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Edited version of private advice

Authorisation Number: 1052138141836

Date of advice: 14 July 2023

Ruling

Subject: Deductions - car cost limit exemption

Question

Is the vehicle exempt from the car limit under section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

This ruling applies for the following period:

30 June 2023

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

You run a business in the construction industry.

You purchased a dual cab utility vehicle during the ruling period, which came with an upgrade option.

The vehicle is advertised under commercial vehicles on the manufacturer's website.

The vehicle has a seating capacity of 5 passengers.

The vehicle has the following specifications:

•                     The Gross Vehicle Mass (GVM) is 3,350 kgs.

•                     The minimum kerb weight is 2,340kg.

•                     The kerb weight is 2,384 kgs.

The manufacturers brochure defines "minimum kerb weight" and "kerb weight" as shown below:

•                     "Kerb weight" includes the vehicle with a full tank of fuel, without occupants, luggage or cargo and with the heaviest possible combination of factory fitted optional equipment included.

•                     "Minimum kerb weight" includes the vehicle with a full tank of fuel, without occupants, luggage or cargo and with the lightest possible orderable combination of factory fit equipment.

The upgrade option is not the full option.

Assumption

You have assumed the payload of the vehicle is 966kg.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 40-230

Income Tax Assessment Act 1997 section 955-1

Reasons for decision

Section 40-230 of the ITAA 1997, where applicable, adjusts the first element of the cost of a car that is designed mainly for carrying passengers down to the car limit for the financial year in which you started to hold it, if its cost exceeds that limit.

Section 995-1 of the ITAA 1997 defines a 'car' to mean a motor vehicle (except a motorcycle or similar vehicle) designed to carry a load of less than one tonne and fewer than 9 passengers.

The one tonne limit relates to the maximum load your vehicle can carry, known as the payload capacity. The payload capacity is the gross vehicle mass (GVM) reduced by the basic kerb weight of the vehicle.

Whether carrying passengers is the principal purpose of crew cab vehicles is considered in clause 4.5.2 of the Vehicle Standard (Australian Design Rules - Definitions and Vehicle Categories) 2005 (ADR) which sets out that:

A vehicle constructed for both the carriage or persons and the carriage of goods shall be considered to be primarily for the carriage of goods if the number of seating positions times 68kg is less than 50 percent of the difference between the 'Gross Vehicle Mass' and the 'Unladen Mass'.

The Commissioner accepts that the principal purpose of a dual or crew cab utility vehicle, with a load capacity of less than two tonnes, may be determined by applying the ADR.

This test can also be applied in determining whether a car is 'mainly designed for carrying passengers' as stipulated in subsection 40-230(1) of the ITAA 1997 as the term 'mainly designed' is broader than the term 'principally purpose' used in the ADR.

Application to your circumstances

In your circumstances, the vehicle purchased has a GVM of 3,350kg and a kerb weight of 2,384kg (or minimum kerb weight of 2,340kg) giving a payload capacity of 966kg (or 1,010kg with the minimum kerb weight). The vehicle is designed to carry 5 passengers meaning the passenger carrying capacity is 340kg. Therefore, the passenger weight of 340kg is less than 50% of the payload.

As the majority of the payload capacity it is not allocated to passenger carrying capacity the vehicle is not 'mainly designed' for carrying passengers and the car limit in section 40-230 of the ITAA 1997 does not apply to the vehicle.

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