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ATO Interpretative Decision

ATO ID 2008/54 (Withdrawn)

Income Tax
Capital Allowances: depreciating asset - fixtures on land subject to sale contract - identification of assets held

Attention This ATO ID is withdrawn. Guidance on this issue can be found in Guide to depreciating assets 2016 (NAT 1996, PDF 623KB) and in TR 2006/13 Income tax: sale and leasebacks. The Ruling explains the taxation consequences of sale and leaseback arrangements which involve depreciating assets subject to Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) and also includes a discussion on transactions involving fixtures having regard to the legal rights and obligations conferred on the parties to such transactions.
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 31 March 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Issue

Were the depreciating assets that the taxpayer started to hold under section 40-40 of the Income Tax Assessment Act 1997 (ITAA 1997) before they were detached and removed from the vendor's land, identified by the assets that the taxpayer actually detached and removed from the land?

Decision

Yes, the depreciating assets that the taxpayer started to hold under section 40-40 of the ITAA 1997 before they were detached and removed from the vendor's land, were identified by the assets that the taxpayer detached and removed from the land.

Facts

The taxpayer entered a contract to purchase depreciating assets from another entity.

The depreciating assets were fixtures attached to the vendor's land. They were generally contained in and affixed to the floor, walls and roof of buildings on the vendor's land and connected to services such as gas, water and electricity.

The taxpayer was required to detach and remove the depreciating assets within a specified period and, for that purpose, was granted a right to access the vendor's land. The taxpayer's right to detach and remove the depreciating assets did not include the obligation (although it may have chosen to) to detach and remove all the elements of the depreciating assets' affixation and connection other than ensuring those elements left behind were left safe, to a specified statutory standard, and the buildings and site secure.

The vendor retained legal title to the land to which the depreciating assets were attached at all times.

The taxpayer's right to detach and remove the depreciating assets from the settlement date, coupled with the reasonable expectation that the taxpayer would exercise that right and thereby become the assets' holder under an item of the table in section 40-40 of the ITAA 1997, made the taxpayer the holder of each of the depreciating assets from that date, to the exclusion of the legal owner (Item 6 of the table in section 40-40 of the ITAA 1997) until each was detached and removed from the vendor's land.

The taxpayer held the depreciating assets once they were detached and removed from the land as legal owner (Item 10 of the table in section 40-40 of the ITAA 1997).

Reasons for Decision

When the contract to purchase the depreciating assets was successfully performed, the assets the taxpayer actually detached and removed from the vendor's land under the contract were the assets it had the right to possess. It follows then that the contract parties' joint understanding was that the taxpayer had no obligation and therefore no right that it intended to exercise under the contract to possess what it did not detach and remove. The elements of affixation and connection of the depreciating assets' attachment to the vendor's land that were left behind after the depreciating assets' detachment and removal were not held by the taxpayer at any time.

Therefore the depreciating assets identified as being held under Item 6 of the table in section 40-40 of the ITAA 1997 prior to their detachment and removal from the vendor's land, were those depreciating assets that the taxpayer actually took possession of (started to hold under Item 10 of the table in section 40-40 of the ITAA 1997) under the purchase contract.

Date of decision: 22 November 2007

Year of income:Year ended 30 June 2004

Legislative references:
Income Tax Assessment Act 1997
   section 40-40

Related ATO Interpretative Decisions
ATO ID 2008/53

Keywords
Depreciating assets
Hold a depreciating asset
Fixtures on land

Siebel/TDMS reference number: 5942329; 1-AVXC07X

Business line: Small Business/Individual Taxpayers

Date of publication: 11 April 2008

ISSN: 1445-2782

ATO ID 2008/54 (Withdrawn) history   Top  
   Date   Version 
   22 November 2007   Original statement   
 You are here ®  31 March 2017   Withdrawn   


 


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