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QB 19/02
02 Apr 2019

Depreciation – change of use event

This Question We’ve Been Asked considers whether depreciation recovery income may arise for a business that becomes a charity and begins deriving exempt income. It concludes that a business that becomes a charity will have a change of use of its depreciable property, as that property is no longer available for use in deriving assessable income but will be used for deriving exempt income. As depreciation deductions will be disallowed, ss EE 47(2) and EE 47(2B) apply. The issue was raised following an amendment to the timing of this income (now contained in s EE 47(2B)) which means that any depreciation recovery income will arise immediately before the income exemption applies.