ATO Interpretative Decision
ATO ID 2002/1036 (Withdrawn)
Income Tax
Division 40: deduction for decline in value - partnership depreciating assetFOI status: may be released
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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.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
For the purpose of calculating the net income of the leasing partnership under section 90 of the Income Tax Assessment Act 1936 (ITAA 1936) is the partnership entitled to deduct, under section 40-25 of the Income Tax Assessment Act 1997 (ITAA 1997), an amount for the decline in value of the depreciating assets it holds?
Decision
Yes, the leasing partnership is entitled to deduct, under section 40-25 of the ITAA 1997, an amount equal to the decline in value for an income year (as worked out under Division 40 of the ITAA 1997) of the depreciating assets it holds.
Facts
A partnership purchased various depreciating assets under a manufacture and supply agreement. It immediately leased the assets on commercial terms to an unrelated entity that had been awarded a franchise by another unrelated entity to operate a business in which the assets are used. Under the lease agreement the lessee is required to make quarterly payments of rent to the leasing partnership for use of the assets. The partnership is a common law partnership and the assets are held by the partnership.
Reasons for Decision
'Net income' in relation to a partnership means the assessable income of the partnership, calculated as if the partnership were a taxpayer who was a resident, less all allowable deductions except deductions allowable under section 82AAT of the ITAA 1936 or Division 36 of the ITAA 1997 (section 90 of the ITAA 1936).
'Partnership loss' in relation to a partnership means the excess (if any) of the allowable deductions, except deductions allowable under section 82AAT of the ITAA 1936 or Division 36 of the ITAA 1997, over the assessable income of the partnership calculated as if the partnership were a taxpayer who was a resident (section 90 of the ITAA 1936).
A deduction for an amount equal to the decline in value for an income year of a depreciating asset (as worked out under Division 40 of the ITAA 1997) is allowable for an asset held during the income year (section 40-25 of the ITAA 1997). The assets in question are depreciating assets (section 40-30 of the ITAA 1997) and are not depreciating assets to which Division 40 does not apply (section 40-45 of the ITAA 1997).
As the partnership is a holder of the depreciating assets in an income year, deductions under section 40-25 of the ITAA 1997 are allowable deductions for the purposes of calculating the net income or partnership loss of the partnership for the income year.
Date of decision: 12 July 2002Year of income: 2000
Legislative References:
Income Tax Assessment Act 1936
section 82AAT
section 90
Division 36
section 40-25
section 40-30
section 40-45
Related Public Rulings (including Determinations)
Taxation Ruling TR 2000/18
Keywords
Deduction
Depreciating asset
Division 40
Partnership asset
ISSN: 1445-2782
| Date: | Version: | |
| 12 July 2002 | Original statement | |
| You are here | 26 August 2005 | Archived |