Document ID: chunk:federal_register_of_legislation:C2025C00029:section:14:p1
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 14 (pt 1/2)
Character Range: 942587–945405

14                                                 A *balancing adjustment event happens to a *depreciating asset you *hold because of subsection 40‑295(1B)                                                                                                                 What would, apart from subsection 40‑285(3), be the asset's *adjustable value on the day the *balancing adjustment event occurs

 (3) The first element of *cost includes an amount you paid or are taken to have paid in relation to starting to *hold the *depreciating asset if that amount is directly connected with holding the asset.
 (4) The first element of *cost of a *depreciating asset does not include an amount that forms part of the second element of cost of another depreciating asset.
Note: The first element of cost may be reduced under section 40‑1130 to account for exploration benefits received under farm‑in farm‑out arrangements.

40‑185  Amount you are taken to have paid to hold a depreciating asset or to receive a benefit
 (1) This Division applies to you as if you had paid, to *hold a *depreciating asset or for an economic benefit for such an asset, the greater of these amounts:
 (a) the sum of the amounts that would have been included in your assessable income because you started to hold the asset or received the benefit, or because you gave something to start holding the asset or receive the benefit, if you ignored the value of anything you gave that reduced the amount actually included; or
 (b) the sum of the applicable amounts set out in this table in relation to holding the asset or receiving the benefit.
Example 1: Gold Medals Ltd manufactures some medals for a local sporting association's annual meeting in return for a die cut stamping machine. The medals have a market value of $20,000. The machine has an arm's length value of $100,000 but Gold Medals has to contribute $75,000 towards acquiring it from the association. Gold Medals will have to include:
 in its assessable income because of section 21A of the Income Tax Assessment Act 1936.
 The first element of the machine's cost will be the greater of:
• the amount it paid ($75,000) plus the market value of the non‑cash benefits it provided ($20,000), which comes to $95,000; and
• the amount that was assessable income from receiving the machine ($25,000) plus the amount by which that assessable income was reduced because of the payment Gold Medals made ($75,000), which comes to $100,000.
 So, in this case, the first element of the machine's cost to Gold Medals is $100,000.
Example 2: Laura travels overseas to purchase a purpose‑built vehicle for use in her trade. The purchase of the vehicle is the sole reason for the trip. Laura incurs expenses for airfares and accommodation. These expenses are included in the cost of the vehicle because