ATO Interpretative Decision
ATO ID 2002/920 (Withdrawn)
Income Tax
Relocation expenses of depreciating assets - Second Element of CostFOI status: may be released
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This ATO ID is withdrawn as it is a straightforward application of legislation.This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Do costs incurred by a taxpayer for relocating a depreciating asset form part of the second element of cost under subsection 40-190(2) of the Income Tax Assessment Act 1997 ('ITAA 1997')?
Decision
Yes. The cost of relocating a depreciating asset does form part of the second element of cost under subsection 40-190(2) of the ITAA 1997.
Facts
The taxpayer moved depreciating assets from one location to another. The depreciating assets are used wholly for taxable purposes.
The taxpayer incurred expenses in moving the assets to their present location.
Reasons for Decision
Expenditure incurred in relocating depreciating assets are capital in nature and therefore not deductible under section 8-1 of the ITAA 1997. However, the cost of moving a depreciating asset from one location to another (including from one state to another) is included as a second element of cost for the purposes of calculating the decline in value of that asset.
The cost of a depreciating asset consists of two elements. The first element of the cost is generally the amount paid or taken to have been paid to start holding the asset. Any cost, of a capital nature, that you incur after you start to hold the asset, that is incurred to bring the asset to its present condition and location, is a second element of cost under subsection 40-190(2) of the ITAA 1997.
Second element costs are worked out after the taxpayer starts to hold depreciating assets. The asset's adjustable value is calculated by using the opening adjustable value for that year, plus any amounts included as a second element of cost for that year less it decline in value for that year, under paragraph 40-85(1)(c) of the ITAA 1997.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 21 November 2014 | Reasons for Decision | Changed reference to calculation to adjustable value |
| Related ATO Interpretative Decisions | Removed link to ATO ID 2001/431 because it has been withdrawn |
Year of income: 2002
Legislative References:
Income Tax Assessment Act 1997
section 8-1
paragraph 40-85(1)(c)
subsection 40-190(2)
Keywords
Second element of cost
Depreciation expenses
Depreciating assets
Relocation expenses
ISSN: 1445-2782
| Date: | Version: | |
| 15 August 2002 | Original statement | |
| You are here | 21 November 2014 | Archived |