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Edited version of private ruling
Authorisation Number: 1011638118176
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
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Ruling
Does the proposed development of a property you owned, disposed off and in which the development did not go ahead meet the eligibility as a deduction for project pool?
No.
This ruling applies for the following period
30 June 2010
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The property was your main residence for the majority of the time you owned it.
You wanted to subdivide the property into two lots and build a second residence.
The development application submitted to the city council was approved.
The property was never subdivided.
The second residence was never built.
You incurred the expenses associated with subdivision, being architectural, city council, civil engineering, consulting engineering, interior design, project management, surveyor and town planning fees
You sold the property as one lot with approval for subdivision.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 40-830
Reason for decision
Under section 40-830 of the Income Tax Assessment Act 1997 (ITAA 1997) you can claim a deduction for project amounts allocated to a project pool.
A project amount is capital expenditure incurred:
· to create or upgrade community infrastructure for a community associated with the project - this expenditure must be paid (not just incurred) to be a project amount
· for site preparation for depreciating assets (other than in draining swamp or low-lying land or for clearing land for horticultural plants)
· for feasibility studies or environmental assessments for the project
· to obtain information associated with the project
· in seeking to obtain a right to intellectual property
· for ornamental trees or shrubs.
Taxation Ruling TR 2005/4 provides the Commissioners views regarding project pools.
A project is an activity (or series of related activities) that are undertaken to achieve a specific purpose, outcome or product. It involves a continuity of activity and active participation.
Paragraph 26 of TR 2005/4 states:
the holding of a passive investment would not have sufficient activity to constitute the carrying on of a project.
A rental property is considered a passive investment and therefore does not qualify for a deduction for project amounts allocated to a project pool.
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