ATO ID 2003/80: Capital Allowances: identical or substantially identical depreciating assets
Date of decision: 18 December 2002
Year of income: 30 June 2002
Business line: Public Groups and International

Issue
Are a curtain, venetian blind and holland blind installed in a rental property identical or substantially identical depreciating assets for the purpose of paragraph 40-80(2)(d) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
No. A curtain, venetian blind and holland blind installed in a rental property are not identical or substantially identical depreciating assets for the purpose of paragraph 40-80(2)(d) of the ITAA 1997.

Facts
The taxpayer owns a residential property that is rented (or available for rent) on a commercial basis at all times. The taxpayer purchased and installed all of the following items in the property during the same income year:

Reasons for decision
Summary: The taxpayer is entitled to deduct the decline in value of each item under section 40-25 of the ITAA 1997 because each item is a depreciating asset that the taxpayer holds and uses wholly for a taxable purpose. Under subsection 40-80(2) of the ITAA 1997 the decline in value of a depreciating asset in an income year is the asset's cost if all of the following tests are satisfied: Each of the curtain, venetian blind and holland blind is a separate depreciating asset. The identical or substantially identical test contained in paragraph 40-80(2)(d) of the ITAA 1997 effectively denies an immediate deduction for the cost of a depreciating asset (that might otherwise be available because of subsection 40-80(2) of the ITAA 1997) if you start to hold in the same income year other depreciating assets that are identical or substantially identical and the total cost of those assets is more than $300. In this case, the decline in value of the assets is worked out by reference to their respective effective life or, if chosen, through the low-value pool mechanism. Whether depreciating assets are identical or substantially identical is a question of fact. Assets are identical if they are the same in all respects. Assets are substantially identical if they are the same in most respects even though there may be some minor or incidental differences. Factors that need to be considered include colour, shape, function, texture, composition, operation, brand and design. The weighting of each factor may vary from asset to asset. Broadly speaking, the curtain, venetian blind and holland blind are similar because they are forms of window coverings. In that sense, their function is also similar because they provide privacy, control the amount of light entering the window and offer aesthetic qualities. However, these similarities in this case do not make the assets identical or even substantially identical. The assets are different in a number of ways, some of which are more significant than others. The assets are of a different construction, operation and composition, they are of a different design and colour and they are for different rooms of the house that contain different window openings. The nature and extent of these differences support the view that they are neither identical nor substantially identical depreciating assets for the purpose of paragraph 40-80(2)(d) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 Section 40-25. Subsection 40-80(2) Paragraph 40-80(2)(d)
Subject references: Decline in value methods Depreciating assets costing $300 or less Immediate deduction for depreciating assets Substantially identical depreciating assets Uniform capital allowances system