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New treatment for 'black hole' expenditure
Recent changes to the law provide income tax treatment for some capital expenses that were not previously recognised for income tax purposes. Such expenses have been known as 'black hole' expenditure.
As part of the new treatment of black hole expenditure, deductions for business-related costs (also known as section 40-880 deductions) are now available for a greater range of business-related capital expenditure provided that the:
- deduction is not denied by another provision, and
- expenditure is not taken into account under another provision.
See the Guide to depreciating assets 2005-06 (NAT 1996-6.2006) for more information.
In addition, the following changes were made:
- the rules relating to the cost base of capital gains tax (CGT) assets and the cost of depreciating assets were amended to increase the range of expenditure that is included in the cost base or cost of an asset - see the Guide to capital gains tax 2005-06 (NAT 4151-6.2006) and the Guide to depreciating assets 2005-06 (NAT 1996-6.2006) for more information
- a five-year straight-line write-off has been introduced for some of the capital costs of terminating a lease or licence, provided this expenditure was incurred either in carrying on a business or in connection with ceasing a business
- the non-commercial loss rules were changed to ensure that they apply to pre- and post-business expenditure deductible under section 40-880 by individuals (either alone or in partnership) - refer to the fact sheet Non-commercial losses: overview - fact sheet (NAT 3379-05.2003) for information on the non-commercial loss rules.
The new rules apply to expenditure incurred after 30 June 2005 and to CGT events happening after that date.
Choice of superannuation fund
Choice of superannuation fund commenced on 1 July 2005. It gives certain employees the opportunity to choose which superannuation fund will receive their compulsory superannuation guarantee employer contributions. Further changes to superannuation laws from 1 July 2006 will enable additional employees to make this choice.
Details concerning your obligation to provide choice to your employees can be obtained by visiting our website www.superchoice.gov.au or phoning our Super Choice Infoline on 13 28 64.
Changes to the simplified tax system
There have been changes to the law relating to the simplified tax system (STS). These changes only apply to income years starting on or after 1 July 2005.
Briefly, the changes are the:
- introduction of an entrepreneurs tax offset
- removal of the requirement that an STS taxpayer must use the STS accounting method
- suspension of the five-year re-entry rule in some circumstances, and
- extension of circumstances in which rollover relief may be available on the disposal of depreciating assets in an STS pool.
For further information, call the Business Infoline on 13 28 66 or the Tax Agents Infoline on 13 72 86.
Last modified: 01 Sep 2006QC 18499