Under the Uniform Capital Allowances (UCA), you can allocate to a project pool certain capital expenditure incurred after 30 June 2001 that is directly connected with a project you carry on (or propose to carry on) for a taxable purpose, and write it off over the project life. Each project has a separate project pool.
The project must be of sufficient substance and be sufficiently identified that it can be shown that the capital expenditure said to be a 'project amount' is directly connected with the project.
A project is carried on if it involves some form of continuing activity. The holding of a passive investment such as a rental property would not have sufficient activity to constitute the carrying on of a project. The capital expenditure is known as a 'project amount' and is expenditure incurred:
to create or upgrade community infrastructure for a community associated with the project; this expenditure must be paid (not just incurred) to be a project amount
for site preparation costs for depreciating assets (other than draining swamp or low-lying land, or clearing land for horticultural plants)
for feasibility studies or environmental assessments for the project
to obtain information associated with the project
in seeking to obtain a right to intellectual property
for ornamental trees or shrubs
- Open the Depreciation worksheet by following the menu path Preparation > Schedules > depreciation worksheet (d)
- At the Depreciation worksheet index click Create Project or [Alt+T] to open the Project Pool dialog.
The fields offered for data entry include:
|Group||This refers to a group of projects (for example, Feasibility Studies). Enter a letter or number as a code to define the group to which this type of project will belong. The Group code may be left blank. Refer to Batch Update: Re-Group.|
|Group Description||Enter a description of the type of projects held in the group. For AE and Series 6 & 8, if you have Standard answers set up, click [F7] to select a description.|
This will determine where the integration point will be in the main return, schedule or worksheet.
For the Individual return:
For non-individual entities:
|Project No.||Enter a number to distinguish this project from other projects within a group. When entering the details of a new project belonging to an existing group, specifying the Group code causes the next consecutive number in the range, 00001 to 99999, to be applied.|
Enter a description of the project (for example, Copper Mine Feasibility). For AE and Series 6 & 8, click [F7] to select a Standard answer, otherwise type a description.
For AE and Series 6 & 8, avoid duplication - if the descriptions of two or more assets are the same, make some distinction in the first 20 characters.
|Completed/abandoned/sold project||If this option is selected the entire undeducted value of the project will become deductible. The amount in the opening balance, plus all the amounts entered in the project this year (environmental impact assessment, mining and transport, other expenditure) will be shown in the Decline in Value field and the closing balance of the project will become zero.|
|Date Project Commenced||Enter the date that the project commenced.|
|Expected Project Life||Enter in this field the number of years and fractions of a year you anticipate the project will run. To qualify for this allowance, the life of the Project must be known, that is it must have a start date and an anticipated end date from which the number of years or fractions of years is calculated. Each year you must estimate the project life and change it if the project circumstances have changed so that the life is less than it was at the beginning, or it is anticipated to run for a longer period than was first estimated. Tax will use this figure to calculate the deduction.|
|Extent Project used for Income Production||Enter a value for the extent to which the project is used for producing income. This will be used to determine the decline in value calculated. For example, if you enter 6%, the calculation for the deductible decline in value will be multiplied by 6%.|
|Primary Production Portion||If applicable enter the value for the extent to which the per cent used for producing income relates to a Primary Production Business. This field applies only to Individual, Trust and Partnership returns.|
|Opening balance of project pool||If this is not the first year in the life of the pool, enter the opening balance of the project. Typically in the first year of a project the opening balance will be zero. In future years the opening balance of the project will be defaulted to be the same as the closing balance of the preceding year.|
Environmental impact assessment expenditure
|Enter the environmental impact assessment expense for the project. All expenditure entered will be included in the calculation of the project decline in value.|
|Mining and/or transport capital expenditure|
Enter the mining and/or transport capital expenditure. All expenditure entered will be included in the calculation of the project decline in value.
|Other||Enter the amount of any other related expenditure for the project. All expenditure entered will be included in the calculation of the project decline in value.|
|Decline in Value||This field will show the amount calculated for the decline in value. The amount calculated is the total of the opening balance and all expenditure this year, multiplied by the rate of decline for this year. This value is calculated for the whole year, regardless of when the expense was incurred.|
|Closing Balance||This field stores the closing balance of the pool. This amount is calculated by adding the opening balance to the current year expenditure, and deducting the decline in value for the year.|
% Rate this year
This is the rate of decline of the project for the year. It is calculated by dividing 150% or 200% by the project life. For example, a 10-year project will be written off at a rate of 15% or 20%.
For Projects commencing before 10 May 2006, a deduction rate of 150% is used for projects that started to operate before that date OR a project that started to operate on or after that date where the project pool contains project amounts incurred before that date. You CANNOT use the higher rate if, on or after 10 May 2006, the taxpayer abandons, sells or otherwise disposes of an existing project then restarts operating the project in order to calculate the deduction using the higher rate.
Where the project pool contains only project amounts incurred on or after 10 May 2006 and the project started to operate on or after that date, the deduction rate is 200%.
|% Rate this year||This is the amount of decline in value that will be integrated to the return. This value is calculated by multiplying the Decline in Value by the Extent project used for income production field|
|Total||This is a summary of the decline in value calculated. It will show the total for the entire return at the Return field and the total for the group at the Group field.|