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Edited version of private advice
Authorisation Number: 1051897777924
Date of advice: 15 September 2021
Ruling
Subject: Depreciation and car limit
Question
Does the car limit under section 40-230 of the Income Tax Assessment Act 1997 apply to the vehicle when calculating the cost of the depreciating asset?
Answer
No.
This ruling applies for the following period
Year ended 30 June 20XX
The scheme commenced on
1 July 20XX
Relevant facts
Entity A (you) purchased a specifically built vehicle on xxxx for $xxxx.
You are registered for GST.
You own the vehicle.
The vehicle is used solely for your enterprise.
You charge a monthly management fee for the use of the vehicle.
The manufacturer's manual details have been provided.
The vehicle is not road registered and has no ability to carry passengers.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 40
Income Tax Assessment Act 1997 Section 40-30
Income Tax Assessment Act 1997 Section 40-230
Income Tax Assessment Act 1997 Section 995-1
Reasons for decision
Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) outlines the tax treatment of depreciating assets.
A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used (section 40-30 of the ITAA 1997).
A car is a depreciating asset.
Car is defined in section 995-1 of the ITAA 1997 and means a *motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers.
A motor vehicle means any motor-powered road vehicle (including a 4 wheel drive vehicle).
Section 40-230 of the ITAA 1997 contains a special rule for cars which limits the first element of the cost of the car in certain circumstances.
In your situation, the vehicle has no ability to carry passengers and is not road registered. It is not regarded as a car for Division 40 of the ITAA 1997 purposes. Therefore the car limit under section 40-230 of the ITAA 1997 does not apply.