NO.031

Today the Government is releasing further exposure draft legislation on the

Uniform Capital Allowance (UCA) system. The exposure draft package comprises

the main bill to give effect to the UCA and a bill containing transitional

and consequential provisions which has not been previously released.

The UCA legislation reflects the Government’s commitment to simplifying

the tax law by streamlining the tax treatment of depreciating assets. The UCA

system applies to all taxpayers, except those small businesses that participate

in the Simplified Tax System. It is a set of common principles that consolidates

and replaces more than 27 separate capital allowance regimes in the existing

tax law. These principles allow taxpayers to calculate deductions for the decline

in value of depreciating assets that they hold.

The UCA legislation is due to begin on 1 July 2001. To provide taxpayers with

the greatest opportunity to familiarise themselves with the proposed law before

the legislation is introduced into Parliament, the Government is releasing

this package today. In particular, this should enhance taxpayers’ understanding

of the new rules applying to the deductibility of existing expenditures, since

these rules have not been previously released in draft form.

An exposure draft of the main UCA Bill was released on 18 December 2000. The

revised exposure draft of the bill incorporates changes that reflect many of

the submissions received.

Comments on the new transitional and consequential provisions should be received

by 18 May.

The UCA Bill will also contain a rule to prevent taxpayers obtaining artificially

accelerated deductions in circumstances where they acquire the asset from an

associate or where the end user of the asset does not change. To limit these

artificial deductions, Division 42 of the Income Tax Assessment Act 1997 will

also be amended so that this rule begins from 10.00 am Australian Eastern Standard

Time today.

From that time, the new owner of plant and equipment which is acquired from

an associate or where the end user does not change (such as the sale and leasing

back of plant and equipment) must use the same depreciation method as the previous

holder. Where the diminishing value method is used, the same effective life

must be used as that which the previous owner used, while the same remaining

effective life can be used where the prime cost method is used. Where the end

user does not change and taxpayers are unable to obtain information on the

previous method of write-off, the diminishing value method and Commissioner’s

safe harbour effective life rate can be used.

The draft legislation and explanatory statement can be obtained from the Treasury

website (www.treasury.gov.au/businesstax)

Comments should be sent to:

Assistant Commissioner

Intangibles/Physical Assets

Australian Taxation Office

PO Box 900, CIVIC SQUARE ACT 2608.

Or can be emailed to capital.allowances@ato.gov.au.

Additional information on the exposure drafts can be obtained from the Business

Tax Reform Information Line on 1300 137619 or the Treasury website.

Canberra

9 May 2001

Contacts: Neil Ferry

Treasury

(02) 6263 4400

Chris Sheehan

Australian Taxation Office

(02) 6216 2039