Document ID: chunk:federal_register_of_legislation:C2025C00029:section:8:p2
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 8 (pt 2/7)
Character Range: 922878–925612

by any entity for one or more of the following purposes:
 (a) a *taxable purpose;
 (b) the purpose of producing *exempt income or *non‑assessable non‑exempt income;
 (c) the purpose of conducting *R&D activities, assuming that this is reasonably likely.
 (1B) Secondly, if relevant for the asset:
 (a) have regard to the wear and tear you reasonably expect from your expected circumstances of use; and
 (b) assume that the asset will be maintained in reasonably good order and condition.
 (2) If, in working out that period, you decide that the asset would be likely to be:
 (a) scrapped; or
 (b) sold for no more than scrap value or abandoned;
before the end of that period, its effective life ends at the earlier time. However, when making your decision, disregard reasons attributable to the technical risk in conducting *R&D activities if it is reasonably likely that the asset will be used for such activities.
 (3) You work out the period mentioned in subsection (1A) or (2) beginning at the *start time of the *depreciating asset.

Exception: intangibles
 (4) This section does not apply to the following intangible *depreciating assets:
 (a) assets to which an item in the table in subsection 40‑95(7) applies;
 (b) *mining, quarrying or prospecting rights;
 (c) *mining, quarrying or prospecting information.

40‑110  Recalculating effective life
 (1) You may choose to recalculate the *effective life of a *depreciating asset from a later income year if the effective life you have been using is no longer accurate because of changed circumstances relating to the nature of the use of the asset.
Example: Some examples of changes in circumstances that may result in your recalculating the effective life of a depreciating asset are:
• your use of the asset turns out to be more or less rigorous than you expected (or was anticipated by the Commissioner's determination);
• there is a downturn in demand for the goods or services the asset is used to produce that will result in the asset being scrapped;
• legislation prevents the asset's continued use;
• changes in technology make the asset redundant;
• there is an unexpected demand, or lack of success, for a film.
 (2) You must recalculate a *depreciating asset's *effective life from a later income year if:
 (a) you:
 (i) self‑assessed its effective life; or
 (ii) are using an effective life worked out under section 40‑100 (about the Commissioner's determination), or 40‑102 (about the capped life of certain depreciating assets), and the *prime cost method; or
 (iii) are using an effective life because of subsection 40‑95(4), (4B), (4C), (5), (5B) or (5C); and
 (b) its *cost is increased in that year by at least 10%.
Note 1: You may conclude that the effective