Depreciating assets - photographic lighting equipment

Are a flash generator, flash head, compact flash generator, light shaping tool and modelling glass protector, regarded as separate depreciating assets under section 40-30 of the Income Tax Assessment Act 1997 ('ITAA 1997')?

Yes. The flash generator, flash head, compact flash generator, light shaping tool and modelling glass protector are regarded as separate depreciating assets under section 40-30 of the ITAA 1997.

During the 2002 income year, the taxpayer purchased the following photographic lighting equipment and accessories. - Flash generator and flash head: these were purchased as a special package. The compact generator distributes and regulates power and contains three power outlets. The flash head comes with its own cord so it can be plugged into the generator to produce the lighting. - Compact flash generator: a compact all-in-one article equipped with its own power and flash head. - Light shaping tools: include zoom reflectors and a grid and filter hold kit. They are lighting attachments purchased separately. Their functions are to change the pool of light spill from the standard operating flash heads such as narrower beam or wider beam, softer and harder qualities of light. They clip onto the flash heads to allow easy removal from the flash heads. - Modelling glass protector: a glass mould (like a cup) that fits over the modelling light and flash tube to protect the light from being damaged, especially whilst in transit.

A depreciating asset is defined as an asset with a limited effective life and can reasonably be expected to decline in value over the time it is used (subsection 40-30(1) of the ITAA 1997).

It is considered that the listed items have both a limited effective life and can reasonably be expected to decline in value over the time it is used.

For composite items it is necessary to determine whether they are considered to be a single depreciating asset or whether the components are separate depreciating assets (subsection 40-30(4) of the ITAA 1997). In doing this, the 'functionality test' that was used as a basis of identifying a 'unit of plant' in the former plant depreciation rules can be used. Specific reference to a 'unit' or an 'item' is not necessary to attract the test because the definition of depreciating asset is based on a life in effective use and the depreciating asset must be identifiable as having its own life in such use.

Taxation Ruling TR 94/11 contains some guidelines about the functionality test and explains how it is applied to the particular factual circumstances of each case. Of particular relevance is that the function of the item being considered need only be separately definable or identifiable and capable of performing its own intended discrete function.

Where an item is attached to another depreciating asset and varies the performance of that asset, that item can still be regarded as having its own independent function if it is separately identifiable.

As a general rule, factors such as the mechanical independence of an item, physical separability and whether an item can be separately acquired, tend to indicate that an item may be a separate depreciating asset.

It is considered that each of the items listed can be purchased individually and are separately identifiable. This includes the flash head and flash generator even though they were purchased as a special package.

All of the items, apart from the compact flash generator, are physically detachable and interchangeable with other generators and/or flash heads. The fact that each has no commercial utility unless linked or connected to other items does not preclude it from being a separate depreciating asset ( Monier Colourtile Pty Ltd v. Commissioner of Taxation 84 ATC 4846; (1984) 15 ATR 1256). None of the listed items are integrated with the flash head and/or the generator but have their own independent function, which is to vary the performance of the unit they are attached to.

The compact flash generators are self-equipped with their own flash head and generator that enable them to function autonomously. They are considered as separate depreciating assets.