ATO Interpretative Decision
ATO ID 2005/203
Income Tax
Non Commercial Losses: 'other assets test' - all terrain vehicles and agricultural motorcyclesFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Issue
Can an All Terrain Vehicle (ATV) and an Agricultural motorcycle (Ag-Bike) be counted for the other assets test in section 35-45 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. Paragraph 35-45(4)(b) of the ITAA 1997 excludes cars, motorcycles and similar vehicles from being counted for the purposes of the other assets test. Both the ATV and the Ag-Bike come within the definition of 'cars, motorcycles and similar vehicles' and are excluded from being counted toward the test under paragraph 35-45(4)(b) of the ITAA 1997.
Facts
An individual taxpayer carried on a business activity of grazing beef cattle.
The taxpayer purchased a four wheel ATV and also an Ag-Bike for use on the property to perform tasks such as fence and dam inspections.
Reasons for Decision
The 'other assets test' in section 35-45 of the ITAA 1997 states that the loss deferral rules in section 35-10 of the ITAA 1997 do not apply to defer a loss from a business activity for a year where certain assets used on a continuing basis in the business activity have a collective value of at least $100,000. The table in subsection 35-45(2) of the ITAA 1997 sets out assets that are counted for the purposes of the 'other assets test' and their values. The assets counted are:
- 1.
- an asset whose decline in value you can deduct under Division 40 of the ITAA 1997
- 2.
- an item of trading stock
- 3.
- an asset that you lease from another entity, and
- 4.
- trademarks, patents copyrights and similar rights.
Assets specifically excluded from being counted for this test include 'cars, motorcycles and similar vehicles' under paragraph 35-45(4)(b) of the ITAA 1997.
Whether a vehicle falls within the category 'cars, motorcycles and similar vehicles' depends on the nature of the vehicle. If the legislation defines the meaning of a type of vehicle within the category, that definition applies. Otherwise, regard must be had to the ordinary meaning of terms.
The term 'motorcycle' is not defined in the legislation, so its ordinary meaning will apply. The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'motorcycle' as:
n. a motor vehicle resembling a bicycle, for one or two riders, sometimes with a sidecar attached.
For a vehicle to be 'similar' to a motorcycle it does not have to be identical. An item is not required to exhibit all the features of the original to be considered similar (Galcif Pty Ltd v. Dudley's Corner Pty Ltd (1995) 6 BPR 14,134; Goodfellow v. FC of T 77 ATC 4086; (1977) 7 ATR 265).
ATVs are commonly referred to as three-wheeled and four-wheeled motorcycles. This is because they share a number of features with two-wheeled motorcycles such as:
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- ATVs have similar engines, transmissions and brakes to two-wheeled motorcycles
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- ATVs are designed and manufactured by two-wheeled motorcycle manufacturers,
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- ATVs are sold by motorcycle dealers.
The Commissioner has stated in Miscellaneous Taxation Ruling MT 2021 that
A 4-wheeled motor cycle is a 'motor cycle or similar vehicle', to which the car fringe benefits valuation rules do not apply.
It is therefore considered that ATVs fall within the category 'cars, motorcycles and similar vehicles' in paragraph 35-45(4)(b) of the ITAA 1997.
Ag-Bikes are motorcycles with special heavy duty features to make them suitable for farm use. Some Ag-Bikes can also be registered for on-road use. Ag-Bikes are considered to be motor cycles within the ordinary meaning of that term and therefore come within the category of 'cars, motorcycles and similar vehicles'.
Accordingly the value of ATVs and Ag-Bikes cannot be counted for the purposes of the other assets test in section 35-45 of the ITAA 1997.
Date of decision: 23 June 05Year of income: Year ended 30 June 2005
Legislative References:
Income Tax Assessment Act 1997
section 35-45
section 35-10
Case References:
Galcif Pty Ltd v. Dudley's Corner Pty Ltd
(1995) 6 BPR 14,134
77 ATC 4086
(1977) 7 ATR 265
Related Public Rulings (including Determinations)
Miscellaneous Taxation Ruling MT 2021
Keywords
Non commercial losses
NCL other assets test
ISSN: 1445-2782
| Date: | Version: | |
| You are here → | 23 June 2005 | Original statement |
| 17 December 2014 | Archived |