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Is a marine park permit a depreciating asset as defined in subsection 40-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

No, a marine park permit is not a depreciating asset as defined in subsection 40-30(1) of the ITAA 1997.

The taxpayer paid a lump sum amount to obtain a marine park permit. The permit is valid for a number of years and allows the taxpayer to use their vessel to access certain areas of the marine park that was not previously accessible given the type of licence the taxpayer was holding. It is expected that the expanded marine park access will provide economic benefits for the taxpayer's business.

A depreciating asset is defined in subsection 40-30(1) of the ITAA 1997 to be an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used but excludes land, trading stock and intangible assets except for those intangible assets listed in subsection 40-30(2) of the ITAA 1997 that are not trading stock.

The term 'intangible asset' in section 40-30 of the ITAA 1997 is not defined and therefore takes on its ordinary meaning. The Macquarie Dictionary [MultiMedia], version 5.0.0, 1/10/01 relevantly defines 'intangible' as: adjective 1. incapable of being perceived by the sense of touch, as incorporeal or immaterial things. ... 3. (of an asset) existing only in connection with something else, as the goodwill of a business.

and 'asset' as: noun 1. a useful thing or quality: *This ability to roll the eyes was a great asset on this sort of expedition. -criena rohan, 1963. 2. an item of property, as a building, a piece of equipment, etc. 3. an economic resource: *And even the best-intentioned Australian governors saw the future of the Aboriginal as becoming an asset in the developing cash economy. -c.d. rowley, 1970.

Further, the phrase 'intangible asset' is defined as; noun an asset, such as a patent, copyright, brand name, etc., which has no physical properties but which can be identified, given a monetary value, and therefore recorded on a balance sheet.

These definitions are mirrored in Australian Accounting Standards Board AASB 138 Intangible Assets which states: An asset is a resource: (a) controlled by an entity as a result of past events; and (b) from which future economic benefits are expected to flow to the entity.

and An intangible asset is an identifiable non-monetary asset without physical substance.

From this, the essential elements of an 'intangible asset' are that: • it has no physical substance • is non-monetary • is an economic resource from which economic benefits are expected to flow, and • can be given a monetary value.

A marine park permit is a licence granted by the Government, which allows a taxpayer to access certain areas of the park. It has no physical substance as it is a right of access and it is non-monetary. It is an economic resource as it is expected that the taxpayer will derive economic benefits from being able to access areas of the marine park from which they would otherwise be excluded. The marine park permit is able to be given a monetary value.

Therefore, it is an intangible asset. It is not an item of intellectual property as defined in subsection 995-1(1) of the ITAA 1997.

Nevertheless, a marine park permit is not an intangible asset listed in subsection 40-30(2) of the ITAA 1997, therefore it is not a depreciating asset for the purposes of Division 40 of the ITAA 1997.

However, the marine park permit would fall under the meaning of a statutory licence as defined under subsection 124-140(3) of the ITAA 1997 and is a capital gains tax asset within the meaning of section 108-5 of the ITAA 1997.

Date of amendment Part Comment 17 February 2017 Legislative References Inserted section 40-30, section 108-5 and subsection 124-140(3). Omitted paragraph 124-140(3)(a). Related Public Rulings (including Determinations) Omitted Capital Gains Cell Determination TD 34 as this was withdrawn on 19 November 2008. Other references Corrected title of reference 1 May 2014 Reasons for Decision Include discussion on the meaning of the term 'intangible asset'.

Date of amendment | Part | Comment

17 February 2017 | Legislative References | Inserted section 40-30, section 108-5 and subsection 124-140(3). Omitted paragraph 124-140(3)(a).

Related Public Rulings (including Determinations) | Omitted Capital Gains Cell Determination TD 34 as this was withdrawn on 19 November 2008.

Other references | Corrected title of reference

1 May 2014 | Reasons for Decision | Include discussion on the meaning of the term 'intangible asset'.