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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of private ruling

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Ruling

Subject: Small Business Investment Allowance

Question

Can the year in which a deduction can be claimed for the investment allowance in Division 41 of the Income Tax Assessment Act 1997 (ITAA 1997) differ from the year in which the asset is first put into use by the taxpayer?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 2009

The scheme commences on:

1 July 2008

Relevant facts and circumstances

You purchased a car following the tax break announcement. You were assured by the dealer that the car would be delivered in mid June 2009. The dealer did not deliver the car until after 30 June 2009. You wanted to make the claim in the year ending 30 June 2009.

Relevant legislative provisions

Income Tax Assessment Act 1997 41-10,

Income Tax Assessment Act 1997 41-15,

Income Tax Assessment Act 1997 41-20

Income Tax Assessment Act 1997 41-30.

Does Part IVA apply to this ruling?

Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.

We have not fully considered the application of Part IVA of the ITAA 1936 to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.

Reasons for decision

Unless otherwise stated, all legislative references in the following Reasons For Decision relate to the Income Tax Assessment Act 1997 (ITAA 1997).

Question

Summary

The tax break deduction to which you are entitled can only be claimed in the year ending 30 June 2010. Unfortunately, there is no latitude provided in the legislation to substitute another year as the year in which the deduction can be claimed.

Detailed reasoning

The Small Business and General Business Tax Break provides an additional deduction for business investment in new, tangible depreciating assets and new expenditure on existing assets. The legislation is found in Division 41 of the ITAA 1997.

Section 41-10 states the circumstances in which you have entitlement to a deduction for new investment under the Tax Break. Under section 41-10, an amount of expenditure must be a recognised new investment amount in order to qualify for the allowance. Section 41-15 says that you can deduct the relevant percentage of the total recognised new investment amount for that particular income year.

Section 41-20 defines what constitutes a recognised new investment amount. Sub-paragraph 41-20(1)(c)(i) states that an amount is a recognised new investment amount for the income year in relation to an asset if the relevant first use time occurs no later than the end of the income year in question. Section 41-30 specifies that the first use time in respect of an amount is when the taxpayer starts to use the asset or has it installed ready for use.

Taken together, what Division 41 states is that, provided all of the eligibility criteria are satisfied for the income year, the tax break can be claimed as a tax deduction in the income tax return for the income year in which you first use the asset or have it installed ready for use.

Unfortunately, there is no latitude provided in the legislation to substitute another year as the year in which the deduction can be claimed where, but for unforeseen circumstances, the first use time would have been in an earlier year. As a consequence, the tax break deduction to which you are entitled can only be claimed in the year ending 30 June 2010.

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