ATO Interpretative Decision

ATO ID 2001/740

Income Tax

Expenditure incurred in reinstalling an overhead powerline underground.
FOI status: may be released

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Issue

Is the taxpayer entitled to claim a deduction for expenditure incurred in reinstalling an overhead powerline underground under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The taxpayer is not entitled to claim a deduction for reinstalling the powerline underground as the expense is capital in nature. Capital expenses are not deductible under paragraph 8-1(2)(a) of the ITAA 1997.

Facts

The taxpayer owns a rural property on which primary production activities are carried on. The taxpayer is seeking to expand the primary production 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.

Reasons for Decision

The reinstallation of an overhead powerline underground would be regarded as capital expenditure.

According to the decision in British Insulated & Helsby Cables Ltd v. Atherton [1926] AC 205 if an enduring benefit is gained then the expenditure is to be regarded as being capital. Placing the overhead powerline underground is a once only expense and the taxpayer has gained an enduring benefit as a result of incurring this expenditure.

Date of decision: 31 October 2001

Year of income: Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1997
section 8-1
paragraph 8-1(2)(a)

Case References:
British Insulated and Helsby Cables v. Atherton
[1926] AC 205

Keywords
Deductions & expenses
Capital expenditure

Siebel/TDMS Reference Number: DW267347; 1-5CGS3U1; 1-AYJFLSK

Business Line: Private Groups and High Wealth Individuals

Date of publication: 30 November 2001
Date reviewed: 9 May 2018

ISSN: 1445-2782

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