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EJ 23: Allocation of deductions for research, development, and resulting market development
or “How to spread out tax deductions for research and development expenses”
You could also call this:

“How to spread out deductions for aircraft engine costs over time”

When you’re allowed to deduct money for buying or overhauling an aircraft engine, or for leasing one under a finance lease, you need to follow some rules about how to spread out that deduction over time.

If you don’t choose to use a different method (which you can learn about in section EJ 25 or EJ 26), you must divide the deduction over each year that’s part of the scheduled time between overhauls. The amount you deduct each year depends on how much of that scheduled time falls in that year.

If you do an overhaul before the scheduled time is up, you need to move the remaining deduction from the previous purchase or overhaul to the year when you do the new overhaul.

If you’re leasing an engine or a plane with an engine (where the engine’s price isn’t specified), and the lease ends before the scheduled time between overhauls is up, you need to move any remaining deduction to the year when the lease ends.

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Next up: EJ 25: Allocation of expenditure on aircraft engine overhauls: election by IFRS user

or “Choosing how to claim deductions for aircraft engine overhauls under IFRS rules”
Next

Part E Timing and quantifying rules
Spreading of specific expenditure: Definitions

EJ 24Allocation of expenditure on aircraft engine overhauls

  1. This section applies when a person is allowed a deduction under section DW 5 or DW 6 (which relate to the acquisition, overhaul, and leasing of aircraft engines) for expenditure incurred in acquiring an aircraft engine or in performing an aircraft engine overhaul of an aircraft engine or under a finance lease involving an aircraft engine.

  2. A person who does not make an election under section EJ 25 or EJ 26 must allocate a proportion of the deduction for an acquisition or aircraft engine overhaul to each income year that includes a part of the scheduled overhaul period following the acquisition or aircraft engine overhaul, with the proportion for an income year being equal to the proportion of the scheduled overhaul period that occurs in the income year.

  3. If the person performs in an income year an aircraft engine overhaul during the scheduled overhaul period relating to the preceding acquisition or aircraft engine overhaul of the aircraft engine, the person must allocate to the income year the part of the deduction for the preceding acquisition or aircraft engine overhaul that would otherwise be allocated under subsection (2) to a later income year.

  4. If the person leases an aircraft engine, or an aircraft including an unpriced aircraft engine, under a lease that ends before the end of the scheduled overhaul period relating to the preceding acquisition or aircraft engine overhaul of the aircraft engine, the person must allocate to the income year in which the lease ends the part of the deduction for the preceding acquisition or aircraft engine overhaul that would otherwise be allocated under subsection (2) to a later income year.

Notes
  • Section EJ 24: inserted, on (applying for the 2017–18 and later income years), by section 69(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).