ATO ID 2004/582: Capital Allowances: project pools - project amount - environmental assessments
Date of decision: 1 June 2004
Year of income: Year ended 30 June 2002
Business line: Public Groups and International

Issue
Was the taxpayer's expenditure an amount incurred for environmental assessments for the project they proposed to carry on within subparagraph 40-840(2)(d)(iv) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. The taxpayer's expenditure was an amount incurred for environmental assessments for their project within subparagraph 40-840(2)(d)(iv) of the ITAA 1997.

Facts
The taxpayer had identified with some certainty a project that they proposed to carry on for a taxable purpose for a determinate period. The taxpayer was required to lodge environmental assessment reports with a development permit application to the local government authority for approval to proceed with their project. Reports to the local government were required for noise, ecological and traffic assessments, soil testing, and stormwater management. The taxpayer incurred capital expenditure in engaging external specialists to conduct the studies and produce these reports for the project.

Reasons for decision
Summary: Broadly, section 40-830 of the ITAA 1997 allows a deduction over the project life of a project for project amounts allocated to a project pool. To be a 'project amount' within subsection 40-840(2) of the ITAA 1997, an amount must be capital expenditure which, in addition to satisfying paragraphs 40-840(2)(a) to 40-840(2)(c) of the ITAA 1997, is one of the amounts specified in subparagraphs 40-840(2)(d)(i) to 40-840(2)(d)(vii) of the ITAA 1997. The amount specified in subparagraph 40-840(2)(d)(iv) of the ITAA 1997 is an amount incurred for environmental assessments for the project. An environmental assessment is the undertaking of a study, the preparing or obtaining of a report or other documentation, or the carrying out of any other activity for the purpose of assessing the impact or likely impact of the project on the environment. For these purposes, the meaning of environment is not limited to the natural environment. The works commissioned by the taxpayer are environmental assessments as the works were commissioned to assess the impacts or likely impacts of their project on the environment. It follows that each amount incurred is a 'project amount' under subparagraph 40-840(2)(d)(iv) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 section 40-830 subsection 40-840(2) paragraph 40-840(2)(d) subparagraph 40-840(2)(d)(iv)
Related ATO interpretative decisions: ATO ID 2004/580 | ATO ID 2004/581 | ATO ID 2004/583
Subject references: Capital Allowances CoE Project amount Project pool Uniform capital allowances system