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Edited version of your private ruling
Authorisation Number: 1012488702181
Ruling
Subject: Storage fees
Question
Are you entitled to claim a deduction for the cost of storing commodities which were acquired for investment purposes?
Answer
No.
This ruling applies for the following periods
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commenced on
1 July 2013
Relevant facts and circumstances
You intend to acquire commodities as part of your investment holding.
The commodities will be stored in a secure location provided by a commercial operator. You will incur fees for the cost of storing the commodities.
You will hold the commodities until the price rises to a level you believe would allow you to sell them and obtain a gain.
You are not currently, and do not intend to commence, operating a business of buying and selling commodities.
Any gain from the future sale of the commodities will be declared as a capital gain.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.
In determining the deductibility of the storage fees we have to determine whether or not the investment has an intrinsically revenue character.
As you are not currently, nor intend to commence, operating a business of commodities trading and will declare any gains made on the future sales of the commodities as capital gains, your investment is considered to be capital in nature.
It follows that the storage fees associated with the investment in commodities are also capital in nature.
Therefore, no deduction is allowable for the cost of storing commodities as the expense and the gain from the investment are capital in nature.