ATO Interpretative Decision

ATO ID 2001/605 (Withdrawn)

Income Tax

Motor Vehicle Expenses - leased motor vehicle - deductibility of GST on payment of the residual value
FOI status: may be released

This ATO ID is withdrawn as it is a straightforward application of the law.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 deduction allowable under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the Goods and Services Tax (GST) paid by the taxpayer in relation to the residual value of a leased motor vehicle?

Decision

No, a deduction is not allowable under section 8-1 of the ITAA 1997 for the GST paid by the taxpayer in relation to the residual value of a leased motor vehicle.

Facts

It was a condition of the taxpayer's employment that they own and maintain a motor vehicle for work purposes.

The taxpayer leased a motor vehicle on a finance lease and made regular lease payments.

The taxpayer used the motor vehicle for work purposes.

Under the finance lease the taxpayer had the option to purchase the vehicle at the end of the lease for its residual value.

The taxpayer paid the residual value and the GST on that value.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.

The GST incurred on losses or outgoings may be deductible under section 8-1 of the ITAA 1997 in certain circumstances, as determined by Division 27 of the ITAA 1997, but only if the loss or outgoing is otherwise deductible.

Although the taxpayer acquired the motor vehicle for work related purposes the payment of the residual value under the lease was for the purpose of acquiring the motor vehicle. This payment is of a capital nature and is not deductible under section 8-1 of the ITAA 1997. Therefore, the taxpayer cannot claim a deduction under section 8-1 of the ITAA 1997 for the GST paid in relation to that capital payment.

Date of decision: 25 May 2001

Legislative References:
Income Tax Assessment Act 1997
section 8-1
Division 27

Related ATO Interpretative Decisions
ATO ID 2001/597

Keywords
Motor vehicle expenses
GST payments
Goods and Services Tax

Business Line: Small Business/Individual Taxpayers

Date of publication: 22 November 2001

ISSN: 1445-2782

history

	Date:	Version:
	25 May 2001	Original statement
You are here	30 July 2010	Archived

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