Environmental protection activities
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You can get an immediate deduction for expenditure to the extent that you incur it for the sole or dominant purpose of carrying on environmental protection activities (EPA). EPA are activities undertaken to prevent, fight or remedy pollution, or to treat, clean up, remove or store waste from your earning activity. Your earning activity is one you carried on, carry on or propose to carry on for the purpose of:
- producing assessable income (other than a net capital gain)
- exploration or prospecting, or
- mining site rehabilitation.
You may also claim a deduction for cleaning up a site on which a predecessor carried on substantially the same business.
The deduction is not available for:
- EPA bonds and security deposits
- expenditure for acquiring land
- expenditure for constructing or altering buildings, structures or structural improvements
- expenditure to the extent that you can deduct an amount for it under another provision.
Expenditure on EPA that is also an environmental impact assessment of your project is not deductible as expenditure on EPA. Instead, it could be deductible over the life of the project using a pool-see Project pools.
Also, expenditure which forms part of the cost of a depreciating asset is not deductible as expenditure on EPA if a deduction is available for the decline in value of the asset.
If the expenditure arises from a non-arm's length transaction and is more than the market value of what it was for, the amount of the expenditure is instead taken to be that market value.
Any recoupment of the expenditure is included in your assessable income for the year in which you receive it.
Note that expenditure incurred on or after 19 August 1992 on certain earthworks constructed as a result of carrying out EPA can be written off at a rate of 2.5 per cent under the provisions for capital works expenditure.
Last modified: 01 Jun 2005QC 27399