ATO Interpretative Decision
ATO ID 2002/362
Income Tax
Deductibility of car expenses incurred in maintaining investment properties owned by a superannuation fundFOI status: may be released
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This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is a taxpayer entitled to a deduction under section 28-12 of the Income Tax Assessment Act 1997 (ITAA 1997) for car expenses, where they are incurred in maintaining and inspecting an investment property owned by a private superannuation fund?
Decision
No. The taxpayer is not entitled to a deduction under section 28-12 of the ITAA 1997 for car expenses incurred in maintaining and inspecting an investment property owned by a private superannuation fund.
Facts
The taxpayer is a beneficiary under a private superannuation fund but was not 'presently entitled' to any income from the superannuation fund in the year of income.
The taxpayer is one of the Trustees of the superannuation fund.
The superannuation fund owns investment properties.
The taxpayer owns the car which is used to travel to the investment properties for the purpose of inspection and maintenance. The costs of maintaining the car are incurred by the taxpayer.
Reasons for Decision
Section 28-12 of the ITAA 1997 allows a deduction for car expenses using one of the two methods under Division 28 of the ITAA 1997. Subdivisions 28-C and 28-F then prescribe how to calculate the deduction referrable to each method.
Both of the methods rely on the concept of 'business kilometres' travelled during the year. A 'business kilometre' is defined in subsection 28-25(3) and 28-90(4) of the ITAA 1997 to mean:
'....the kilometres the car travelled in the course of producing your assessable income or your travel between workplaces.....'
The term 'producing your assessable income' has the same meaning as those words used in section 8-1 of the ITAA 1997.
Under section 8-1 of the ITAA 1997 a loss or outgoing will not be deductible if it is incurred in gaining or producing the assessable income of a person other than the one who incurs it (FC of T v. Munro (1926) 38 CLR 153; [1926] HCA 58). In order for a deduction to be allowable, there must be a nexus between the incurring of the outgoing and the assessable income being derived.
Private superannuation funds are constituted as trusts. The term 'present entitlement' is central to the trust provisions. The methods of taxing the income of trusts depends on whether the taxpayer is 'presently entitled' to the income of the trust or not.
In general, the term 'presently entitled' means that the beneficiary of a trust estate has a present or immediate right to demand payment of a share of the net trust income from the trustee.
The taxpayer was not presently entitled to any of the income from the superannuation fund in the income year they incurred the car expenses and did not receive any income from the superannuation fund. There was no nexus between the incurring of the car expenses to travel to the investment properties owned by the superannuation fund and any assessable income from the superannuation fund.
Accordingly, the travel does not meet the definition of 'business kilometres' travelled in subsections 28-25(3) and 28-90(4) of the ITAA 1997. Therefore, the deduction for the car expenses incurred in travelling to inspect the investment properties owned by the superannuation fund is not allowable under section 28-12 of the ITAA 1997.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 13 May 2016 | Reasons for decision | Amended in order to reflect a legislative change to Division 28
Inserted medium neutral citation |
| Legislative references | Inserted medium neutral citation | |
| 6 March 2015 | Reasons for decision | Amended for clarity |
| Legislative references | Updated for clarity |
Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
section 8-1
Division 28
section 28-12
Subdivision 28-C
subsection 28-25(3)
Subdivision 28-F
subsection 28-90(4)
Case References:
FC of T v. Munro
38 CLR 153
[1926] HCA 58
Keywords
Personal superannuation funds
Rental expenses
Travel expenses
Rental property
Self-managed superannuation funds
Trust beneficiaries
ISSN: 1445-2782
| Date: | Version: | |
| 25 January 2002 | Original statement | |
| 6 March 2015 | Updated statement | |
| You are here → | 13 May 2016 | Updated statement |