ATO Interpretative Decision
ATO ID 2002/53
Income Tax
Depreciation - Installation costs of petrol storage (bowser) tankFOI status: may be released
This version is no longer current. Please follow this link to view the current version. |
-
This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Can a taxpayer, who incurred costs in installing a new petrol storage tank at an income producing property include those costs in the total cost of the plant and equipment upon which a depreciation deduction is calculated under section 42-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The taxpayer can include installation costs in the total cost of petrol storage tank when calculating the depreciation deduction under section 42-15 of the ITAA 1997.
Facts
The taxpayer is the part owner of an income producing property that uses a petrol storage tank (also known as a bowser tank). The income producing property is not operated as a partnership.
The taxpayer replaced the leaking petrol storage tank with a new tank because the tank could not be repaired.
The petrol storage tank is part of the petrol delivery system which included the pipes connecting the pumps and the pumps themselves. In replacing the petrol storage tank, the taxpayer incurred installation costs of:
- •
- transporting the replacement storage on to the site and installing it;
- •
- reconnecting and replacement of some of the pipeworks; and
- •
- pressure testing the new systems.
There were no structural alterations to existing buildings and plant to accommodate the replacement tank.
Reasons for Decision
Section 42-15 of the ITAA 1997 allows a deduction for depreciation on plant owned and used, or installed for use, in the production of assessable income.
Taxation Ruling IT 2197 states that installation costs are part of the total cost of the plant and equipment upon which a depreciation deduction is calculated. However, costs incurred in the demolition of existing plant and generally clearing a site for the installation or erection of new plant and equipment is of a capital nature and no income tax deduction will be allowable either to an owner or to a lessee.
Taxation Ruling IT 2398 states that it is not necessary for a taxpayer to have full and complete ownership to be able to claim depreciation on an item of plant. Where depreciable plant is jointly owned or co-owned, but not used in a partnership, each co-owner is entitled to a depreciation deduction according to their respective interest in the plant and the use which is made of the plant.
Consequently, as the taxpayer owned the plant and equipment which is used to produce assessable income, the installation cost is included in the total cost of the plant and equipment upon which a depreciation deduction under section 42-15 of the ITAA 1997 is calculated.
Year of income: Year ended 30 June 2000
Legislative References:
Income Tax Assessment Act 1997
section 42-15
Related Public Rulings (including Determinations)
IT 2197
IT 2398
TR 2000/18
ATO ID 2002/54
Keywords
Depreciation
Depreciable plant & articles
Depreciation expense
Depreciation expenses
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 22 October 2001 | Original statement |
| 9 June 2006 | Archived |