Senator IAN CAMPBELL (10:56 AM) —by leave—I move:

(1) Schedule 1, item 14, page 6 (after line 4), after the Table of Subdivisions, insert:

Guide to Division 46

46-1 What this Division is about

This Division allows a deduction, over 2½ years, for capital and non-capital expenditure you incur in acquiring or developing software for your own use.

You may choose to pool such expenditure. This can help you to work out your deductions if it would be hard to attribute your costs to individual projects separately.

The Division also allows an immediate deduction for expenditure on software, incurred before 1 January 2000, to ensure that a computer system attains Year 2000 compliance. Immediate deductions are also allowed for minor expenditure and for expenditure on software that you decide never to use.

[This is the end of the Guide.]

[Division 46—insertion of guide]

(2) Schedule 1, item 14, page 6 (lines 19 to 34), omit all the words and examples after paragraph (c).

[section 46-10—scope of Division]

(3) Schedule 1, item 14, page 7 (after line 13), at the end of section 46-15 (after the example), add:

(2) This Division also does not apply to *expenditure on software if:

(a) you can get a deduction for the expenditure under a provision of this Act (including section 8-1) outside this Division; and

(b) the *software was acquired or developed other than principally for you to use to perform the functions for which it was acquired or developed.

Example 1: You incur capital expenditure in developing new software to use in controlling your mining operations. You would consider selling other similar businesses a licence to use the software, but this has not influenced your decision to develop it. This Division still applies to the expenditure, even though Division 330 (Mining and quarrying) might otherwise have applied to it, because you developed it principally to perform that function in your business; not principally as a product to sell to others.

Example 2: You incur expenditure in developing new software principally to sell to the general public, but you also incidentally plan to use the software in your own business. Assuming that the expenditure is also covered by section 8-1 (General deductions), this Division does not apply to it, because you developed the software principally to sell it to the public; not principally to use in-house.

(3) To avoid doubt, expenditure is excluded from the scope of this Division if it is covered by either or both of subsections (1) and (2).

[section 46-15—scope of Division]

(4) Schedule 1, item 14, page 7 (line 16), after "if", insert "(having taken into account the effect of section 46-15)".

[section 46-20—scope of Division]

The amendments to the Taxation Laws Amendment (Software Depreciation) Bill 1999 will ensure that all expenditure on software will be deductible, either within new division 46 or elsewhere in the tax law. Following the introduction of the bill into the House, the government received a number of representations that there may be a small number of cases where taxpayers may not be able to obtain a deduction under any provision of the law, including new division 46, for expenditure on software. This would be an unsatisfactory outcome, and the amendments I am moving will address that situation. The amendments represent yet another area where the government's commitment to consult on a new regime for software expenditure has provided a workable outcome. I table the supplementary explanatory memorandum to the amendments.