• Deduction for environmental protection expenses

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Did you have a business expense for environmental protection activities?

    No, Go to Section 40-880 deduction.

    Yes, Read on.

    You need to know

    Show here the amount of allowable expenditure on environmental protection activities (EPA).

    You can deduct expenditure to the extent that you incur it for the sole or dominant purpose of carrying on 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 activity.

    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, or
    • expenditure to the extent that you can deduct an amount for it under another provision.

    Accordingly, 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. See the Guide to depreciating assets 2005-06 (NAT 1996-6.2006) for information on the deduction for decline in value.

    Expenditure incurred on or after 19 August 1992 on certain earthworks constructed as a result of carrying out EPA can be written off at the rate of 2.5% per annum under the provisions for capital works expenditure.

    Expenditure on an environmental assessment of a project is not deductible as expenditure on EPA. If it is capital expenditure directly connected with a project, it could be a project amount for which a deduction would be available over the project life. See Business deduction for project pool. An example would be a study to determine the quantity and type of pollutants which will be produced from a process used in a proposed business.

    If the deduction arises from a non-arm's length transaction and the expenditure 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 would be assessable income.

    Completing this item

    Step 1, Write your total primary production EPA expenses at Deduction for environmental protection expenses in the Primary production column, item P8 on page 3 of your schedule. Do not show cents.

    Step 2, Write your total non-primary production EPA expenses at Deduction for environmental protection expenses in the Non-primary production column. Do not show cents.

    Step 3, Add up your primary production and non-primary production EPA expenses and write the total at V.

    Last modified: 01 Sep 2006QC 18499