Document ID: chunk:federal_register_of_legislation:C2010C00603:clause:1_2:p4
Version: federal_register_of_legislation:C2010C00603
Segment Type: clause
Provision Reference: sch 1 cl 2 (pt 4/5)
Character Range: 36899–39636

the software; and

(b) the head company cannot deduct the expenditure under section 40‑455 as it operates because of section 701‑5.

Note 2: This does not prevent the head company from deducting under section 40‑455 expenditure that is not reasonably related to the in‑house software and that the head company is treated by section 701‑5 as having incurred and allocated to a software development pool because the joining entity did.

Prime cost method of working out decline in value of software

 (4) Subsection 701‑55(2) operates as if the *prime cost method of working out the decline in value of the *in‑house software applied just before the joining time.

Note: This affects the method of working out the decline in value of the software for the head company of the consolidated group.

Effective life of software

 (5) Subdivision 40‑B operates as if the *effective life of the *in‑house software were the period specified for in‑house software in subsection 40‑95(7). Subsection 701‑55(2) is subject to this subsection.

Cost of in‑house software

 (6) Sections 701‑10 and 701‑60 and Division 705 (and section 40‑85, so far as it affects that Division) operate as if the *cost of the *in‑house software were the total amount of the joining entity's expenditure that reasonably related to the software and was allocated to a software development pool.

Earlier decline in value of the in‑house software

 (7) Sections 701‑10 and 701‑60 and Division 705 (and section 40‑85, so far as it affects that Division) operate as if the decline in value, and deductions for the decline in value, of the *in‑house software for a period before the joining time were the amount worked out under subsection (8).

 (8) Work out the amount by:
 (a) working out, for each software development pool to which expenditure relating to the *in‑house software was allocated, the amount of the joining entity's deductions under section 40‑455 that reasonably relates to the software; and
 (b) adding up each of those amounts if there are 2 or more such pools.

Note: Subsections (6), (7) and (8) can affect the working out of the tax cost setting amount for the in‑house software in these ways:

(a) one way is by affecting the adjustable value of the software, which may be worked out under section 40‑85 by reference to the decline in value of the software, and which is relevant to section 705‑50 (which reduces the tax cost setting amount for over‑depreciated assets);

(b) another way is by affecting the joining entity's terminating value for the software, which section 705‑30 defines as being the adjustable value of the software just before the joining time, and which is relevant to sections 705‑40, 705‑50 and 705‑57 (which may reduce the