Private ruling: Deduction - depreciation
Date of advice: 29 August 2023
Published: 9 October 2023
Ruling period: Year ended 30 June 2023
Date scheme commenced: 1 July 2022

Ruling: Q1: Is your utility vehicle exempt from the car limit for depreciation purposes under section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: You carry on a business in the construction industry. You have supplied the make, model, variant and make year of a utility you purchased to carry tools and tow work trailers. The vehicle has seating for 5 people and a tray. The vehicle will also incur some incidental private usage. You have supplied the gross vehicle mass and kerb weight of the vehicle. The carrying capacity of the vehicle is less than 1 tonne. The vehicle has not been modified.

Relevant legislative provisions: Income Tax Assessment Act 1997 (ITAA 1997) Division 40 | Income Tax Assessment Act 1997 (ITAA 1997) section 40-25 | Income Tax Assessment Act 1997 (ITAA 1997) section 40-230 | Income Tax Assessment Act 1997 (ITAA 1997) subsection 40-230(1) | Income Tax Assessment Act 1997 (ITAA 1997) subsection 40-230(3)

Reasons for decision: Summary: A deduction for the decline in value of depreciating assets is available under Division 40 of the ITAA 1997. Specifically, a deduction is available for the decline in value of a depreciating asset that is held by you to produce assessable income under section 40-25 of the ITAA. Under subsection 40-230(1) a taxpayer cannot claim more for the depreciation of their asset than the car limit defined in subsection 40-230(3) for a vehicle designed mainly to carry passengers. Some cars are designed to carry both goods and passengers. In determining what a car was designed to carry the ATO has considered the Australian Design Rules. Under section 4.5.2 of the Vehicle Standard Australian Design Rule (ADR 2005) a vehicle designed to carry both goods and passengers is considered a goods vehicle if the number of seats multiplied by 68 kilograms is less than half of the carrying capacity or payload of the vehicle, otherwise it will be considered a passenger vehicle. You have purchased a utility vehicle that seats 5 people. With 5 seats and a tray, your vehicle is designed to carry both goods and passengers. The passenger carrying capacity or payload of 340 kilograms is less than half of the vehicle's total carrying capacity of the vehicle. Therefore, it can be considered your vehicle was designed to carry goods. In this case, the car limit will not apply for depreciation purposes.