ATO Interpretative Decision

ATO ID 2002/800 (Withdrawn)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 claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for lease payments incurred in connection with the private use of a car provided by their employer?

Decision

No. The taxpayer is not entitled to claim a deduction under section 8-1 of the ITAA 1997 because section 51AF of the Income Tax Assessment Act 1936 (ITAA 1936) prevents a deduction for expenses incurred by a taxpayer in connection with the private use of a car provided by their employer.

Facts

The taxpayer's employer is the owner of several cars. The employer has a private use leaseback scheme for its cars with its employees.

Under the leaseback scheme between the employer and the taxpayer the car:

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is for the exclusive use of the taxpayer;

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remains in the employer's car pool on weekdays when not used by the taxpayer for work purposes;

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is available for non business use by the taxpayer on weekends, rostered days off and periods of leave not exceeding up to 10 weeks per annum; and

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leaseback payments are calculated to cover the private use costs of the car.

Reasons for Decision

A private use leaseback scheme is an arrangement under which the employer leases its cars to its employees for their private use.

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

However, paragraph 8-1(2)(d) of the ITAA 1997 provides that a loss or outgoing is not deductible if a provision of 'this Act' prevents the deduction. 'This Act' is defined to include the ITAA 1936 (section 995-1 of the ITAA 1997).

Section 51AF of the ITAA 1936 provides that where an employer provides a car for the exclusive use of an employee (or a relative of the employee) and the employee is allowed to use the car for private purposes, expenses incurred by the employee (or relative of the employee) in connection with the car are not deductible.

The taxpayer's employer provided a car for the taxpayer to use for private purposes. The leaseback payments made by the taxpayer were incurred in connection with the car when it was used by the taxpayer for private purposes.

Accordingly, the taxpayer is not entitled to claim the leaseback payments calculated to cover the private use costs of the car under section 8-1 of the ITAA 1997 as section 51AF of the ITAA 1936 prevents the deduction.

Year of income:  Year ended 30 June 1997 Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2001 Year ended 30 June 2000

Legislative References:
Income Tax Assessment Act 1997
   section 8-1
   paragraph 8-1(2)(d)

Keywords
Lease & hire expenses
Deduction and expenses
Private and domestic expenses

Business Line:  Small Business/Individual Taxpayers

Date of publication:  22 August 2002

ISSN: 1445-2782