How is car tax worked out
This Ruling provides you with the following level of protection:
This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. If you rely on this ruling, we must apply the law to you in the way set out in the ruling (or in a way that is more favourable for you if we are satisfied that the ruling is incorrect and disadvantages you, and we are not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you.
1. Yes. The special rules in section 40-370 of the Income Tax Assessment Act 1997 , 1 instead of the general rules in section 40-285, apply to work out the balancing adjustment for a car you held where a deduction is available to you under Division 40 for the car's decline in value for an income year (for example, by using either the 'log book' or 'one-third of actual expenses' methods for deducting car expenses), but you chose either the 'cents per kilometre' or '12% of original value' method under Division 28 for deducting
your car expenses for the car for one or more other income years.
2. Louise acquired a car on 1 July 2002 for $30,000 for use in her assessable income earning activities.
3. For the 2002-03 income year, Louise used the 'log book' method to work out her deduction for car expenses and her log book showed that the extent of her taxable purpose use was 40%. Louise chose to use the prime cost method and the Commissioner's determination of effective life of eight years to work out the decline in value of the car.
4. For the 2003-04 income year, Louise decided to use the 'one-third of actual expenses' method to work out her deduction for car expenses.
5. For the 2004-05 income year, Louise decided to use the '12% of original value' method to work out her deduction for car expenses.
6. For the 2005-06 income year, Louise decided to use the 'cents per kilometre' method to work out her deduction for car expenses.
7. Louise sold her car for $18,000 on 30 June 2006.
8. Section 40-370 applies to work out the balancing adjustment for Louise's car because Louise deducted the decline in value of her car under Division 40 for some income years (being the 2002-03 and 2003-04 income years) and used either the '12% of original value' method for another income year (being the 2004-05 income year) or the 'cents per kilometre' method for another income year (being the 2005-06 income year).
9. The relevant figures needed to apply the method statement in subsection 40-370(2) are:Source: law.ato.gov.au