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Ruling

Subject: Eligibility to claim a deduction for a car fridge

Question 1

Are you able to claim a deduction for the decline in value of a car fridge that you will use for the storage of food and drink when you travel away overnight for work purposes?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

21 November 2011

Relevant facts

You are a capital city based salesperson and you are supplied with a company car for both business and private use.

Part of your job is to visit your clients in country areas visiting mining and power companies on-site over a wide area. You typically travel one week in three and you are away for up to five days at a time.

You are paid a meal allowance for the time that you are travelling away from home.

When travelling you stay overnight and eat in a local motel. Your other meals are generally consumed while you are travelling and you are presently using an esky to carry the food and drink.

You are considering purchasing a portable car fridge to replace the esky and when the fridge is not being used for overnight trips it will remain in the company car.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 40-25

Reasons for decision

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows for a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.

Expenditure on items such as a car fridge is considered capital in nature and is therefore not deductible under section 8-1.

However there are specific provisions in Division 40 of the ITAA 1997 which deal with the deductibility of capital expenditure, including expenditure on certain assets (called depreciating assets) acquired after 30 June 2001.

Section 40-25 of the ITAA 1997 allows you to deduct an amount equal to the decline in value (depreciation) for an income year of a depreciating asset to the extent that it used for the purpose of producing assessable income. You cannot deduct the part of the asset's decline in value that is attributable to your use of the asset for private purposes.

Taxation Ruling TR 95/18 states that a deduction is allowed for the depreciation on the cost a portable fridge purchased for the storage of food and drink while travelling for income producing purposes. Whilst TR 95/18 deals with deductions for employee truck drivers, this principle may be applied to other employees as well.

In your situation, when you are travelling away from home at least overnight for work purposes it is accepted the fridge will be used for work purposes.

Accordingly, you are entitled to claim deductions for the decline in value of the fridge to the extent that it is being used for income producing purposes.

Your deduction must be reduced if you use the fridge for recreational and private purposes and for storing your food and drinks when you are not travelling away from home overnight for work purposes.

If you purchase the car fridge part way through the income year, you must pro-rata the deduction for decline in value based on the number of days that you have the fridge.