the ITAA 1997. Paragraphs 43-70(2)(a) – (i) of the ITAA 1997 are alternatives, in the event that any one paragraph is satisfied it will not be necessary to consider the remaining paragraphs and the expenditure will not be ‘construction expenditure’ for the purposes of subsection 43-70(1) of the ITAA 1997. Relevantly, paragraph 43-70(2)(e) of the ITAA 1997 states that expenditure on ‘plant’ does not fall within the meaning of the term ‘construction expenditure’ under subsection 43-70(1) of the ITAA 1997. In the event that Asset 1 is considered to be ‘plant’ then expenditure incurred on it will be excluded from the meaning of ‘construction expenditure’ by paragraph 43-70(2)(e) and a deduction could not be claimed for the amounts under section 43-15 of the ITAA 1997. The term ‘plant’ is defined in section 995-1 of the ITAA 1997 as having the meaning given by section 45-40 of the ITAA 1997. Section 45-40 of the ITAA 1997 contains a definition of the word ‘plant’ which is inclusive, that is, it extends the ordinary meaning of the word ‘plant’ to include the particular items listed in subsections 45-40(1) and 45-40(2) of the ITAA 1997. None of the items listed in either subsection 45-40(1) or subsection 45-40(2) of the ITAA 1997 are relevant in terms of Asset 1. As such, it is necessary to consider the ordinary meaning of the word ‘plant’ for the purposes of paragraph 43-70(2)(e) of the ITAA 1997. Ordinary meaning of plant In Wangaratta Woollen Mills Limited v The Commissioner of Taxation of the Commonwealth of Australia (1969) 119 CLR 1 ( Wangaratta Woollen Mills ) the High Court of Australia considered whether a dyehouse was ‘plant or articles’ for the purposes of former subsection 54(1) of the Income Tax Assessment Act 1936 . McTiernan J on page 9 considered earlier authorities and identified that ‘plant’ is generally considered to be something more than the mere setting in which a business is conducted, that is plant is essentially a part of the business or a tool which plays a part in the business activities. McTiernan J concluded in Wangaratta Woollen Mills at page 10: I am of the opinion that the appellant’s dyehouse is “in the nature of a tool” in the trade and does “play a part” itself in the manufacturing process. It is much more than a convenient setting for the appellant’s operations. It is an essential part in the efficient and economic operation of the appellant’s business… Its structure is an active tool in preventing spoiling of material, and in enabling the operatives to carry out their tasks. The basis of the conclusion reached by McTiernan J in Wangaratta Woollen Mills is consistent with the reasoning in Taxation Ruling TR 2007/9: Income tax: circumstances when an item used to create a particular atmosphere or ambience for premises used in a cafe, restaurant, licensed club, hotel, motel or retail shopping business constitutes an item of plant (TR 2007/9). TR 2007/9 considered the decision of the Supreme Court of New South Wales in Macquarie Worsteds Pty Ltd v The Commissioner of Taxation of the Commonwealth of Australia (1974) 23 FLR 69 and stated at paragraph 38: Whether ‘buildings, structures or the like, or parts of them’ that are ‘more than mere setting’ come within the ordinary meaning of plant depends upon ‘whether the function performed by the thing [the building, structure, or part of it] is so related to the taxpayer’s operations or special that it warrants it being held to be plant. Asset 1 has a functional significance to the successful operation of the Company’s business. It is specially engineered as an integral part of the business operations and cannot be described as simply being the mere setting for the business. In the circumstances we are satisfied that Asset 1 is ‘plant’ for the purposes of paragraph 43-70(2)(e) of the ITAA 1997. As such, expenditure on it will be excluded from the meaning of ‘construction expenditure’ by paragraph 43-70(2)(e) of the ITAA 1997 and even though it is capital works a deduction cannot be claimed under section 43-15 of the ITAA 1997. Given the above conclusions Asset 1 will not be prevented from being a depreciating asset under subsection 40-30(1) of the ITAA 1997 by the operation of subsection 40-45(2) of the ITAA 1997. | Summary: Asset 2 is not a depreciating asset for which deductions are available under Division 40 of the ITAA 1997? | Detailed Reasoning - Detailed reasoning: In the detailed reasoning for question 1 we discuss in detail the various provisions and operation of Division 40 of the ITAA 1997. We do not intend to repeat that discussion here but as far as that discussion is relevant it is to be read as forming part of the detailed reasoning for question 2. It is sufficient for present purposes to observe the following in relation to the above: ● Whether an asset is a depreciating asset is determined by section 40-30 of the ITAA 1997. ● We conclude that Asset 2 will not be part of a composite asset for the purposes of subsection 40-30(4) of the ITAA 1997. ● A number of assets, including those which are capital works for which amounts can be deducted under Division 43 of the ITAA 1997, are excluded from being depreciating assets by section 40-45 of the ITAA 1997. Is Asset 2 a depreciating asset for the purposes of Division 40 of the ITAA 1997? Asset 2 is an asset which is expected to decline in value over the time that it is used. It is subject to wear caused by exposure to the elements and meet the requirements of being a depreciating asset for the purposes of subsection 40-30(1) of the ITAA 1997. Is Asset 2 excluded from being a depreciating asset by section 40-45 of the ITAA 1997? As indicated above, a number of assets are specifically excluded from being depreciating assets for the purposes of Division 40 of the ITAA 1997 by section 40-45 of the ITAA 1997. In the present context the only exclusion of relevance is subsection 40-45(2) of the ITAA 1997. Subsection 40-45(2) relevantly states: (2) This Division does not apply to capital works for which you can deduct amounts under Division 43, or for which you could deduct amounts under that Division: (a) But for expenditure being incurred, or capital works being started, before a particular day; or (b) Had you used the capital works for a purpose relevant to those capital works under section 43-140. Determining whether or not Asset 2 falls within subsection 40-45(2) of the ITAA requires a consideration of whether it is capital works for which amounts could be deducted under Division 43 of the ITAA 1997. Division 43 of the ITAA 1997 A deduction can be claimed for capital works under Division 43 of the ITAA 1997. Section 43-10 of the ITAA 1997 states: (1) You can deduct an amount for capital works for an income year. (2) You can only deduct the amount if: (a) the capital works have a construction expenditure area; and (b) there is a pool of construction expenditure for that area; and (c) you use your area in the income year in the way set out in Table 43-140 (Current year use). Section 43-20 of the ITAA 1997 identifies the capital works for which a deduction can be claimed under Division 43 of the ITAA 1997: Buildings (1) This Division applies to capital works being a building, or an extension, alteration or improvement to a building (a) begun in Australia after 21 August 1979; or (b) begun outside Australia after 21 August 1990. Structural improvements (2) This Division also applies to capital works (other than capital works referred to in subsection (1)) begun after 26 February 1992 that are structural improvements, or extensions, alterations or improvements to structural improvements, whether they are in or outside Australia. (3) Some examples of structural improvements are: (a) sealed roads, sealed driveways, sealed car parks, sealed airport runways, bridges, pipelines, lined road tunnels, retaining walls, fences, concrete or rock dams and artificial sports fields; and (b) earthworks that are integral to the construction of a structural improvement (other than a structural improvement described in subsection (4)), for example, embankments, culverts and tunnels associated with a runway, road or railway. In the circumstances we do not consider that Asset 2 is a structural improvement for the purposes of subsection 43-20(2) of the ITAA 1997. It does not have a character which is identical to or similar to any of the examples given in subsection 43-20(3) of the ITAA 1997. It is therefore necessary to consider whether Asset 2 is a building for the purposes of subsection 43-20(1) of the ITAA 1997. Is Asset 2 a building for the purposes of subsection 43-20(1) of the ITAA 1997? The word ‘building’ is not defined in the ITAA 1997 for the purposes of subsection 43-20(2) of the ITAA 1997. The word ‘building’ therefore takes its ordinary meaning appropriate to the context in which the term is used. The Macquarie Dictionary defines a building as follows: …a substantial structure with a roof and walls, as a shed, house, department store, etc. The term ‘building’ has been considered in a number of authorities, including Stevens v Gourley (1859) 7 CBNS 99, Moir v Williams [1892] 1 QB 264; Hilderbrandt v Stephen [1964] NSWR 740; Australian Building Construction Employees’ & Builders Labourers’ Federation v Dillingham Australia Ltd (1982) 58 FLR 170. These authorities anticipate that a building is a substantial or permanent structure which has a roof and walls. A number of authorities have also considered that it is appropriate to have regard to what an ordinary person would consider to be a building, including: Harris v. De Pinna (1886) LR 33 Ch D 238 ( Harris ); Re St Peter the Great, Chichester [1961] 1 WLR 907 ( Re St Peter ); Metals & Alloys Co v. Ontario Regional Assessment Commissioner (1985) 36 RPR 163 ( Metals & Alloys ). In Harris , Chitty J in considering the words ‘other building’ proposed that it was appropriate to have regard to what a reasonable person would consider to be a building at page 249: The proposition I am about to put again is not a decisive one, but I will put it. Would an ordinary man, with a reasonable knowledge of the English language, passing this structure speak of it as a building? I agree that, it is only putting it in a somewhat different form. The question in substance is one of fact and viewing it as a whole and having regard particularly to the model, and by no means disregarding the photographs which I have seen, I have come to the conclusion that this is a structure, but not a building within sect. 3 of the Prescription Act. In Re St Peter , Buckle J seemingly accepted that there were three tests to determine what constituted a building at page 912: 1. Would the ordinary man think this was a building? 2. Has the relevant structure four walls and a roof? 3. Can one say that the structure is built? In Metals & Alloys Co a similar approach was taken to that in Harris . The Court commented at paragraph 50: “Building”, however, is an ordinary English word, and in this statute should be given the meaning an ordinary person would attribute to it. What we have in this case looks like a building. It is almost identical to its neighbouring structure, which is admittedly a building. It is built like a building. It is used like a building. … The only reasonable conclusion, in my view, is that it is a building. Given the authorities above it is appropriate when looking at whether something is a building to consider, in addition to whether it has walls and a roof, whether a reasonable person would consider that it was a building. Asset 2 is built, is a substantial structure with a high degree of permanence, it comprises walls and a roof, it is capable of providing shelter and a reasonable person observing it would likely describe it as a building within the ordinary meaning of the word ‘building’. We consider in the circumstances that Asset 2 is a building for the purposes of subsection 43-20(2) of the ITAA 1997. As such, Asset 2 is capital works for which deductions could be claimed under Division 43 of the ITAA 1997. Could amounts be claimed for Asset 2 as capital works under Division 43 of the ITAA 1997? The amount that can be deducted for capital works under section 43-10 of the ITAA 1997 is determined by section 43-15 of the ITAA 1997. Section 43-15 of the ITAA 1997 states: (1) The amount you can deduct is a portion of your construction expenditure. However, it cannot exceed the amount of undeducted construction expenditure for your area. (2) Your deduction is calculated under section 43- 210 or 43- 215. The term ‘construction expenditure’ as used in section 43-15 of the ITAA 1997 is defined in section 995-1 of the ITAA 1997 as having the meaning given by section 43-70 of the ITAA 1997. Section 43-70 of the ITAA 1997 states: (1) Construction expenditure is capital expenditure incurred in respect of the construction of capital works. Paragraphs 43-70(2)(a) – (i) of the ITAA 1997 list a number of things which are not included in the meaning of ‘construction expenditure’ under subsection 43-70(1) of the ITAA 1997. Paragraphs 43-70(2)(a) – (i) of the ITAA 1997 are alternatives, in the event that any one paragraph is satisfied it will not be necessary to consider the remaining paragraphs and the expenditure will not be ‘construction expenditure’ for the purposes of subsection 43-70(1) of the ITAA 1997. We do not consider in the circumstances that any of the paragraphs are satisfied in 43-70(2)(a) – (i) of the ITAA 1997. As such, expenditure incurred in respect of the construction of Asset 2 will be ‘construction expenditure’ for the purposes of section 43-70 of the ITAA 1997 and a portion of that amount can be deducted under section 43-15 of the ITAA 1997. In the circumstances we are satisfied that Asset 2 is capital works for which an amount could be claimed under Division 43 of the ITAA 1997. As such, Asset 2 is excluded from being a depreciating asset under subsection 40-30(1) of the ITAA 1997 by the operation of subsection 40- 45(2) of the ITAA 1997.