Taxation Laws Amendment Act 1993 (17 of 1993)

Part 3   AMENDMENT OF THE INCOME TAX ASSESSMENT ACT 1936

Division 11   Amendments relating to motor vehicle depreciation limit

41   Limit on cost price for depreciation of motor vehicle

Section 57AF of the Principal Act is amended:

(a) by omitting subsections (2) to (12) (inclusive) and substituting the following subsections:

(Limit on cost for depreciation purposes)

"(2) For the purpose of calculating the depreciation allowable to a taxpayer in respect of a unit of property to which this section applies, if:

(a) the cost of the unit;

is more than:

(b) the motor vehicle depreciation limit (see subsection (3) or (4)) for the financial year ('the first-use year') when the taxpayer first used it for any purpose;

then its cost is taken to be equal to the motor vehicle depreciation limit for the first-use year.

(Motor vehicle depreciation limit for 1992-93)

"(3) The motor vehicle depreciation limit for the 1992-93 first-use year is $47,280.

(Motor vehicle depreciation limit for 1993-94 and later years)

"(4) For any later first-use year, the motor vehicle depreciation limit for the first-use year is calculated by:

(a) taking the motor vehicle depreciation limit for the financial year before it (ignoring any increase that may have resulted from applying paragraph (d)); and

(b) multiplying the amount under (a) by the indexation factor for the first-use year (see subsection (5)); and

(c) rounding the result to the nearest whole dollar (rounding up an amount ending in 50 cents); and

(d) if the result is less than $18,000-increasing it to $18,000.

(Working out the indexation factor)

"(5) The indexation factor for the first-use year is calculated using the following formula (and then rounded under subsection (6)):

sum of index numbers for quarters in first March year

sum of index numbers for quarters in second March year

where:

'first March year' means the period of 12 months ending on 31 March immediately before the first-use year;

'index number', for a quarter, means the index number for the motor vehicle purchase sub-group of the Consumer Price Index, being the weighted average of the 8 capital cities, published by the Australian Statistician in respect of the quarter (ignoring any later number that may be published by the Australian Statistician in substitution for it);

'second March year' means the period of 12 months immediately before the first March year.

(Rounding the indexation factor)

"(6) The result under subsection (5) must be rounded up or down to 3 decimal places (rounding up in the case exactly half-way between).

(Indexation factor: change in CPI reference base)

"(7) For the purposes of applying the formula component 'index number' in subsection (5), if:

(a) at any time, whether before or after the commencement of this subsection, the Australian Statistician has changed or changes the reference base for the motor vehicle purchase sub-group of the Consumer Price Index;

then:

(b) after the change, only index numbers published in terms of the new base are to be used.

(Publishing the indexation factor)

"(8) Before the beginning of each financial year, the Commissioner must publish by written notice the indexation factor and the motor vehicle depreciation limit for the financial year.

(Example of how to work out motor vehicle depreciation limit)

"(9) A typical example of how the motor vehicle depreciation limit is worked out for a first-use year is as follows:

(a) start with the limit for the previous financial year-assume it is $56,477;

(b) next, work out the indexation factor for the first-use year.

This involves:

(i) adding the 4 index numbers for the year ending on March 31 in the previous financial year (assume they come to 132) and doing the same for the year before that (assume they come to 128);

(ii) dividing the first sum by the second:

(132 / 128) = 1.03125

(iii) rounding the result down to 3 decimal places, giving an indexation factor of 1.031 (if the number under (ii) had instead been exactly half-way between 1.031 and 1.032 (i.e. 1.0315), or had been more than half-way, it would have been rounded up to 1.032);

(c) finally, multiply the previous financial year's limit (the amount in (a)) by the indexation factor:

$56,477 * 1.031 = $58,227.787

The result is then rounded up to $58,228, which is the motor vehicle depreciation limit for the first-use year.";

(b) by omitting from paragraph (13)(e) "year of income" and substituting "financial year";

(c) by omitting from subsection (15) the definitions of "index number" and "relevant year of income";

(d) by renumbering subsections (13), (14) and (15) as (10), (11) and (12) respectively, after all other amendments of section 57AF by this Act have been made.