ATO Interpretative Decision

ATO ID 2002/782

Income Tax

Theft of a depreciating asset - involuntary disposal
FOI status: may be released

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the theft of a computer and printer an involuntary disposal under section 40-365 of the Income Tax Assessment Act 1997 ('ITAA 1997')?

Decision

Yes. The theft of a computer and printer is an involuntary disposal under section 40-365 of the ITAA 1997.

Facts

The taxpayer's computer and printer were stolen in May 2002. The assets were insured and a claim was made with the insurance company.

The insurance company provided a replacement computer and printer.

The replacement assets were used wholly for a taxable purpose.

Reasons for Decision

Section 40-365 of the ITAA 1997 allows a taxpayer to exclude some or all of a balancing adjustment amount from their assessable income where a depreciating asset is lost or destroyed. A taxpayer can make this choice to the extent that the amount is applied in reduction of the cost or opening adjustable value of one or more replacement assets.

It is considered that the theft of a depreciating asset falls within the meaning of the words lost or destroyed because the taxpayer is deprived of the use of the asset and no longer possesses the asset. The taxpayer may therefore exclude some or all of the amount that would otherwise be included in assessable income to the extent that the amount is applied in reduction of the cost of one or more replacement assets.

Note: To be able to make this choice the taxpayer must also satisfy the following conditions as contained in subsections 40-365(3) and 40-365(4) of the ITAA 1997:

-
The taxpayer must incur the expenditure on the replacement asset, or start to hold it, no earlier than one year before the involuntary disposal and no later than one year after the end of the income year in which the disposal occurred.

-
The replacement asset must be used wholly for a taxable purpose and the taxpayer must be able to deduct an amount for it.

Date of decision: 17 June 2002

Year of income: Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   section 40-365
   subsection 40-365(3)
   subsection 40-365(4)

Related ATO Interpretative Decisions
ATO ID 2002/783

Keywords
Disposal of depreciating asset
Involuntary disposal
Theft of asset

Siebel/TDMS Reference Number: DW454825

Business Line: Public Groups and International

Date of publication: 31 July 2002

ISSN: 1445-2782

Copyright notice

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).