ATO ID 2004/613: Deduction: global positioning system installed in employer provided motor vehicle
Date of decision: 31 May 2004
Year of income: Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007
Business line: Small Business/Individual Taxpayers

Issue
Is the taxpayer disallowed a deduction in respect of the installation of a global positioning system (GPS) in their employer provided motor vehicle pursuant to section 51AF of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision
No. The taxpayer is not disallowed a deduction in respect of the installation of a GPS in their employer provided motor vehicle pursuant to section 51AF of the ITAA 1936.

Facts
The taxpayer has an employer provided motor vehicle. The employer provided motor vehicle is a sedan. The motor vehicle is provided for the taxpayer's exclusive use and the taxpayer is entitled to use it for private purposes. The taxpayer purchased and installed a portable GPS in this vehicle. The GPS is an electronic street directory/course plotting tool. The GPS was used by the taxpayer for work purposes and the taxpayer would be entitled to a deduction under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) for the decline in value of the GPS.

Reasons for decision
Summary: Section 51AF of the ITAA 1936 operates to deny a deduction for car expenses incurred by an employee in relation to a car which is provided by the employer for the exclusive use of the employee and which the employee is entitled to use for private purposes. The term 'car' has the meaning given by section 995-1 of the ITAA 1997 which defines it as 'a motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers'. Subsection 51AF(2) of the ITAA 1936 also provides that the phrase 'car expense' has the meaning given by section 28-13 of the ITAA 1997, which defines car expense as 'a loss or outgoing to do with a car' including 'a loss or outgoing to do with operating a car and the decline in value of a car'. The definition of car expense in section 28-13 of the ITAA 1997 has its antecedence in subsection 82KT(1) of the ITAA 1936. Accordingly, discussion on the meaning of 'car expenses' in subsection 82KT(1) of the ITAA 1936 is relevant for the purposes of section 28-13 of the ITAA 1997. In AAT Case 7273 (1991) 22 ATR 3402; Case Y43 91 ATC 412, the Tribunal found that the phrase 'car expenses', for the purposes of subsection 82KT(1) of the ITAA 1936 should not be read to encompass any and all expenses connected to an employer provided car. Rather, the scope of 'car expenses' is to be defined by taking into account the context and the purpose of the provision, and the issue is whether the expenses are 'in respect of a car expense that relates to the car'. In the Tribunal's view: the disallowance of car expenses is primarily put in place to prevent "double dipping", in which an employee claims expenses already factored into the formulas used to calculate fringe benefits tax assessed to the employer. That being so, the better construction is that expenses such as parking fees and bridge tolls in the present case, linked to the car, but generated for reasons other than the direct operation of the car and not otherwise factored into the tax regime, should not be disallowed. Accordingly, under this view expenses linked to the car which are generated other than by the direct operation of the car would not usually be caught by section 51AF of the ITAA 1936. The taxpayer's employer provided sedan is a 'car' as defined in section 995-1 of the ITAA 1997. The car is provided for the taxpayer's exclusive use and the taxpayer is entitled to use the car for private purposes. The taxpayer has installed a GPS in the car to assist them to locate client addresses. The taxpayer would be entitled to a deduction for the decline in value of the GPS under Division 40 of the ITAA 1997. The GPS has no bearing on the operation of the car itself. As such, the expenditure on the GPS is generated for 'reasons other than the direct operation of the car' and so does not fall within the definition of 'car expenses' for the purposes of section 28-13 of the ITAA 1997. As an outgoing on the GPS is not a 'car expense' a deduction in respect of the GPS will not be disallowed under section 51AF of the ITAA 1936.

Legislative references: Income Tax Assessment Act 1936 section 51AF subsection 51AF(2) subsection 82KT(1)
Case references: AAT Case 7273 (1991) 22 ATR 3402
Related ATO interpretative decisions: ATO ID 2004/612 | ATO ID 2004/614
Subject references: Car expenses Motor vehicle expenses