INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 57AF   LIMIT ON COST PRICE FOR DEPRECIATION OF MOTOR VEHICLE  

57AF(1)   Units of property to which this section applies.  

This section applies in relation to a unit of property (other than an excluded unit of property) being:

(a) a unit of property in respect of which depreciation is allowable under this Act; and

(b) a motor vehicle (including a vehicle known as a four wheel drive vehicle) that is a motor car or station wagon.

57AF(2)   Limit on cost for depreciation purposes.  

For the purpose of calculating the depreciation allowable to a taxpayer in respect of a unit of property to which this section applies, if:

(a) the cost of the unit;

is more than:

(b) the motor vehicle depreciation limit (see subsection (3) or (4)) for the financial year ( ``the first-use year'' ) when the taxpayer first used it for any purpose;

then its cost is taken to be equal to the motor vehicle depreciation limit for the first-use year.

57AF(3)   Motor vehicle depreciation limit for 1992-93.  

The motor vehicle depreciation limit for the 1992-93 first-use year is $47,280.

57AF(4)   Motor vehicle depreciation limit for 1993-94 and later years.  

For any later first-use year, the motor vehicle depreciation limit for the first-use year is calculated by:

(a) taking the motor vehicle depreciation limit for the financial year before it (ignoring any increase that may have resulted from applying paragraph (d)); and

(b) multiplying the amount under (a) by the indexation factor for the first-use year (see subsection (5)); and

(c) rounding the result to the nearest whole dollar (rounding up an amount ending in 50 cents); and

(d) if the result is less than $18,000 - increasing it to $18,000.

57AF(5)   Working out the indexation factor.  

The indexation factor for the first-use year is calculated using the following formula (and then rounded under subsection (6)):

sum of index numbers for quarters in first March year   sum of index numbers for quarters in second March year

where:

``first March year'' means the period of 12 months ending on 31 March immediately before the first-use year;

``index number'' , for a quarter, means the index number for the motor vehicle purchase sub-group of the Consumer Price Index, being the weighted average of the 8 capital cities, published by the Australian Statistician in respect of the quarter (ignoring any later number that may be published by the Australian Statistician in substitution for it);

``second March year'' means the period of 12 months immediately before the first March year.

57AF(5A)   [1997/98 indexation factor]  

Despite subsection (5), the indexation factor for the 1997-98 financial year is 1.

57AF(6)   Rounding the indexation factor.  

The result under subsection (5) must be rounded up or down to 3 decimal places (rounding up in the case exactly half-way between).

57AF(7)   Indexation factor: change in CPI reference base.  

For the purposes of applying the formula component ``index number'' in subsection (5), if:

(a) at any time, whether before or after the commencement of this subsection, the Australian Statistician has changed or changes the reference base for the motor vehicle purchase sub-group of the Consumer Price Index;

then:

(b) after the change, only index numbers published in terms of the new base are to be used.

57AF(8)   Publishing the indexation factor.  

Before the beginning of each financial year, the Commissioner must publish by written notice the indexation factor and the motor vehicle depreciation limit for the financial year.

57AF(9)   Example of how to work out motor vehicle depreciation limit.  

A typical example of how the motor vehicle depreciation limit is worked out for a first-use year is as follows:

(a) start with the limit for the previous financial year - assume it is $56,477;

(b) next, work out the indexation factor for the first-use year. This involves:

(i) adding the 4 index numbers for the year ending on March 31 in the previous financial year (assume they come to 132) and doing the same for the year before that (assume they come to 128);

(ii) dividing the first sum by the second:

132 128

=   1.03125

(iii) rounding the result down to 3 decimal places, giving an indexation factor of 1.031 (if the number under (ii) had instead been exactly half-way between 1.031 and 1.032 (i.e. 1.0315), or had been more than half-way, it would have been rounded up to 1.032);

(c) finally, multiply the previous financial year's limit (the amount in (a)) by the indexation factor:

$56,477   ×   1.031   =   $58,227.787

The result is then rounded up to $58,228, which is the motor vehicle depreciation limit for the first-use year .

57AF(10)   Reduced disposal price in return for discount.  

Where -

(a) a taxpayer disposes of a unit of property (in this subsection referred to as the ``first unit of property'' ) by sale for a consideration the amount or value of which (in this subsection referred to as the ``reduced disposal price'' ) is, in the opinion of the Commissioner, less than the market value of the first unit of property immediately before the time of disposal;

(b) depreciation under this Act has been allowed or is allowable to the taxpayer in relation to the first unit of property;

(c) the cost to the taxpayer or another person (in this subsection referred to as the ``discounted cost'' ) of acquiring ownership of another unit of property (in this subsection referred to as the ``second unit of property'' ), being a unit of property to which this section applies, is less than the amount that would otherwise have been the cost to the taxpayer or that other person of acquiring ownership of the second unit of property by reason of the allowance of a discount (in this subsection referred to as the ``cost price discount'' );

(d) the Commissioner is satisfied, having regard to all the circumstances, that the whole or a part of the cost price discount (which whole or part, as the case may be, is in this subsection referred to as the ``relevant discount amount'' ) was based on, directly or indirectly referable to, or fixed by reason of, the reduced disposal price of the first unit of property being less than the market value of the first unit of property immediately before the time of disposal; and

(e) the sum of the discounted cost and the relevant discount amount is greater than the motor vehicle depreciation limit in relation to the financial year in which the second unit of property was first used by the taxpayer or that other person (whether for the purpose of producing assessable income or otherwise),

the discounted cost in relation to the second unit of property for the purposes of the application of the provisions of this Act relating to depreciation and the sale price of the first unit of property for the purposes of section 59 shall each be deemed to be increased by the relevant discount amount.

57AF(11)   Meaning of ``market value''.  

In this section, a reference to the market value of property at a particular time shall, if there is insufficient evidence of the market value at that time, be read as a reference to such amount as, in the opinion of the Commissioner, is fair and reasonable.

57AF(12)   Definitions.  

In this section:

"discount"
, in relation to the acquisition of a unit of property, includes any allowance that has the effect of reducing the price payable for the acquisition of the unit of property;

"excluded unit of property"
, in relation to a taxpayer, means -

(a) a unit of property that was acquired by the taxpayer on or before 21 August 1979 or under a contract entered into on or before that date;

(b) a unit of property that was constructed by the taxpayer where the construction commenced on or before 21 August 1979; or

(c) a unit of property that was acquired by the taxpayer after 21 August 1979 where -

(i) the unit of property had been acquired by a person on or before that date or under a contract entered into on or before that date; and

(ii) at all times after the unit of property was acquired by that person and before it was acquired by the taxpayer, the owner for the time being of the unit of property held the unit of property as trading stock; or

(d) a unit of property, being a motor vehicle that, immediately before it was first used by the taxpayer for any purpose, was specially fitted out for transporting disabled persons seated in wheelchairs (except if, at that time, the motor vehicle met the description in subitem 96(1) or 97(1) of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 ).

"index number"

"relevant year of income"

57AF(13)    

57AF(14)    

57AF(15)