Australia

Details

  • Service: Tax, Corporate Tax
  • Type: Regulatory update
  • Date: 26/08/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Nicholas Blunt

Nicholas Blunt
Director, Tax

+61 2 9335 8111

nblunt@kpmg.com.au

Privatisations and the application of Division 58 

by Nicholas Blunt, Corporate Tax Specialist

With the recent divestment of various government owned assets and the potential for future divestments, it is important to consider how Division 58 of the Income Tax Assessment Act 1997 (ITAA 1997) operates in respect of privatised depreciable assets for tax purposes. This is particularly relevant for capital intensive businesses such as key infrastructure assets (ports, rail, electricity) which have or may be privatised.

Broadly, Division 58 operates to set a depreciable asset’s cost at either its notional written down value or a pre-existing audited book value at the time the asset is privatised rather than using the market value for a depreciable asset to establish its cost for tax purposes.

 

In undertaking a Division 58 calculation, taxpayers often need to consider whether sufficient reliable information exists to compute these values (as often public sector agencies may no longer hold historic records) or whether a suitable alternative methodology acceptable to the ATO could be used.

 

Other issues to consider

  • Is it possible to include any stamp duty paid in the opening cost base of a depreciable asset under an asset sale for Division 58 purposes?
  • Do I still need to consider what the market value of a depreciable asset is if I tax consolidate the privatised entity that holds the privatised assets? What impact is there for the allocable cost amount (ACA) calculations under tax consolidation?
  • Is it possible to reset the depreciation methodology or effective lives of the depreciable assets?
  • Do the Division 58 rules continue to apply to set a depreciable asset’s cost in a subsequent sale of the assets by one consolidated group to another within 24 months from the time the assets are first privatised?

 

A careful assessment of each of the consequences of Division 58 on the tax value of depreciable assets should be a key consideration for any taxpayer.

 

Share this

Share this

Tax

Our Tax Team assists with corporate tax, transfer pricing, indirect tax, international executive services, R&D incentives, superannuation and more.

Corporate Tax

At KPMG we combine an in-depth knowledge of corporate taxation issues with our understanding of how tax fits into the broader picture.