ATO Interpretative Decision

ATO ID 2002/846

Income Tax

Deduction for the cost of installing waste treatment system
FOI status: may be released

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Status of this decision: Decision Current

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 cost of installing a waste treatment (septic) system deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The cost of installing a waste treatment system is not deductible under section 8-1 of the ITAA 1997.

Facts

The taxpayer, an individual, is a joint owner of a property on which cattle are bred and fattened. A septic system was installed to manage effluent disposal on the property.

The source of the effluent is the waste water from the toilets, kitchen, laundry and bathroom of the private residence located on the property.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are incurred in gaining or producing exempt income.

The test of deductibility under section 8-1 of the ITAA 1997 is that 'it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income' (Ronpibon Tin NL and Tongkah Compound NL v. FC of T (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431).

The septic system is for the treatment of effluent from the taxpayer's private residence.

The expenditure is not incidental and relevant to the gaining of assessable income. Nor has the expenditure been necessarily incurred in carrying on a business. Therefore, the expenditure is not deductible under section 8-1 of the ITAA 1997.

Amendment History

Date of Amendment	Part	Comment
13 February 2015	Reason for Decision	Updated for clarity.

Date of decision: 16 July 2002

Year of income: Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
section 8-1

Case References:
Ronpibon Tin NL v. FC of T
   (1949) 78 CLR 47
   4 AITR 263
    (1949) ATD 432.

Keywords
Deductions & expenses
Individual taxpayers
Partnerships
Primary production expenses

Siebel/TDMS Reference Number: DW471777; 1-CSTZ4XW

Business Line: Private Groups and High Wealth Individuals

Date of publication: 23 August 2002
Date reviewed: 23 October 2017

ISSN: 1445-2782

history

	Date:	Version:
	16 July 2002	Original statement
You are here →	13 February 2015	Updated statement

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