Private ruling: Business deductions
Date of advice: 30 June 2016
Published: August 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Questions and answers | 1. Are you entitled to an immediate deduction under section 8-1 of the Income Tax Assessment Act 1997 for the costs associated with erecting fences at your business? | No. | 2. Are you entitled to a deduction for the decline in value under section 40-25 of the Income Tax Assessment Act 1997 for the cost associated with erecting fences at your business? | Yes.

Relevant facts and circumstances: You run a business. You lease premises for the business. You need to erect fences at the leased property. The fence will not form part of the boundary of the property. The invoices for the fencing have been made out to you and have been paid by the landlord. You will repay these amounts to the landlord. You are required to remove the fences once the property is not leased by the business.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 40-25

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 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, or relate to the earning of exempt income. Fences are a depreciating asset; therefore you are not entitled to a deduction under section 8-1 of the ITAA 1997 for the costs associated with the erection of fences at your business. You can deduct an amount equal to the decline in value for an income year of a depreciating asset under subsection 40-25 (1) of the ITAA 1997. A depreciating asset is defined in section 40-30 of the ITAA 1997 and includes fences. You are entitled to deduct the decline in value of the fences over the effective life of a fence. Taxation Ruling 2015/2 sets out the effective life of depreciating assets which includes fences. This ruling sets out the different fences and materials they are made from. This will assist you in claiming the decline in value of the fences used in your business.