NO.046

NEW TAX TREATMENT FOR FILM COPYRIGHT

The Australian Government will amend the capital allowance treatment of film

copyright that does not currently qualify for concessional treatment under Divisions

10B and 10BA of the Income Tax Assessment Act 1936. Films may not qualify

for concessional treatment because they lack sufficient Australian content.

This would include films made overseas by Australian taxpayers. Under the change,

film copyright will now be included in the effective life depreciation regime.

Under the current law, capital expenditure on qualifying Australian films attracts

an immediate tax deduction under Division 10BA, or a two year write-off under

Division 10B. Currently film copyright more generally is depreciated either

over 25 years or over the remaining life of the copyright, whichever is less.

This does not reflect the true economic life of films.

By bringing film copyright under the effective life depreciation regime, the

Commissioner of Taxation may make a determination specifying a ‘safe harbour’

effective life. Further, taxpayers may choose to self-assess the effective life

or choose the Commissioner’s safe harbour effective life determination.

The change will apply to expenditure on film copyright taken out on or after

1July2004.

The Commissioner is expected to make an effective life determination shortly

after legislation to implement the measure has been enacted.

CANBERRA

10 May 2005