ATO Interpretative Decision

ATO ID 2002/884 (Withdrawn)

Income Tax

Division 40: Cost - transportation expenses of a depreciating asset
FOI status: may be released

This ATO ID is withdrawn as it is a straightforward application of legislation.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is expenditure on meals, fuel and accommodation incurred by the holder of a depreciating asset in transporting the asset to the holder's place of business a second element of the asset's cost pursuant to section 40-190 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No, the expenditure is a first element cost of the depreciating asset under section 40-180 of the ITAA 1997.

Facts

The taxpayer commenced a transport business and, for the purpose of the business, ordered a transport vehicle from a supplier located in another State. The taxpayer travelled, at no cost, to the other State to take delivery of the vehicle but incurred expenditure on meals, fuel and accommodation in transporting the vehicle from the dealer's location to the taxpayer's place of business.

Reasons for Decision

The cost of a depreciating asset consists of two elements - first and second elements (section 40-175 of the ITAA 1997).

First element costs are those a taxpayer incurs to start holding the asset. This element includes the acquisition price of the asset (sections 40-180 and 40-185 of the ITAA 1997).

Second element costs are worked out after a taxpayer starts to hold the asset. This element includes additional costs incurred to bring the asset to its current condition and location (section 40-190 of the ITAA 1997).

The costs incurred by the taxpayer were wholly directed to putting the vehicle in a position where it could be used to carry on the taxpayer's business of transportation and were incurred by the taxpayer as he started to hold the asset. The costs in question satisfy the concept of first element costs and are not dissimilar to delivery charges that are often paid by a purchaser of goods to a supplier.

The vehicle was the first to be acquired by the taxpayer and was the substantive asset of the business. In all these circumstances, the costs are considered to be of a capital nature and, therefore, not otherwise excluded from first element costs (section 40-220 of the ITAA 1997)

Amendment History

Date of Amendment	Part	Comment
21 November 2014	Decision	Changed decision to no, and changed legislative reference to section 40-180 of the ITAA 1997
	Reasons for Decision	Change reference to first element of cost and grammar used.

Date of decision: 7 August 2002

Year of income: Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   section 40-175
   section 40-180
   section 40-185
   section 40-190
   section 40-220

Related Public Rulings (including Determinations)
Taxation Ruling IT 2197

Keywords
Depreciating assets
Division 40
Cost of a depreciating asset
First element of cost
Second element of cost

Business Line: Private Groups and High Wealth Individuals

Date of publication: 28 August 2002

ISSN: 1445-2782

history

	Date:	Version:
	7 August 2002	Original statement
You are here	21 November 2014	Archived

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