myTax 2023 Deduction for project pool

Things to know

Complete this section if you had capital expenditure directly connected with a project.

You may be able to claim a deduction at this section for capital expenditure allocated to a project pool for a project you:

• operated in 2022–23 for a taxable purpose
• carried on, or proposed to carry on, for a taxable purpose which was abandoned, sold or otherwise disposed of in 2022–23, before or after it started to operate.

You can't claim a deduction here for:

• private or domestic expenditure such as the cost of constructing a driveway at your home
• capital expenditure directly connected with a project undertaken in carrying on a business.

A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used.

A taxable purpose is the purpose of producing assessable income, the purpose of exploration or prospecting, the purpose of mining site rehabilitation or environmental protection activities.

Certain capital expenditure you incurred after 30 June 2001, which was directly connected with a project that you carried on (or proposed to carry on) for a taxable purpose, can be allocated to a project pool and written off over the 'project life'. The expenditure must not otherwise be deductible or form part of the cost of a depreciating asset you hold or held.

Such capital expenditure, known as a 'project amount', is expenditure incurred:

• to create or upgrade community infrastructure for a community associated with the project; this expenditure must be paid, not just incurred, to be a project amount
• for site preparation for depreciating assets (other than in draining swamp or low-lying land or for clearing land for horticultural plants)
• for feasibility studies or environmental assessments for the project
• to obtain information associated with the project
• in seeking to obtain a right to intellectual property
• for ornamental trees or shrubs.

The project amounts are allocated to a 'project pool'. Each project has a separate project pool.

If you are unsure whether the capital expenditure you incurred qualifies as a project amount, see Guide to depreciating assets.

You spread your deduction for project amounts allocated to a project pool over the project life:

• The project life is the period from when the project starts to operate until when it stops operating.
• The project life isn't determined by how long you intend to carry on the project. Factors outside your control, such as something inherent in the project such as a legislative or environmental restriction that limits the project's operating period, are relevant to estimating the project life.
• If there is no finite project life, there is no project and therefore no deduction is available under these rules.

You start to deduct amounts for a project pool for the income year when the project starts to operate. So, if you started to operate a project in 2022–23 for a taxable purpose, a deduction is available 2022–23.

If your project operated in 2022–23 for purposes other than taxable purposes, you must reduce the deduction amount by a reasonable amount for the extent to which the project operated for other than taxable purposes.

An amount is assessable income and must be shown at Other income if, in 2022–23, you:

• recouped an amount of expenditure allocated to the project pool, or
• derived a capital amount in relation to a project amount or something on which a project amount was expended.

Completing this section

To personalise your return to show a deduction for project pools, at Personalise return select:

• You had deductions you want to claim
• Other deductions

To show a deduction for project pools, at Prepare return select 'Add/Edit' at the Deductions banner.

At the Deduction for project pool banner:

1. For each project pool, select Add, enter the project pool description and work through the following steps to calculate your project pool deduction amount.
2. Did you conduct transactions in a foreign currency for your project in 2022–23?
   Yes – See Foreign exchange rules. Go to step 3.
   No – Go to step 3.
3. Use the Project pool calculator (XLSX, 123KB)This link will download a file to calculate your project pool deduction.
   When you have calculated your project pool deduction, go to step 4.
4. Enter your 2022–23 project pool deduction into Project pool deduction amount.
5. Select Save.
6. Select Save and continue when you have completed the Deductions section.

If your project was abandoned, sold or otherwise disposed of in 2022–23, then any amount you received for the abandonment, sale or other disposal is assessable income. This must be shown at Other income.

Foreign exchange rules

The pool value can be subject to adjustments. An adjustment could happen under foreign exchange (forex) rules that apply to transactions conducted in foreign currency.

If during 2022–23 you met or otherwise ceased to have an obligation to pay in a foreign currency a project amount which you allocated to a project pool, you might have derived a gain or incurred a loss under these rules. If the amount in foreign currency became due for payment within 12 months after the time you incurred it, usually the pool value will be reduced by any such gain (known as a forex gain) and it will be increased by any such loss (known as a forex loss).

If the forex gain exceeds the pool value, the pool value is reduced to zero and the residual gain is assessable income which you should include at Other income. If you had previously elected that this treatment (known as 'the 12-month rule') should not apply, any gain will be assessable and should be included at Other income and any loss will be deductible and should be included at Other deductions.

For more information about the forex rules, see: Foreign exchange gains and losses.

How to claim deductions for certain capital expenditure when you lodge your return using myTax.