Document ID: chunk:federal_register_of_legislation:F2024L00964:reg:40
Version: federal_register_of_legislation:F2024L00964
Segment Type: reg
Provision Reference: reg 40
Character Range: 80404–81712

40  Capital costs and operating costs
 (1) For the purposes of step 5 of the residual pricing method, an included cost for a participant in a relevant operation is a capital cost if:
 (a) it is not a personal cost; and
 (b) it is not a commercial tolling fee; and
 (c) any of the following subparagraphs apply:
 (i) it was incurred before the production date;
 (ii) the unit of property for which it was incurred is a depreciating asset for the purposes of section 40–30 of the Income Tax Assessment Act 1997;
 (iii) it is a project amount within the meaning of section 40‑840 of the Income Tax Assessment Act 1997.
Note: Subparagraph (c)(i) applies if, for example, a person incurs operating expenses before the production date. Those expenses will be capital costs for the purposes of this instrument.
 (2) A cost that is a capital cost only because of subparagraph (1)(c)(i) is taken to have been incurred on 1 January in the financial year in which it was incurred.
Note: Costs that relate to a unit of property that is constructed over several years of tax are dealt with in section 43.
 (3) For the purposes of step 5 of the residual pricing method, an included cost for a participant in a relevant operation is an operating cost if:
 (a) it is not a personal cost; and
 (b) it is not a capital cost.