Edited version of private advice

Authorisation Number: 1052041638713

Date of advice: 5 October 2022

Ruling

Subject: Depreciating assets

Question

Can the loss from the theft of a trailer deposit be claimed as a deduction on a tax return?

Answer

Yes.

Division 40 of the Income Tax Assessment Act 1997(ITAA 1997 works by the purchase price of the trailer being a capital expense (not deductible under Section 8-1 of the ITAA 1997 contributing to the cost of the depreciating asset for which a percentage deduction is allowed under Section 40-25 of the ITAA 1997, based on the asset's effective life.

X should add the $XXX to the cost of the new trailer for Division 40 of the ITAA 1997 decline in value calculation purposes.

This ruling applies for the following period:

Year ending XX June 20XX

The scheme commences on:

X July 20XX

Relevant facts and circumstances

X works as an employee carpenter.

X is required to take his own tools and equipment to different work sites - some of these tools and equipment are bulky and there is no storage onsite. To transport these items, X needed to purchase a custom-made trailer.

On XX 20XX, X made a deposit of $X to Y in order to get a custom-made trailer. He was quoted $X for the entire trailer with the deposit required before the trailer was made.

Y then stopped operating and didn't process the order for the custom-made trailer.

X did not have any insurance on the trailer.

X since went to Z to order another custom-made trailer, which X has taken delivery of and is using it solely for purposes of employment.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Division 40

Income Tax Assessment Act 1997 Section 40-25