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ATO Interpretative Decision

ATO ID 2002/1004

Income Tax

Income Tax: car lease residual values
FOI status: may be released

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

What are the minimum residual values for leased cars effective from 1 July 2002?

Decision

The percentage of cost to be used to determine minimum residual values for leased assets with an effective life of eight (8) years are:

Minimum residual value - percentage of cost
Term of lease Effective Life
8 years
Year 1 65.63%
Year 2 56.25%
Year 3 46.88%
Year 4 37.5%
Year 5 28.13%

Facts

The Commissioner has amended his determination for the effective life for cars from 6 & 2/3 years to 8 years.

The changes, which take effect from 1 July 2002, only affect assets acquired on or after this date.

Reason for Decision

Taxation Ruling IT 28 and Taxation Determination TD 93/142 set out percentages of cost to be used to determine minimum residual values able to be used for leased items. However, they contain no reference to the percentage that should be used for plant and equipment having an effective life of 8 years.

The figures in the table above follow the methodology set out in TD 93/142.

Date of decision:  17 October 2002

Year of income:  Year ended 30 June 2002

Related Public Rulings (including Determinations)
Taxation Ruling IT 28
Taxation Determination TD 93/142

Keywords
Lease residual values
Residual values

Siebel/TDMS Reference Number:  CW3126002

Business Line:  Public Groups and International

Date of publication:  30 October 2002

ISSN: 1445-2782


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