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Is the taxpayer entitled to use one of the four methods in Division 28 of the Income Tax Assessment Act 1997 (ITAA 1997) to calculate a deduction for car expenses, in relation to a car that was given to them as a gift?

Yes. As they own the car for the purposes of Division 28 of the ITAA 1997, the taxpayer is entitled to use one of the four methods in Division 28 to calculate a deduction for car expenses, in relation to a car that was given to them as a gift.

The taxpayer incurs car expenses in relation to a car that they use for income producing purposes.

The car was given to the taxpayer as a gift; they did not purchase or contribute towards the purchase of the car.

The car is not registered in the taxpayer's name, but they are responsible for all costs associated with running and maintaining the car.

Section 28-12 of the ITAA 1997 allows taxpayers a deduction for car expenses, using one of the four methods in Division 28 of the ITAA 1997, in relation to a car that they own or lease.

The term 'own' is not defined in income tax legislation. The word therefore bears its ordinary meaning.

The Australian Oxford Dictionary defines own as to 'have as property; possess'.

A person may own or possess property through an effective gift transaction (as the donor transfers ownership or possession of the property to the donee).

Consequently, a taxpayer may own a car as a result of a gift. In such circumstances, a taxpayer does not have to purchase or contribute towards the purchase of a car to own it for the purposes of Division 28 of the ITAA 1997. The taxpayer in this case, therefore, owns the car for the purposes of Division 28 of the ITAA 1997.

Accordingly, the taxpayer is entitled to use one of the 4 methods in Division 28 of the ITAA 1997 to calculate a deduction for car expenses, in relation to a car that was given to them as a gift.