Issue
What are the minimum residual values for leased cars effective from 1 July 2002?
Decision
The percentage of cost to be used to determine minimum residual values for leased assets with an effective life of eight (8) years are: Minimum residual value - percentage of cost Term of lease Effective Life 8 years Year 1 65.63% Year 2 56.25% Year 3 46.88% Year 4 37.5% Year 5 28.13%
Term of lease | Effective Life
8 years
Year 1 | 65.63%
Year 2 | 56.25%
Year 3 | 46.88%
Year 4 | 37.5%
Year 5 | 28.13%
Facts
The Commissioner has amended his determination for the effective life for cars from 6 & 2/3 years to 8 years.
The changes, which take effect from 1 July 2002, only affect assets acquired on or after this date.
Reason for Decision
Taxation Ruling IT 28 and Taxation Determination TD 93/142 set out percentages of cost to be used to determine minimum residual values able to be used for leased items. However, they contain no reference to the percentage that should be used for plant and equipment having an effective life of 8 years.
The figures in the table above follow the methodology set out in TD 93/142.