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Edited version of private advice
Authorisation Number: 1013041570224
Date of advice: 30 June 2016
Ruling
Subject: Novated lease and depreciation
Question
Should you depreciate your motor vehicle using the normal rules for depreciating a capital asset?
Answer
No
Question
Where the associate is providing the lease via a Pty Ltd is there any implication for the company paying the running costs as part of the lease against the packaging company paying the running costs prior to passing on the lease payment to the associate.
Answer
Invalid - Not a tax question.
This ruling applies for the following periods
Year ending 30 June 2016
The scheme commenced on
1 July 2015
Relevant facts
You have entered into a novated lease as an associate .
The lease agreement is between Corporation A and Corporation B.
You are an employee of Corporation B.
Corporation C is the salary packaging provider who deducts the lease payments from your wages each week and remits to Corporation A.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 40-40.
Reasons for decision
The rules governing the holding of a depreciating asset can be found in Section 40-40 of the Income Tax Assessment Act 1997 (ITAA 1997)
The table identifying the holder of a depreciating asset at item 10 shows any depreciating asset as the owner, or the legal owner if there is both a legal and equitable owner.
Novation
Taxation Ruling TR 1999/15 discusses the Commissioner's view on arrangements involving the novation by an employee to an employer of some or all of the obligations under a motor vehicle lease. Full novation involves a transfer of all the rights and obligations in a finance lease or in a finance lease and sub-lease arrangement, consequently the employer takes over all the rights and responsibilities contained in the original lease and are entitled to depreciation deductions. The normal rules for depreciation apply.
As you have a novated lease agreement with your employer having signed the lease agreement your employer has taken all the rights and responsibilities in relation to the car.
Therefore you do not hold the car for depreciation purposes.