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Stop using an asset for work purposes - balancing adjustment

Initiate Registered Tax Practitioner

Views 674

Replies 4

If you stop using an asset for work purposes, whether a motor vehicle, computer, phone or low value pool asset and still retain the asset, what is the consideration received, for balancing adjustment purposes? 

 

 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Taxicorn Registered Tax Practitioner

Replies 2

If you stop using an asset for work purposes, whether a motor vehicle, computer, phone or low value pool asset and still retain the asset, what is the consideration received, for balancing adjustment purposes? 

 

No balancing adj because you have not disposed of the asset  -  need to apportion amount of depn claimed that year.

e.g. if full year depn = $ 550, but asset only used for 150 days in 2020, then depn claim  = $ 550 x 150/366.

Usually done by changing private use % in depn schedule.

 

4 REPLIES 4

Champion

Replies 0

If you cease to hold or use a depreciating asset, a balancing adjustment event may occur. A balancing adjustment event occurs for a depreciating asset when: you stop holding the asset – for example, it is sold, lost, or destroyed. you stop using it for any purpose and expect never to use it again.

Most helpful response

Taxicorn Registered Tax Practitioner

Replies 2

If you stop using an asset for work purposes, whether a motor vehicle, computer, phone or low value pool asset and still retain the asset, what is the consideration received, for balancing adjustment purposes? 

 

No balancing adj because you have not disposed of the asset  -  need to apportion amount of depn claimed that year.

e.g. if full year depn = $ 550, but asset only used for 150 days in 2020, then depn claim  = $ 550 x 150/366.

Usually done by changing private use % in depn schedule.

 

Initiate Registered Tax Practitioner

Replies 1

In light of Lewis-H's response to this question, where you stop using an asset for work or business purposes

and intention is not to ever use again, this person is saying that a balancing adjustment is necessary.

 

Could I please receive clarification/confirmation as to whether a balancing adjustment is necessary, and how you work out value of consideration, if balancing adjustment is necessary.

 

Taxicorn Registered Tax Practitioner

Replies 0

In light of Lewis-H's response to this question, where you stop using an asset for work or business purposes

and intention is not to ever use again, this person is saying that a balancing adjustment is necessary.

 

Could I please receive clarification/confirmation as to whether a balancing adjustment is necessary, and how you work out value of consideration, if balancing adjustment is necessary.

 

If it the asset is never going to be used again - ever - for income purposes, then it is like a disposal for market value.

 

From ATO:

For any asset other than a unit of in-house software, if you stop using it and expect never to use it again but still hold it, the termination value is the market value at that time. For a depreciating asset you decide never to use but still hold, the termination value is the market value when you make the decision.

https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/General-depreciatio...