Document ID: chunk:federal_register_of_legislation:C2004A00844:clause:1_10:p4
Version: federal_register_of_legislation:C2004A00844
Segment Type: clause
Provision Reference: sch 1 cl 10 (pt 4/13)
Character Range: 29734–32397

choose to recalculate effective life because of changed circumstances: see section 40‑110. That section also requires you to recalculate effective life in some cases.

Exception: intangibles

 (2) You cannot use the *diminishing value method to work out the decline in value of:
 (a) *in‑house software; or
 (b) an item of *intellectual property; or
 (c) a *spectrum licence; or
 (d) a *datacasting transmitter licence.

Limit on decline

 (3) The decline in value of a *depreciating asset under this section for an income year cannot be more than the amount that is the asset's base value in the formula in subsection (1) for that income year.

40‑75  Prime cost method

 (1) You work out the decline in value of a *depreciating asset for an income year using the prime cost method in this way:
where:
where:

days held has the same meaning as in subsection 40‑70(1).

Example: Greg acquires an asset for $3,500 and first uses it on the 26th day of the income year. If the effective life of the asset is 31/3 years, the asset would decline in value in that year by:

 The asset's adjustable value at the end of the income year is:

 (2) However, you must adjust the formula in subsection (1) for an income year (the change year):
 (a) for which you recalculate the *depreciating asset's *effective life; or
 (b) after the year in which the asset's start time occurs and in which an amount is included in the second element of the asset's *cost; or
 (c) for which the asset's cost or *adjustable value is reduced under section 40‑90 (about debt forgiveness); or
 (d) for which there is roll‑over relief under section 40‑340 where the transferor referred to in that section was using the *prime cost method; or
 (e) for which there is a reduction to the asset's adjustable value under paragraph 40‑365(5)(b) (about involuntary disposals) where you are using the prime cost method; or
 (f) for which the *opening adjustable value of the asset is modified under subsection 27‑80(4), 27‑85(3) or 27‑90(3).
The adjustments apply for the change year and later years.

Note: For recalculating a depreciating asset's effective life: see section 40‑110.

 (3) The adjustments are:
 (a) instead of the asset's *cost, you use its *opening adjustable value for the change year plus the amounts (if any) included in the second element of its cost for that year; and
 (b) instead of the asset's *effective life, you use its *remaining effective life.

 (4) The remaining effective life of a *depreciating asset is any period of its *effective life that is yet to elapse as at the start of the change year.

Note: Effective life is worked out in years and fractions of years.