Private ruling: Business - deduction - motor vehicle depreciation
Published: July 2014
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to claim a deduction for motor vehicle depreciation? | A1: No.

Relevant facts and circumstances: You undertook to purchase a motor vehicle under a finance arrangement. However, at the time, you did not qualify for the finance. You were able to purchase the vehicle in a family member's name instead. You paid an initial deposit and are paying the loan instalments. All running expenses of the vehicle have been paid by you. The vehicle registration remains in your family member's name. The motor vehicle has been used in connection to your business activities. You would like to claim a deduction for depreciation of the motor vehicle.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 40-25 and | Income Tax Assessment Act 1997 Section 40-40.

Reasons for decision: Summary: Section 40-25 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for the decline in value (depreciation) of a depreciating asset you hold, to the extent the asset is used for a taxable purpose. The table in section 40-40 of the ITAA 1997 identifies a holder of a depreciating asset in any particular circumstance. Where an entity is not a holder under a particular item, it cannot be the holder under any other item in the table. The default rule is that a taxpayer holds an asset if they are the owner, or legal owner if there is both a legal and equitable owner (item 10 of the table in section 40-40 of the ITAA 1997). In your case, as your asset does not fall under items one to nine of the table in section 40-40 of the ITAA 1997, your asset will be caught under item 10. Whilst it is appreciated that you have paid the deposit for the motor vehicle and the loan repayments, the fact remains that the loan is not in your name nor is the registration. Therefore you will not be entitled to claim a deduction for the depreciation on the motor vehicle, as you are not considered to be the holder of the asset.