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.
- 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.