Compare documents

No. Subsection 54(1) of the Income Tax Assessment Act 1936 does not allow a deduction for depreciation on plant, which is to be used for income-producing operations in a business, where the taxpayer has not yet commenced those operations.

The subsection requires the plant to be used by the taxpayer during the year of income for the purpose of producing assessable income. As the business has yet to commence, the plant cannot have been used for income-producing operations in the business.

Alternatively, the subsection requires the plant to be installed ready for such use and held in reserve. We interpret the expression 'held in reserve' as to keep back or save for future use in present income-producing operations. (Mr Beddoe in Case X46 90 ATC 378 at 381, AAT Case 5877 21 ATR 3411 at 3414)