ATO Interpretative Decision

ATO ID 2005/188 (Withdrawn)

Income Tax

Non Commercial Losses: 'other assets tests' - truck with carrying capacity of two tonnes
FOI status: may be released

This ATO ID is withdrawn as the position stated in this ATO ID is no longer current. The current ATO position on this issue is contained in TR 2001/14 Income tax: Division 35 - non-commercial business losses.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Can a truck with a carrying capacity of two tonnes be counted for the purposes of the other assets test in section 35-45 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. The truck does not come within the definition of 'cars, motorcycles and similar vehicles' and therefore is not an excluded asset for the purposes of the other assets test in section 35-45 of the ITAA 1997.

Facts

An individual taxpayer carried on a business activity of growing vegetables.

The taxpayer purchased a tray-truck that had a carrying capacity of two tonnes for use in transporting produce to various farmers' markets that operated in the local district.

Reasons for Decision

The 'other assets test' in section 35-45 of the ITAA 1997 states that the loss deferral rules in section 35-10 of the ITAA 1997 do not apply to defer a loss from a business activity for a year where certain assets used on a continuing basis in the business activity have a collective value of at least $100,000. The table in subsection 35-45(2) of the ITAA 1997 sets out assets that are counted for the purposes of the 'other assets test' and their values. The assets counted are:

1.: An asset whose decline in value you can deduct under Division 40 of the ITAA 1936
2.: An item of trading stock
3.: An asset that you lease from another entity, and
4.: Trademarks, patents copyrights and similar rights.

Assets specifically excluded from being counted for the purposes of this test include 'cars, motor cycles and similar vehicles' under paragraph 35-45(4)(b) of the ITAA 1997.

Whether a vehicle falls within the category 'cars, motor cycles and similar vehicles' depends on the nature of the vehicle. The term 'cars' is defined in section 995-1 of the ITAA 1997 as a motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers. It does not include motor cycles or similar vehicles.

The term 'motor vehicle' is then defined in section 995-1 of the ITAA 1997 to mean 'any motor-powered road vehicle (including a four-wheel drive vehicle)'.

Therefore, to determine whether a particular vehicle comes within the definition of 'cars' it must be determined whether it:

•: is designed to carry a load of less than one tonne
•: is designed to carry less than nine passengers
•: is a motor vehicle

While the tray-truck is a motor vehicle and is designed to carry less than nine passengers, it is also designed to carry a load in excess of one tonne and is therefore not a 'car' for the purposes of paragraph 35-45(4)(b) of the ITAA 1997.

The definition also contemplates vehicles similar to cars. This vehicle is specifically designed to carry heavy loads and is distinguishable from, and therefore not similar to, a car on this basis.

Therefore the truck does not come within the category 'cars, motor cycles, and similar vehicles' and the value of the truck can be counted for the purposes of the other assets test.

Date of decision: 23 June 2005

Year of income: Year ended 30 June 2005

Legislative References:
Income Tax Assessment Act 1997
   section 35-45
   section 35-10
   section 995-1

Keywords
Non commercial losses
NCL other assets test

Business Line: Private Groups and High Wealth Individuals

Date of publication: 1 July 2005

ISSN: 1445-2782

history

	Date:	Version:
	23 June 2005	Original statement
You are here	17 December 2014	Archived

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