ATO Interpretative Decision

ATO ID 2004/612

Income Tax

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Issue

Is a global positioning system (GPS) device acquired and installed by the taxpayer in a car held by their employer, a separate depreciating asset from the car within the meaning of that term in section 40-30 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. A GPS device acquired and installed by the taxpayer in a car held by their employer is a separate depreciating asset from the car within the meaning of that term in section 40-30 of the ITAA 1997.

Facts

The taxpayer's employment requires extensive travelling.

The taxpayer purchased and installed a portable GPS in a car provided by their employer. The GPS functions as an electronic street directory. The taxpayer did not need permission from the employer to install the device.

The device is mounted in a cradle attached to the inside of the car and draws power from the car. It can be easily removed and attached to another car. It can only work in a motor vehicle and has no functions other than navigation.

The taxpayer intends to remove the device from the car if their employment is terminated. The removal will not cause any damage to the car.

The taxpayer uses the device solely for a taxable purpose.

The employer is the holder of the car for the purposes of Division 40 of the ITAA 1997.

Reasons for Decision

Broadly, a depreciating asset is defined as an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used (subsection 40-30(1) of the ITAA 1997).

As a tangible operating mechanism, a GPS will have a limited effective life and can reasonably be expected to decline in value over the time it is used.

For composite items it is necessary to determine whether they are considered to be a single depreciating asset or whether the components are separate depreciating assets. This is a question of fact and degree which can only be determined in the light of all the circumstances of the particular case (subsection 40-30(4) of the ITAA 1997).

A test used in determining that outcome is a test of function, the functional test.

The Commissioner's views as to the application of the functional test are set out in Taxation Ruling TR 94/11. Some of the factors to be considered in applying the functional test include:

•

being separately identifiable

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whether the item is capable of performing its own separate function

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the item varies the performance of another item.

Factors such as the mechanical independence of an item, physical separability and whether an item can be separately acquired need also to be considered in deciding whether an item may be a separate depreciating asset.

Cars are normally considered to be one depreciating asset.

The GPS was purchased separately by the taxpayer. It was not installed as a standard feature of the car at time of manufacture and is not available as a special option from the manufacturer. The mode of affixation and the intention of the taxpayer indicate that the installation of the GPS in the car is less permanent than other parts of the car. The GPS performs a discrete function as an electronic street directory. It is not mechanically essential for the car.

In applying the functional test to the above items, the GPS is considered to be a separate depreciating asset from the car.

Year of income:  Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1997
   section 40-30
   subsection 40-30(1)
   subsection 40-30(4)

Related Public Rulings (including Determinations)
Taxation Ruling TR 94/11

Related ATO Interpretative Decisions
ATO ID 2004/613
ATO ID 2004/614

Keywords
Cost of a depreciating asset
Decline in value
Deduction for depreciating assets
Depreciating assets

Business Line:  Small Business/Individual Taxpayers

Date of publication:  30 July 2004

ISSN: 1445-2782