Private ruling: Depreciation and capital works
Date of advice: 9 April 2021
Published: June 2021
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction under Division 40 of the Income Tax Assessment Act 1997 for the following depreciating assets: furnishings, furniture, new external signage? | A1: Yes. Depreciating assets are assets that have a limited effective life and can be expected to decline in value over the time it is used. Section 40-25 of the ITAA 1997 allows you a deduction equal to the decline in value of a depreciating asset to the extent to which it is used to produce assessable income or is installed ready for use for that purpose. | Q2: Are you entitled to claim a capital works deduction for the painting of walls and new flooring under Division 43 of the Income Tax Assessment Act 1997 ? | A2: Yes. Assets which form part of premises will be included in calculating a buildings capital works deduction. Section 43-10 of the ITAA 1997 allows you to claim a deduction for capital expenditure for the period during the year a property is used for income producing purposes.

Relevant facts and circumstances: You purchased a business. The franchisee agreement states that the franchisor would refurbish certain areas while the franchisee is responsible for the cost of refurbishing other areas. The franchisor has provided new furnishings, furniture, painting of walls, new flooring and new external signage. You are in possession of all of the refurbishment and have to maintain them for the remainder of the life of the store or until it is sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 40 | Income Tax Assessment Act 1997 Division 43