Commissioner of Taxation v Reef Networks Pty Ltd

[2004] FCAFC 275

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Interrogate

Catchwords

1. Taxation
2. › Income Tax
3. › Deductions
4. › Depreciation
5. › Use of plant for purpose of producing assessable income
6. › Fibre optic cable partly licensed to third party for no monetary consideration
7. › Whether cable wholly used for purpose of producing assessable income
8. › Whether depreciation deduction must be reduced
9. › Income Tax Assessment Act 1997 (Cth), ss 40-25, 42-15, 42-170(1), 995-1
1. Taxation
2. › Income Tax
3. › Deductions
4. › Depreciation
5. › Distinction between depreciation provisions and general deduction provisions
6. › Whether s 51(1) distinction between expenditure 'in carrying on business' and expenditure enabling business applies to depreciation
7. › Income Tax Assessment Act 1997 (Cth), ss 42-15, 42-170(1), 40-25

Quick Take

The distinction drawn in the s 51(1) general deduction cases between expenditure 'in carrying on business' and expenditure 'for the purpose of enabling a person to carry on business' does not apply to depreciation deductions under Divisions 42 and 40 of the ITAA 1997. Plant may be used for the purpose of producing assessable income even though it does not itself directly generate assessable income, provided its use forms part of the taxpayer's business of deriving assessable income. Where part of a single unit of depreciable plant is made available to a third party for no monetary consideration as part of the arrangement enabling the taxpayer to carry on its income-producing business, no reduction of the depreciation deduction is required.