Document ID: chunk:federal_register_of_legislation:C2004A00844:clause:1_10:p9
Version: federal_register_of_legislation:C2004A00844
Segment Type: clause
Provision Reference: sch 1 cl 10 (pt 9/13)
Character Range: 43388–46113

producing *exempt income:
 (a) assuming it will be subject to wear and tear at a rate that is reasonable for the Commissioner to assume; and
 (b) assuming it will be maintained in reasonably good order and condition; and
 (c) having regard to the period within which it is likely to be scrapped, sold for no more than scrap value or abandoned.

40‑105  Self‑assessing effective life

 (1) You work out the effective life of a *depreciating asset yourself by estimating the period (in years, including fractions of years) it can be used by any entity for a *taxable purpose or for the purpose of producing *exempt income:
 (a) having regard to the wear and tear you reasonably expect from your expected circumstances of use; and
 (b) assuming that it will be maintained in reasonably good order and condition.

 (2) If, in working out that period, you conclude that the asset would be likely to be scrapped, sold for no more than scrap value or abandoned before the end of that period, its effective life ends at the earlier time.

 (3) You work out the period in subsection (1) or (2) as from the *start time of the *depreciating asset.

Exception: intangibles

 (4) This section does not apply to an intangible *depreciating asset mentioned in the table in subsection 40‑95(7).

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.

 (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) and the *prime cost method; or
 (iii) are using an effective life because of subsection 40‑95(4) or (5); and
 (b) its *cost is increased in that year by at least 10%.

Note 1: You may conclude that the effective life is the same.

Note 2: For the elements of the cost of a depreciating asset, see Subdivision 40‑C.

Example 1: