ATO Interpretative Decision
ATO ID 2004/612
Income TaxCapital Allowances: depreciating asset - car global positioning system device
FOI status: may be released
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Status of this decision: Decision Current
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Is a global positioning system (GPS) device acquired and installed by the taxpayer in a car held by their employer, a separate depreciating asset from the car within the meaning of that term in section 40-30 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Yes. A GPS device acquired and installed by the taxpayer in a car held by their employer is a separate depreciating asset from the car within the meaning of that term in section 40-30 of the ITAA 1997.
The taxpayer's employment requires extensive travelling.
The taxpayer purchased and installed a portable GPS in a car provided by their employer. The GPS functions as an electronic street directory. The taxpayer did not need permission from the employer to install the device.
The device is mounted in a cradle attached to the inside of the car and draws power from the car. It can be easily removed and attached to another car. It can only work in a motor vehicle and has no functions other than navigation.
The taxpayer intends to remove the device from the car if their employment is terminated. The removal will not cause any damage to the car.
The taxpayer uses the device solely for a taxable purpose.
The employer is the holder of the car for the purposes of Division 40 of the ITAA 1997.
Reasons for Decision
Broadly, a depreciating asset is defined as an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used (subsection 40-30(1) of the ITAA 1997).
As a tangible operating mechanism, a GPS will have a limited effective life and can reasonably be expected to decline in value over the time it is used.
For composite items it is necessary to determine whether they are considered to be a single depreciating asset or whether the components are separate depreciating assets. This is a question of fact and degree which can only be determined in the light of all the circumstances of the particular case (subsection 40-30(4) of the ITAA 1997).
A test used in determining that outcome is a test of function, the functional test.
The Commissioner's views as to the application of the functional test are set out in Taxation Ruling TR 94/11. Some of the factors to be considered in applying the functional test include:
- being separately identifiable
- whether the item is capable of performing its own separate function
- the item varies the performance of another item.
Factors such as the mechanical independence of an item, physical separability and whether an item can be separately acquired need also to be considered in deciding whether an item may be a separate depreciating asset.
Cars are normally considered to be one depreciating asset.
The GPS was purchased separately by the taxpayer. It was not installed as a standard feature of the car at time of manufacture and is not available as a special option from the manufacturer. The mode of affixation and the intention of the taxpayer indicate that the installation of the GPS in the car is less permanent than other parts of the car. The GPS performs a discrete function as an electronic street directory. It is not mechanically essential for the car.
In applying the functional test to the above items, the GPS is considered to be a separate depreciating asset from the car.Date of decision: June 11 2004
Year of income: Year ended 30 June 2004
Related Public Rulings (including Determinations)
Taxation Ruling TR 94/11
ATO ID 2004/613
ATO ID 2004/614
Cost of a depreciating asset
Decline in value
Deduction for depreciating assets