ATO Interpretative Decision
ATO ID 2004/93 (Withdrawn)
Income Tax
Capital Allowances: termination value - reasonable attribution of undissected amountFOI status: may be released
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This ATO ID has been withdrawn as the issue is dealt with in the Guide to depreciating assets (NAT 1996)This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
In working out the termination value of depreciating assets sold with a rental property for a single undissected amount, is it reasonable to attribute, under section 40-310 of the Income Tax Assessment Act 1997 (ITAA 1997), the single amount received to each depreciating asset in proportion to the relevant market value of each of the assets?
Decision
Yes. It is reasonable to attribute, under section 40-310 of the ITAA 1997, the single amount received for all the assets to each depreciating asset in proportion to the relevant market value of each of the assets.
Facts
The taxpayer sold a rental property in an arm's length transaction. The sale included a number of depreciating assets. There was no agreed allocation of the sale price to the separate assets included in the sale.
Reasons for Decision
The termination value of a depreciating asset is worked out as at the time when a balancing adjustment event occurs (section 40-300 of the ITAA 1997). It is, in certain circumstances, an amount specified in the table in subsection 40-300(2) of the ITAA 1997 or, more generally, the amount taken to have been received under section 40-305 of the ITAA 1997.
Where a single undissected amount is received for two or more things, including a depreciating asset subject to a balancing adjustment event, only that part of the amount received that is reasonably attributable to the depreciating asset will be taken into account as its termination value (section 40-310 of the ITAA 1997).
What is reasonable will often depend upon the particular circumstances. As set out in Taxation Determination TD 98/24, it is expected that the vendor, in making an apportionment, will generally have regard to and be able to justify their reasonable apportionment based on the relevant market values of the separate depreciating assets at the time of the making of the contract.
The Commissioner does not accept that the adjustable value of a depreciating asset necessarily represents the market value of the asset.
Date of decision: 24 December 2003Year of income: Year ended 30 June 2004
Legislative References:
Income Tax Assessment Act 1997
section 40-300
subsection 40-300(2)
section 40-305
section 40-310
Related Public Rulings (including Determinations)
Taxation Determination TD 98/24
ATO ID 2002/818
ATO ID 2002/1016
Keywords
Depreciating assets
Termination value
ISSN: 1445-2782
| Date: | Version: | |
| 24 December 2003 | Original statement | |
| You are here | 6 May 2005 | Archived |