Tax Treatment of Taxi License Lease Arrangement

Q&A Tax

Question : 

Mr. C holds two taxi licences and leased the two licenses out.

Can Mr. C depreciate or amortise the cost of the license given that the value of the taxi license has
dropped substantially?

 

Answer : 

It would not be possible to claim any deductions for the decline in value, depreciation or amortisation of
the taxi plates / licences.

Section 40-30 ITAA 1997 sets out the definition of depreciating asset as being an asset with a limited
effective life that can reasonably be expected to decline in value over the time it is used. However,
certain assets are excluded from this definition, including intangible assets unless they are mentioned
in subsection 40-30(2). The only intangible assets that are listed are:

(a) mining, quarrying or prospecting rights;
(b) mining, quarrying or prospecting information;
(c) items of intellectual property;
(d) in-house software;
(e) IRUs;
(f) spectrum licences;
(g) datacasting transmitter licences;
(h) telecommunications site access rights

The definition of intellectual property in section 995-1 includes rights held in relation to a patent,
registered design or copyright. The taxi licences should be treated as intangible assets.

Mr. C would have to wait until a CGT event occurs in relation to the licences and a capital loss might
arise if the capital proceeds are less than the reduced cost base of the licences.

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