Private ruling: Aircraft deductions
Published: June 2015
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a decline in value (depreciation) deduction in relation to the cost of the aircraft? | A1: Yes. | Q2: Are you entitled to a deduction for the ongoing expenses of the aircraft? | A2: Yes.

Relevant facts and circumstances: You operate a business at more than 10 locations throughout the state. You use the aircraft to access country areas where you have to drive and to make areas more accessible to give better service to customers. Prior to purchasing the aircraft you spent substantial sums per year on travel and flights for business. The aircraft is not used for any private purposes. You incur costs for storage, insurance, services, fuel and incidentals.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Subsection 40-25(2)

Reasons for decision: Summary: Division 40 allows you to deduct an amount equal to the decline in value of a depreciating asset. A depreciating asset is an asset that has a limited effective life and that is reasonably expected to decline in value over the time it is used. Subsection 40-25(2) of the ITAA 1997 further requires the deduction be limited to the extent the asset is used in the course of earning your assessable income. In your case, the aircraft is considered to be a depreciating asset and it is accepted that the aircraft will assist you to perform your income earning activities. Consequently, you are entitled to claim a deduction for the decline in value of your aircraft. Section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing to the extent that it is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, provided that it is not an outgoing of capital, or of a capital nature and is not private or domestic in nature. In order for an expense to be deductible there must be a sufficient connection between the outgoing and the activities directed at gaining or producing assessable income. In Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236 , the High Court stated that for an expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. In your case, it is accepted that there is a sufficient nexus between the on-going expenses incurred and your income earning activities so that the outgoing is incidental and relevant to the gaining of assessable income. Therefore you are entitled to a deduction for these costs under section 8-1 of the ITAA 1997.