Published on 01 Apr 08
by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE
One of the certainties of tax is that the boundary between revenue and capital is blurred and difficult. A substantial body of case law has failed to produce clarity and precision. The authors propose a new market-based approach to identifying whether a transaction is on revenue or capital account. In this paper, the approach is applied in relation to depreciation. The authors conclude that the current system of allowing specific deductions for depreciation is unsound and should be replaced by the market-based approach which delivers outcomes that are more certain, more equitable, and more soundly based on economic principle.