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ATO Interpretative Decision

ATO ID 2003/792 (Withdrawn)

Income Tax

Capital allowances: balancing adjustment on sale of a depreciating asset being capital works
FOI status: may be released
  • This ATO ID is a straight application of the law and does not contain an interpretative decision.
    This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Status of this decision: Decision Withdrawn 26 August 2005
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the balancing adjustment provisions of Subdivision 40-D of the Income Tax Assessment Act 1997 (ITAA 1997) apply to capital works to which Division 43 of the ITAA 1997 applies if a taxpayer can deduct an amount under Division 43 of the ITAA 1997?

Decision

No. The sale of capital works for which an amount can be deducted under Division 43 of the ITAA 1997 does not require a balancing adjustment under section 40-285 of the ITAA 1997.

Facts

The taxpayer owned buildings that it used in a business. The buildings were qualifying capital works for which an amount was deducted under Division 43 of the ITAA 1997.

The taxpayer sold the buildings to another taxpayer.

Reasons for Decision

A taxpayer must make a balancing adjustment to assessable income if a balancing adjustment event occurs for a depreciating asset that they hold and the decline in value of the asset was worked out under Subdivision 40-B of the ITAA 1997.

Subsection 40-45(2) of the ITAA 1997 provides that Division 40 of the ITAA 1997 does not apply to depreciating assets that are capital works for which you can deduct an amount under Division 43 of the ITAA 1997. Therefore, a balancing adjustment is not required under section 40-285 of the ITAA 1997 for capital works because the decline in value of the capital works is not worked out under Subdivision 40-B of the ITAA 1997.

While the sale of the assets cannot result in a balancing adjustment, the sale may result in a capital gain or a capital loss under Part 3-1 of the ITAA 1997.

Date of decision:  25 August 2003

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   subsection 40-45(2)
   section 40-285
   Subdivision 40-B
   Division 40
   Division 43
   Part 3-1

Related ATO Interpretative Decisions
ATO ID 2003/791

Keywords
Disposal of assets
Balancing adjustments
Balancing adjustment event
Uniform capital allowances system

Business Line:  Effective Life and Capital Allowance Centre of Expertise

Date of publication:  5 September 2003

ISSN: 1445-2782

history
  Date: Version:
  25 August 2003 Original statement
You are here → 26 August 2005 Archived

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