Taxation Determination

TD 2015/16

Income tax: what is the car limit under section 40-230 of the Income Tax Assessment Act 1997 for the 2015-16 financial year?

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Ruling

1. The car limit under section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997) for the 2015-16 financial year is $57,466.

Example

2. In July 2015, Laura buys a car to which the car limit applies for $60,000 to use in carrying on her business. As Laura started to hold the car in the 2015-16 financial year, in working out the car's decline in value for the 2015-16 income year, the first element of cost of the car is reduced to $57,466.

Date of effect

3. The Determination applies for the financial year commencing on 1 July 2015.

Commissioner of Taxation
15 July 2015

Appendix 1 - Explanation

Exclamation This Appendix is provided as information to help you understand how the Commissioner's view has been reached. It does not form part of the binding public ruling.

Explanation

4. The car limit under section 40-230 of the ITAA 1997 is used, amongst other things, in section 40-230 for the purposes of working out the first element of cost of certain cars to which the car limit applies. If the first element of cost of a car to which the car limit applies exceeds the car limit, the first element of cost of that car is reduced to the car limit. The relevant car limit is the one that applies for the financial year in which the taxpayer starts to hold the car.

5. Subsection 40-230(3) of the ITAA 1997 states that the car limit is indexed annually.

6. Under Subdivision 960-M of the ITAA 1997, the car limit is indexed annually in line with movements in the motor vehicle purchase sub-group of the Consumer Price Index. Subsection 960-270(1) of the ITAA 1997 states that you index an amount by multiplying it by its indexation factor.

7. Subsection 960-275(1) of the ITAA 1997 states that the indexation factor for indexation amounts on an annual basis is calculated by dividing the sum of the index numbers for the quarters in the year ending on 31 March just before the start of the relevant financial year by the sum of the index numbers for the quarters in the year ending on the previous 31 March. The sum of the index numbers for the quarters in the year ending on 31 March 2015 was 382.1 and the sum of the index numbers for the quarters in the year ending on 31 March 2014 was 384.6 resulting in an indexation factor of 0.993 (rounded to three decimal places). Subsection 960-270(2) of the ITAA 1997 states that, where the indexation factor is 1 or less, you do not index the amount, resulting in the car limit not being indexed.

8. As a result, the car limit under section 40-230 of the ITAA 1997 for the 2015-16 financial year remains at $57,466 which was the car limit under section 40-230 for the 2014-15 financial year.

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

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References

ATO references:
NO 1-6WWGXQV

ISSN: 1038-8982

Related Rulings/Determinations:

TR 2006/10
TD 2014/17

Subject References:
car limit
decline in value
motor vehicle depreciation
motor vehicle depreciation limits

Legislative References:
ITAA 1997 40-230
ITAA 1997 40-230(3)
ITAA 1997 Subdiv 960-M
ITAA 1997 960-270(1)
ITAA 1997 960-270(2)
ITAA 1997 960-275(1)
TAA 1953


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