Taxation Determination

TD 93/5

Income tax: in which circumstances is the construction cost of an access road incurred by a person carrying on timber operations for the purpose of gaining or producing assessable income an allowable deduction?

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FOI status:

may be releasedFOI number: I 1213869

This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

1. Section 124E of the Income Tax Assessment Act 1936 defines 'access road' as meaning a road (including a bridge, culvert or similar work forming part of a road) constructed primarily and principally for the purpose of providing access to an area so as to enable:

(a)
the planting or tending of trees in the area; or
(b)
the removal from the area of timber felled in the area;

and defines 'timber operations' as meaning:

(a)
the planting or tending of trees for felling;
(b)
the felling of standing timber;
(c)
the removal of felled timber; or
(d)
the milling or other processing of felled timber.

2. Subsection 124F(1) allows a deduction for the construction cost of an access road (as defined) incurred by a person in connection with the carrying on by him of timber operations (as defined) for the purpose of gaining or producing assessable income.

3. Under subsection 124F(2) the construction cost is deductible by equal annual instalments over the estimated period during which the access road will be used for the purpose for which it was primarily and principally constructed, or 25 years, whichever is the less.

Example 1: XYZ Pty Ltd carries on timber operations. It pays $100,000 for an access road during the year ended 30 June, 1990. It pays a further $18,000 during the year ended 30 June,1991. The road will be used in these operations for ten years.

Deduction allowable for the year ended 30 June, 1990 -
(100,000 / 10) $10,000
Deduction allowable for the year ended 30 June, 1991 -
Construction costs during the year ended 30 June, 1990 100,000
Construction costs during the year ended 30 June, 1991 18,000
118,000
Deduction 30 June, 1990 10,000
108,000
Amount Deductible

(108,000 / 9)

$12,000

Example 2: The company pays $100,000 for an access road during the year ended 30 June, 1991. The road will be used in the timber operations for 30 years.Deduction allowable for the year ended 30 June, 1991-

(100,000 / 25) = $4,000

Commissioner of Taxation
21/01/93

Previously issued as Draft TD 92/D204

References

ATO references:
NO New TD16

ISSN 1038 - 8982

Subject References:
access road;
primary production;
timber industry

Legislative References:
ITAA 124E;
ITAA 124F

TD 93/5 history
  Date: Version: Change:
You are here 21 January 1993 Original ruling  
  23 June 2010 Withdrawn