Private ruling: Interpretation of section 110-25
Published: September 2011
Date scheme commenced: August 2011

Ruling: Q1: Will section 110-25 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a payment such that the amount will be included in the cost base of the relevant asset? | A1: Yes

Relevant facts and circumstances: An entity makes a capital payment that increases value of a relevant asset.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 110-25.

Reasons for decision: Summary: Based on the facts, the requirements of subsection 110-25(5) are satisfied as the expected effect of the expenditure is to increase or preserve the value of the asset.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Does Part IVA apply to this ruling?: Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.