Asset Treatment
Scenario:
My business involves purchasing and hiring shipping containers. The containers eventually get sold to some buyers. My question is, should the shipping containers for hire be treated as stock or depreciable assets or neither?
Explanation:
As the containers are initially used to generate assessable income (from hiring), they are depreciating assets (ITAA 1997s 40-40 and 40-30) and should be capitalised and depreciated (ITAA 1997s 40-25) over their useful life (typically 10 years). Refer to Private Binding Ruling 17306. Although that ruling deals with leasing the containers to non-residents, all the salient technical issues are the same.