Certain business related capital expenditure incurred after 30 June 2001 is deductible to the extent that the business is, was or will be carried on for a taxable purpose. The following types of capital expenditure may qualify for deduction:
- expenditure to establish your business structure - such expenditure includes the costs of incorporating a company or creating a partnership or trust through which you will carry on your business but does not include the costs of acquiring a franchise or goodwill
- expenditure to convert your business structure to a different structure - such as the costs of transferring your business assets to a partnership because you have decided to start carrying on your business through a partnership rather than as a sole trader
- expenditure to raise equity for your business
- expenditure to defend your business against a takeover
- costs to your business of unsuccessfully attempting a takeover
- costs of liquidating a company that carried on a business and of which you are a shareholder, and
- costs to stop carrying on your business - such as the legal costs of terminating the services of employees when the business ceases.
The deduction cannot be claimed for capital expenditure to the extent to which it:
- can be deducted under another provision
- forms part of the cost of a depreciating asset you hold or of land
- relates to a lease
- would be taken into account in working out an assessable profit or deductible loss
- would be taken into account in working out a capital gain or a capital loss, or
- is specifically not deductible under the income tax laws - such as a fine.
If the expenditure arises from a non-arm's length dealing and is more than the market value of what it was for, the amount of the expenditure is taken to be that market value.
You deduct 20% of the expenditure in the year you incur it and in each of the following four years.
A recoupment of the expenditure may be included in your assessable income.