Taxation Determination

TD 92/143

Income tax: is establishment expenditure incurred by a company preparatory to listing its shares on an Australian or foreign stock exchange deductible under subsection 51(1) of the Income Tax Assessment Act 1936?

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FOI status:

1. No. There is insufficient connection between establishment expenses incurred by a company and the derivation of assessable income from its income producing activities for the expenses to be deductible under the first limb of subsection 51(1). The costs are not incidental or relevant to the operations or activities regularly carried on by a company for the production of its assessable income (Ronpibon Tin NL v FC of T (1949) 78 CLR 47).

2. Establishment expenses are not necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income under the second limb of subsection 51(1). The expenses do not have the character of a working expense or form part of the cost of a company's trading operations (John Fairfax & Sons Pty Ltd v FC of T (1959) 101 CLR 30).

3. Establishment expenses are outgoings on the business entity, structure or organisation or its ownership and are not deductible under subsection 51(1). They are outgoings of capital or of a capital nature.

Commissioner of Taxation
20/08/92

References

ATO references:
NO Bankstown TD 1

Subject References:
deductions;
stock exchange listing expenses

Legislative References:
ITAA 51(1)

Case References:
Ronpibon Tin NL v FC of T
(1949) 78 CLR 47