ATO ID 2003/110: Capital Allowances: balancing adjustment event on the theft of a depreciating asset
Date of decision: 26 November 2002
Year of income: Year ended 30 June 2002
Business line: Private Groups and High Wealth Individuals

Issue
Does a balancing adjustment event occur for a depreciating asset under paragraph 40-295(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) on the theft of the asset?

Decision
No. The theft of a depreciating asset does not, of itself, constitute a balancing adjustment event occurring for the asset under paragraph 40-295(1)(a) of the ITAA 1997.

Facts
The taxpayer owned a depreciating asset at the time it was stolen. The taxpayer used the asset wholly for a taxable purpose. The asset was insured against the event of theft.

Reasons for decision
Summary: Subsection 40-295(1) of the ITAA 1997 states that a balancing adjustment event occurs for a depreciating asset if: For a balancing adjustment event to occur for a depreciating asset under paragraph 40-295(1)(a) of the ITAA 1997, the taxpayer must stop holding the asset. The taxpayer is the legal owner of the asset and, therefore, a holder of it under Item 10 of the table in section 40-40 of the ITAA 1997. The taxpayer does not cease to be the asset's legal owner even though they have lost immediate physical possession of it. The taxpayer retains legal title to the asset while it remains stolen. This means that the theft of a depreciating asset does not, of itself, cause a balancing adjustment event to occur for the asset under paragraph 40-295(1)(a) of the ITAA 1997. A balancing adjustment event would occur for a stolen depreciating asset under paragraph 40-295(1)(a) of the ITAA 1997 if, for example:

Legislative references: Income Tax Assessment Act 1997 section 40-40 subsection 40-295(1) paragraph 40-295(1)(a)
Related ATO interpretative decisions: ATO ID 2002/782 | ATO ID 2003/111 | ATO ID 2003/112
Subject references: Losses from fraud, theft & embezzlement Capital Allowances CoE Balancing adjustment event Hold a depreciating asset