| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011743992933
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.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Capital purchase - non-capital purchase
Question
Are your costs relating to creating a commercial website capital?
Answer
Yes.
This ruling applies for the following period:
Year ending 30 June 2011
The scheme commences on:
1 July 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.
You are building a website. Your web site will have items that are for sale, will charge a membership fee, and will sell advertising space.
You have incurred large costs in building the web site.
Your intention is that the web site will generate income that is taxable, and that it will continue to do so beyond the short term.
You are not in the business of creating and selling web sites.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1,
Income Tax Assessment Act 1997 Section 40-25,
Income Tax Assessment Act 1997 Section 40-30 and
Income Tax Assessment Act 1997 Section 40-880.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Outgoings or losses incurred in earning assessable income cannot be deducted from your assessable income if they are capital, or capital in nature. However, the cost of capital items may be deductible provided specific circumstances have been met.
Deductions may be made for the costs of capital items, spread over the life of the asset, as these assets are typically used for more than one tax year.
To be considered capital an asset should provide an enduring benefit beyond one tax year, and its purpose must be to produce assessable income.
In your case
· your web site will be an asset that provides an enduring benefit beyond one tax year, and
· your web site will be used to produce assessable income.
The costs incurred in creating your web site are considered capital.