The project pool rules for MCE and TCE are a ‘catch-all’ provision where a taxpayer incurs capital expenditure of a specified type “in carrying on a business or mining operation”, and the expenditure does not form part of a depreciating asset held by the taxpayer.
While the project pool rules have a specific provision dealing with a taxpayer disposing of a project, there are no provisions dealing with a taxpayer acquiring an interest in a project which includes project pool expenditure.
After reviewing the former MCE and TCE provisions contained in Division 330 of the 1997 Act, as well as the Explanatory Memorandum introducing the Capital Allowances provisions, there is no apparent policy oversight. The project pool provisions seem only to be intended to apply to capital expenditure directly incurred by a taxpayer. There is no provision to transfer the benefit of unclaimed pool expenditure to a purchaser as is the case with capital works or with allowable capital expenditure (ACE) under the former mining provisions.
The practical solution to this issue is to understand the underlying assets the expenditure relates to, and to establish if this qualifies as a depreciating asset held by the taxpayer (e.g. a haulage road, power facility or an employee camp). The other key difference to consider in this case is the ‘effective life’ of the asset, as this may be different to the ‘project life’ under the project pool provisions.