ATO ID 2003/111: Capital Allowances: termination value of a depreciating asset that has been stolen
Date of decision: 26 November 2002
Year of income: Year ended 30 June 2002
Business line: Private Groups and High Wealth Individuals

Issue
If a balancing adjustment event occurs for a depreciating asset that has been stolen, what is the termination value of the asset for the purpose of working out the balancing adjustment amount under Subdivision 40-D of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
The termination value of a stolen depreciating asset under a balancing adjustment event is the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction pursuant to Item 8 of the table in subsection 40-300(2) 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: A balancing adjustment event may occur for a depreciating asset that is stolen because the asset stops being used (or installed ready for use) for any purpose and it is expected that it will never be used (or installed ready for use) again (paragraph 40-295(1)(b) of the ITAA 1997). In this case, Item 1 of the table in subsection 40-300(2) of the ITAA 1997 applies to prescribe a termination value of the market value of the asset when it ceased to be used (or installed ready for use). Item 8 of the table in subsection 40-300(2) of the ITAA 1997 may also apply to a stolen depreciating asset because the theft of an asset may fall within the meaning of the phrase 'lost or destroyed'. In this case, a termination value of the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction is prescribed. If more than one item in the table in subsection 40-300(2) of the ITAA 1997 applies, the subsection specifies that the value under the last applicable item is to be used. The termination value of a stolen depreciating asset under a balancing adjustment event is, therefore, the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction pursuant to Item 8 of the table in subsection 40-300(2) of the ITAA 1997. If no amount or value is received or receivable under an insurance policy or otherwise for the loss or destruction of the depreciating asset, the termination value is nil.

Legislative references: Income Tax Assessment Act 1997 paragraph 40-295(1)(b) subsection 40-300(2)
Related ATO interpretative decisions: ATO ID 2002/782 | ATO ID 2003/110 | ATO ID 2003/112
Subject references: Losses from fraud, theft & embezzlement Capital Allowances CoE Balancing adjustment event Termination value