ATO Interpretative Decision
ATO ID 2001/750
Income Tax
Deductibility of capital expenditure incurred in reinstalling an overhead powerline underground.FOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxpayer entitled to deduct over 10 years expenditure incurred in reinstalling an overhead powerline underground under subdivision 387E of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The taxpayer is not entitled to deduct expenditure over 10 years under subdivision 387E of the ITAA 1997 as there was no increase in the amount of electricity transmitted by the reinstalled powerline.
Facts
The taxpayer owns a rural property on which primary production activities are carried on. The taxpayer is seeking to expand the activities carried on. To do this it will be necessary to place an overhead powerline underground.
Under the arrangement with the electricity provider, if the taxpayer wants the powerline placed underground, the taxpayer will be responsible for any expenses incurred.
The electricity transmitted by the line is used partly for business and partly for private purposes.
The single phase overhead powerline is to be replaced by a single phase underground powerline. There will be no increase in capacity in the amount of electricity that is transmitted to the property as a result of this work.
Reasons for Decision
Primary Producers are entitled to deduct capital expenditure over ten years under subdivision 387E of the ITAA 1997 when:
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- Electricity is connected to the property for the first time.
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- Expenditure has been incurred to upgrade the capacity of an existing connection to the property.
The taxpayer has replaced an existing overhead powerline with an underground powerline of the same capacity. The taxpayer is not upgrading the capacity of the powerline or connecting electricity to the property for the first time.
The capital expenditure incurred in putting the powerline underground will not qualify to be deducted over 10 years under Division 387E of the ITAA 1997.
Date of decision: 31 October 2001Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
Subdivision 387E
Keywords
Deductions & expenses
Primary Producer
Capital expenditure
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 31 October 2001 | Original statement |
| 9 June 2006 | Archived |