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

This version is no longer current.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


CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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:

•
Electricity is connected to the property for the first time.
•
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 2001

Year of income:  Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1997
   Subdivision 387E

Keywords
Deductions & expenses
Primary Producer
Capital expenditure

Business Line:  Small Business/Individual Taxpayers

Date of publication:  30 November 2001

ISSN: 1445-2782

history
  Date: Version:
You are here 31 October 2001 Original statement
  9 June 2006 Archived

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).