ATO Interpretative Decision
ATO ID 2002/1097 (Withdrawn)
Income Tax
Cost of obtaining an estimate of the cost of depreciating assetsFOI status: may be released
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This ATO ID is withdrawn from the database as the ATO view is contained in the Tax Office publication Rental properties (NAT 1729).This document incorporates revisions made since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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Can a taxpayer claim a deduction under section 25-5 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses incurred in obtaining an estimate of the costs of depreciating assets for the purpose of determining a deduction for decline in value under Division 40 of the ITAA 1997?
Decision
Yes. The taxpayer can claim a deduction under section 25-5 of the ITAA 1997 for expenses incurred in obtaining an estimate of the costs of depreciating assets for the purpose of determining a deduction for decline in value under Division 40 of the ITAA 1997.
Facts
The taxpayer owns an investment property.
When the taxpayer acquired the investment property they also acquired depreciating assets which were part of that property.
The taxpayer obtained a report from an appropriately qualified person for the purposes of obtaining an estimate of the costs of depreciating assets that were in the investment property.
The taxpayer needed to establish the cost of the depreciating assets in order to calculate the decline in value of these assets for taxation purposes.
Reasons for Decision
Section 25-5 of the ITAA 1997 allows a deduction where an expense is incurred by a taxpayer in order to manage their tax affairs. The costs of creating and maintaining records for income tax purposes qualifies as an allowable expense under this section.
Capital expenditure is expressly excluded from being deductible under section 25-5 of the ITAA 1997. However, expenditure for this purpose is not necessarily characterised as being 'capital', merely because it relates to matters of a capital nature.
The taxpayer incurred expenditure which established the values of the depreciating assets on the basis that those costs would be used in calculating their tax liability. This is an expense incurred by the taxpayer for the purpose of managing their tax affairs.
Accordingly, the taxpayer can claim a deduction under section 25-5 of the ITAA 1997 for expenses incurred in obtaining an estimate of the costs of depreciating assets for the purpose of determining a deduction for decline in value under Division 40 of the ITAA 1997.
Date of decision: 20 November 2002Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
section 25-5
Division 40
Keywords
Decline in value
Depreciation
Depreciation deduction
Depreciation expenses
Depreciation schedule
Landlord expenses
Rental expenses
Landlord & tenant
Surveyors
ISSN: 1445-2782
| Date: | Version: | |
| 20 November 2002 | Original statement | |
| You are here | 25 July 2008 | Archived |