| Disclaimer This edited version has been archived due to the length of time since original publication.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. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011660460983
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Small business and general business tax break
Can the Commissioner exercise discretion to extend the first use period under paragraph 41-20(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997)?
No, the Commissioner does not have the power to exercise discretion for this circumstance.
This ruling applies for the following period
1 July 2010 - 30 June 2011
The scheme commenced on
1 July 2009
Relevant facts
You ordered an asset from an overseas manufacturer in 2008, to be paid in instalments. Final payment was made in 2009 and you expected delivery by mid 2010.
The manufacturer started building the asset in 2009.
Under the arrangement you are organising for the manufacturer to be supplied specialised parts which will be attached to the asset prior to delivery.
The manufacturer has been affected by economic and commercial circumstances beyond their control.
You purchased the specialised parts in 2009 from a supplier. The supplier failed to deliver the parts as agreed.
You have undertaken various legal actions to recover outgoings. Legal issues have not been settled and you are pursuing a return of all deposits of funds.
A new supplier for the parts was found and you entered into a contract in October 2010.
The parts are expected to be manufactured and delivered in December 2010 to the asset manufacturer.
You expect the asset to be shipped to Australia in early 2011.
You have done everything in your control to receive the asset within the time periods set out for the tax break investment allowance.
Relevant legislative provisions
Income Tax Assessment Act 1997 Paragraph 41-20(1)(c)
Reasons for decision
The tax break
Under the Tax Laws Amendment (Small Business and General Business Tax Break) Act 2009 a deduction is available for eligible expenditure on new investment in tangible, depreciating assets.
Small business entities are able to claim a bonus tax deduction of 50% (the tax break) for eligible assets costing $1,000 or more (exclusive of GST) that they commit to investing in within the investment commitment time and first use the asset by the required period.
Under paragraph 41-20(1)(c) of the ITAA 1997 the small business entity must first use the asset or have it installed ready for use, on or before 31 December 2010.
The Revised Explanatory Memorandum to Tax Laws Amendment (Small Business and General Business Tax Break) Bill 2009 at paragraph 1.114 notes 'for each new investment in an eligible asset, this first use time needs to occur on or before 31 December 2010 for the amount to be a recognised new investment amount'.
Application to your circumstances
In order to use the asset or hold it ready for use in your business you need to take delivery of the asset from the manufacturer. You do not expect to have the asset delivered by 31 December 2010. This would mean the first use time requirement would not be satisfied.
It is noted that you have set out circumstances beyond your control, however the Commissioner does not have any power to exercise discretion to extend the date for first time use under paragraph 41-20(1)(c) of the ITAA 1997. You cannot claim the tax break for this expenditure if the asset is delivered after 31 December 2010.
Additional note - investment commitment time
Eligible investment must be made between 13 December 2008 and 31 December 2009.
Under subparagraph 41-25(1)(a)(i) of the ITAA 1997 the investment commitment time for an amount which is included in the first element of cost of a depreciating asset is the time at which you enter into a contract under which you hold the asset at that time, or will hold the asset at a later time.