Private ruling: Capital purchase - non-capital purchase
Ruling period: Year ending 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are your costs relating to creating a commercial website capital? | A1: Yes.

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: Summary: 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. | Detailed Reasoning - 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.

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.