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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?

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.

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).

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.