ATO Interpretative Decision
ATO ID 2002/240 (Withdrawn)
Income Tax
Eligibility for Concessional Balancing Charge on Cessation of BusinessFOI status: may be released
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This ATO ID is withdrawn from the database because it contains a view in respect of a provision of the Income Tax Assessment Act 1997 that was repealed with effect from 1 July 2001. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions relating to the former provision.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is the taxpayer entitled to have a concessional rate of tax applied to a balancing charge under section 42-295 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The taxpayer is entitled to concessional treatment on the balancing charge that was included in assessable income as a result of the cessation of business under section 42-295 of the ITAA 1997.
Facts
The taxpayer was a trucking contractor who operated as a sole trader. The taxpayer ceased operations as a trucking contractor and sold the truck that was used in the trucking operations. The sale of the truck resulted in a balancing charge being included in the taxpayer's assessable income.
The taxpayer did not claim depreciation on the truck through a pool.
The taxpayer was not entitled to the averaging provisions available to primary producers and certain professionals.
The taxpayer did not receive balancing charge relief under sections 42-285 (same year relief), 42-290 (later year relief) or 42-293 (involuntary disposals) of the ITAA 1997.
Reasons for Decision
Section 42-295 of the ITAA 1997 allows for a concessional rate of tax to be applied to a balancing charge that is included in assessable income provided that the balancing adjustment resulted from the cessation of a business carried on by the taxpayer and a balancing adjustment event, as defined in subsection 42-295(3) of the ITAA 1997, did not occur.
As the taxpayer's situation meets the requirements of section 42-295 of the ITAA 1997, the taxpayer will be entitled to have a concessional rate of income tax applied to the portion of assessable income which constitutes the balancing charge.
Date of decision: 30 January 2002Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
section 42-295
subsection 42-295(3)
section 42-285
section 42-290
section 42-293
Keywords
Depreciation
Assessable balancing adjustment amount
Cessation of business
Sole trader
ISSN: 1445-2782
| Date: | Version: | |
| 30 January 2002 | Original statement | |
| You are here | 15 September 2006 | Archived |