Taxation Determination

TD 1999/1

Income tax: are deductions under Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997) excluded by subsection 82(2) of the Income Tax Assessment Act 1936 (ITAA 1936) in calculating any assessable profit or deductible loss from the sale of the property by the person who constructed the building?

This version is no longer current. Please follow this link to view the current version.

• Please note that the PDF version is the authorised version of this ruling.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

FOI status:

may be releasedFOI number: I 1018333

1. Yes. In broad terms, the basic purpose of section 82 of the ITAA 1936 is to lay down a general rule that only one deduction is allowed to a taxpayer for the one amount of expenditure in circumstances where deductions would otherwise be allowable under both the general and special provisions of the Act. Subsection 82(2) provides that, where the profit arising from the sale of any property is included in the assessable income of any person, or where the loss arising from the sale is an allowable deduction, any expenditure incurred in connection with that property which has been allowed or is allowable as a deduction shall not be deducted in ascertaining the amount of the profit or loss.

2. In the absence of subsection 82(2) it would be possible to claim a deduction under Division 43 of the ITAA 97 and take the same expenditure into account in calculating the assessable profit or deductible loss on the sale of a property.

3. Division 43 of the ITAA 97 allows deductions for certain capital expenditure on assessable income producing buildings and other capital works.

4. Accordingly, a deduction under Division 43 is a deduction for 'any expenditure incurred ... in connexion with that property' for the purposes of subsection 82(2) of the ITAA 36. As such, the expenditure for which a deduction is allowed or is allowable is excluded by subsection 82(2) from the calculation of any assessable profit or deductible loss on the sale of the property.

5. This Determination refers to Division 43 of the ITAA 97 which expresses the same ideas as Division 10D and sections 124ZH and 124ZG of the ITAA 36.

Example

6. A taxpayer constructs a building for $60m which it leases, and claims deductions for certain capital expenditure under Division 43. Because of the particular business of the taxpayer, any profit on a subsequent sale of the property will be assessable.

7. The taxpayer sells the property for $70m.

8. At the time of sale, the taxpayer has claimed Division 43 deductions of $2m.

9. The amount of $2m represents expenditure incurred in connection with the property for which a deduction has been allowed under Division 43. Consequently, it is excluded by subsection 82(2) from the calculation of the assessable profit.

10. Accordingly, the assessable profit is $12m (i.e., $70m - ($60m - $2m)).

Commissioner of Taxation
24 March 1999

TD 98/D5

References

ATO references:
NO 98/2475-8

Subject References:
allowable deductions
capital expenditure
double deductions
losses
profit
sale of property

Legislative References:
ITAA36 Div 10D
ITAA36 82
ITAA36 82(2)
ITAA36 124ZG
ITAA36 124ZH
ITAA97 Div 43
ITAA97 43-10