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Edited version of private advice
Authorisation Number: 1051655352685
Date of advice: 07 April 2020
Ruling
Subject: Deductibility of expenditure on realignment of assets
Question
Are the costs incurred by Company A to undertake the Works deductible pursuant to section 8-1 of the ITAA 1997?
Answer
Yes.
This ruling applies for the following period
1 April 2016 to 31 March 2021
The scheme commences on:
1 April 2016
Relevant facts and circumstances
Companies A and B are Australian tax resident companies.
Company B, an entity unrelated to Company A, requested that Company A realign a portion of its assets (the Works). Company B will reimburse Company A in full for the costs incurred in delivering the Works.
Relevant legislative provisions
Section 8-1 of the Income Tax Assessment Act 1997
Section 8-2 of the Income Tax Assessment Act 1997
Reasons for decision
The costs incurred by Company A for the Realignment Works do not amount to improvements or change in character of its assets. The costs are not outgoings that are capital or of a capital nature and are therefore deductible under section 8-1 of the ITAA 1997.
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