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Treatment for blackhole expenditure

Last updated 26 August 2007

The law was changed in 2001 to provide income tax treatment for various capital expenses which were not previously recognised for income tax purposes. Such expenses are known as 'blackhole' expenditure.

As part of the treatment of blackhole expenditure, a deduction (also known as a section 40-880 deduction) is available for a greater range of business-related capital expenditure, provided that no other provision either takes the expenditure into account or denies a deduction.

In addition, in 2005 the following changes were made:

  • the rules relating to the cost base of capital gains tax (CGT ) assets and the cost of depreciating assets provide for an increased range of expenditure that is included in the cost base or cost of an asset - see the Guide to capital gains tax 2006–07 (NAT 4151-6.2007) and The cost of a depreciating asset for more information
  • there is a five-year straight-line write-off for certain capital expenditure incurred to terminate a lease or licence if the expenditure is incurred in carrying on, or in connection with ceasing to carry on, a business
  • the non-commercial loss rules 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 (NAT 3379) for information on the non-commercial loss rules.

The changes apply to expenditure incurred after 30 June 2005 and CGT events happening after that date.