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Edited version of your private ruling
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Ruling
Subject: Interpretation of section 110-25
Question 1
Will section 110-25 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a payment such that the amount will be included in the cost base of the relevant asset?
Answer
Yes
The scheme commences on:
August 2011
Relevant facts and circumstances
An entity makes a capital payment that increases value of a relevant asset.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 110-25.
Does Part IVA apply to this ruling?
Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.
We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.
If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.
For more information on Part IVA, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.
Reasons for decision
Based on the facts, the requirements of subsection 110-25(5) are satisfied as the expected effect of the expenditure is to increase or preserve the value of the asset.