On 27 June 2018, the Commissioner issued TR 2018/4, setting out his determination of the effective life of depreciating assets, for the purposes of depreciation deductions under Division 40 of the ITAA97 (s40-25).
Though taxpayers can choose their own ‘effective lives’ s40-100 allows the Commissioner to determine effective lives, which are widely used as they avoid audit adjustments.
The Ruling includes new effective life determinations for assets used in the following industries and activities:
- butter manufacturing;
- fruit and vegetable processing;
- gas, oil and mining support services (excluding offshore services);
- ice cream manufacturing;
- scientific testing and analysis services; and
- spirit manufacturing.
The TR 2018/4 effective life determinations for replace the effective lives, under withdrawn equivalent: TR 2017/2, for assets first used, or installed ready for use (within five years) on or after 1 July 2018. This is under s40-95. TR 2017/2 was withdrawn on 27 June 2018, also.
To the extent that the Commissioner’s views in the withdrawn ruling are still applicable, they have been incorporated into TR 2018/4.
The antecedents of this, go back to 1 June 2018, when Assistant Commissioner, Public Groups and International: Sharon Murray, made the following legislative instrument Income Tax (Effective Life of Depreciating Assets) Amendment Determination 2018 (No 1). Schedule 1 of the 2018 Determination replaces Schedule 1 of the Income Tax (Effective Life of Depreciating Assets) Determination 2015 to provide for specific assets with effective lives as a basis to calculate the decline in value (depreciation) of a depreciating asset for income tax purposes – registered on 11 June 2015.
FJM 1.7.18
[LTN 121, 27/6/18; KPMG 28/6/18; Tax Month – June 2018]
Study questions (answers available)
- Does this ruling set out the Commissioner’s determination of the effective lives of depreciating assets for the 2018/19 year?
- Does it apply to assets first used within this year (assuming they were installed ready for use in the same year)?
- Does the 2017 equivalent ruling remain in effect?
