ATO Interpretative Decision

ATO ID 2005/51 (Withdrawn)

Income Tax

• 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.

Issue

Is the taxpayer entitled to calculate a deduction for car expenses, using the 'cents per kilometre' method, under Subdivision 28-C of the Income Tax Assessment Act 1997 (ITAA 1997), in relation to a car that is powered by a hybrid system which combines a petrol engine together with an electric motor?

Decision

Yes. The taxpayer is entitled to calculate a deduction for car expenses, using the 'cents per kilometre' method, under Subdivision 28-C of the ITAA 1997, in relation to a car that is powered by a hybrid system which combines a petrol engine together with an electric motor.

Facts

The taxpayer owns their car.

The taxpayer's car satisfies the definition of 'car' for the purposes of Division 28 of the ITAA 1997.

The taxpayer uses their car for business purposes, during the income year.

The taxpayer's car is powered by a hybrid system which is a combination petrol engine/electric motor.

The petrol engine is a 1.5 litre piston engine.

Reasons for Decision

Section 28-25 of the ITAA 1997 provides that under the 'cents per kilometre' method, a deduction for car expenses is calculated by multiplying the number of business kilometres the car travelled in the income year up to a maximum of 5000 km by a number of cents based on the car's engine capacity.

The rates used in the 'cents per kilometre' method are set out in Part 2 of Schedule 1 to the Income Tax Assessment Regulations 1997 (ITAR 1997), and are based on whether the car is a 'small car', 'medium car' or 'large car'.

Part 1 of Schedule 1 to the ITAR 1997 provides that for the purposes of Part 2 of Schedule 1 to the ITAR 1997:

small car means a car that is powered by:

(a)

an engine (other than a rotary engine) with a capacity that does not exceed 1600 cm³; or

(b)

a rotary engine with a capacity that does not exceed 800 cm³.

medium car means a car that is powered by:

(a)

an engine (other than a rotary engine) with a capacity that exceeds 1600 cm³ but does not exceed 2600 cm³; or

(b)

a rotary engine with a capacity that exceeds 800 cm³ but does not exceed 1300 cm³.

large car means a car that is powered by:

(a)

an engine (other than a rotary engine) with a capacity that exceeds 2600 cm³; or

(b)

a rotary engine with a capacity that exceeds 1300 cm³.

The taxpayer's car runs on a hybrid system which combines a 1.5 litre petrol engine together with an electric motor to power the car. The petrol engine is a piston engine.

The taxpayer's car falls within the definition of a small car in Part 1 of Schedule 1 to the ITAR 1997 as it has a non rotary engine capacity of less than 1600 cm³. Therefore, the taxpayer is entitled to use the prescribed cents per kilometre rate for a small car for the relevant income year as set out in Part 2 of Schedule 1 to the ITAR 1997.

Year of income:  30 June 2005

Legislative References:
Income Tax Assessment Act 1997
   section 28-25

Other References:
Explanatory Statement to the Income Tax Assessment Amendment Regulations 2002 (No. 1)

Keywords
Car expenses
Motor vehicle expenses

Business Line:  Administration, Business and Personal Taxes Centre of Expertise

Date of publication:  18 February 2005

ISSN: 1445-2782