The Minister for Revenue and Assistant Treasurer, Senator Coonan, announced today that the Government will introduce legislation to ensure depreciation deductions for aeroplanes, helicopters, gas transmission and distribution assets, oil and gas production assets and assets used to manufacture condensate, crude oil, domestic gas, liquid natural gas (LNG) or liquid petroleum gas (LPG) remain appropriate following reviews of the effective lives of these assets by the Commissioner of Taxation.
The industries affected, and the Government, have been aware for some time that significant increases in the effective lives of these assets was in prospect, based solely on tax integrity criteria.
"The Government has taken these considerations and other broader national interest concerns, into account in deciding on the appropriate effective life", Senator Coonan said.
The legislative statutory caps for these assets will take effect once the Commissioner of Taxation increases their safe harbour effective lives. It is expected that the Commissioner of Taxation's forthcoming determination will take effect from 1 July 2002. The statutory caps are detailed below.
|
Asset class |
Statutory cap on effective life (years) |
Current effective life or range (years) |
|
Aeroplanes: |
||
|
General use |
10 |
8 |
|
Used predominantly for agricultural spraying or dusting |
8 |
4 |
|
Helicopters: |
||
|
General use |
10 |
8 |
|
Used predominantly for mustering, or agricultural spraying or dusting |
8 |
4 |
|
Gas transmission and distribution assets |
20 |
20 |
|
Oil and gas production assets except electricity generation assets and offshore platforms |
15 |
10-20 |
|
Offshore oil or gas platforms |
20 |
20 |
|
Assets (except electricity generation assets) used to manufacture condensate, crude oil, domestic gas, liquid natural gas (LNG) or liquid petroleum gas (LPG), otherwise than at an oil refinery |
15 |
13.3 |
The statutory caps represent the maximum period over which depreciation deductions can be taken if a taxpayer chooses to use the effective life determined by the Commissioner for an asset. The statutory caps do not remove the ability of a taxpayer to self-assess the effective life appropriate to their own circumstances. In this sense, the statutory cap will operate as a "safe harbour" effective life.
Under the statutory cap approach, the Commissioner's "safe harbour" effective lives will continue to apply to individual assets within the asset classes, where those effective lives are shorter than the capped life. This means that in many cases, the average effective life will be shorter than the limit set by the statutory cap.
Senator Coonan also stated that "it is important that the Commissioner of Taxation continues to modernise, update and revise the effective life schedule for depreciable assets to reflect current business practices".
The new statutory effective life caps will provide certainty for the industries concerned, and provide an appropriate balance between meeting the needs of those industries as well as maintaining the integrity of the effective life depreciation system.
The effective lives of gas to liquids (GTL) production assets have yet to be determined. The GTL industry will need to consult with the Commissioner of Taxation on these determinations.