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Edited version of your written advice
Authorisation Number: 1012708366867
Ruling
Subject: SBE Depreciation - General Pool
Question 1
Does a motor vehicle allocated to a small business entity (SBE) general pool for depreciation purposes continue to be depreciated in the pool if it is now used for both business and work related purposes?
Answer
Yes.
Question 2
Is the general pool balance reduced by a proportion of the sale price of the vehicle that has been used for both business and work related use?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
14 June 2011
Relevant facts
The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant document is:
• Private Ruling application form dated 24 September 2014
On 14 June 20XX you purchased a vehicle for business purposes and kept a log book with a business percentage of 90% for the 20XX financial year.
The vehicle was included in your SBE General Pool for depreciation purposes in the 20WW/XX income year.
In 20YY you also used the vehicle for your work as an employee. You kept a log book, the business percentage was 56% and the employee work related percentage was 33.33%.
In 2013 you continued on both business and wages with percentages of 51.42% (business) and 38.58% (employee work related).
In 2014 the percentages were 53% (business) and 32% (work related).
On 2 June 2014 you sold the vehicle.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 328-175
Income Tax Assessment Act 1997 Section 328-190
Income Tax Assessment Act 1997 Section 328-205
Income Tax Assessment Act 1997 Section 328-215
Income Tax Assessment Act 1997 Section 328-220
Income Tax Assessment Act 1997 Section 328-225
Income Tax Assessment Act 1997 Section 40-25
Reasons for decision
All legislative references in this Ruling are to the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise indicated.
You included the vehicle in the small business entity (SBE) General Pool with a 90% taxable purpose use proportion in the 20WW/XX income year, when you used the vehicle in your business. The Note at section 328-175 states that: If you choose to use this Subdivision for an income year, you continue to use this Subdivision for your small business pools for a later income year even if you are not a small business entity, or do not choose to use this Subdivision, for the later year: see section 328-220.
The definition of taxable purpose is set out in section 40-25 and is for the purpose of producing assessable income. It is not only for the purpose of producing business income. So when you use the vehicle for both business and work related purposes, it is still being used for a taxable purpose (section 328-205). It is the sum of these two uses that is taken into account, to work out the percentage for taxable use in the later years. This percentage for taxable use has not varied by more than 10% over the period of ownership, therefore no adjustment is required (section 328-225).
Your deprecation for the vehicle will be calculated in this pool and not apportioned separately for business and work related use.
When the vehicle is sold, the SBE general pool rules will apply and a proportion of the amount it is sold for, will be subtracted from the pool balance, as a balancing adjustment event (section 328-215). If it reduces the balance to a negative amount, that amount will be included in your assessable income in that year.