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Ruling
Subject: Business deductions after cessation of business
Question 1
Are you entitled to a deduction for expenses incurred for storing your business records after the cessation of your business?
Answer
Yes
This ruling applies for the following periods
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
The scheme commences on
1 July 2011
Relevant facts and circumstances
You operate a business.
The business is to be sold.
After the business is sold you are required to keep your business records for five years for taxation purposes.
You will store your business records at a record storage facility.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 25-5
Reasons for decision
Section 25-5 of the ITAA 1997 allows a deduction for tax related expenses. Under this section, you can deduct expenditure you incur to the extent that it is for:
o managing your tax affairs (which is defined as meaning affairs relating to tax)
o complying with an obligation imposed on you by a Commonwealth law in so far as that obligation relates to the tax affairs of an entity
o the general interest charge
o obtaining a valuation in respect of a gift of property.
In your case you are required by law to retain your business records for tax purposes for a period of 5 years. After your business ceases you intend to store your records and you will incur a cost to do so. The cost you will pay to store your records after your business has ceased will be an allowable deduction under section 25-5 of the ITAA 1997.