Private ruling: Deduction for Environmental Expenses
Date of advice: 19 October 2015
Published: October 2014
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to claim a deduction under section 40-755 of the Income Tax Assessment Act 1997 (ITAA 1997) for your contribution to the cost of cleaning up pollution of the site where your business was operated? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 40-755

Reasons for decision: Summary: Section 40-755 of the ITAA 1997 allows a deduction for expenditure, including expenditure of a capital nature, incurred by taxpayers for the sole or dominant purpose of carrying on eligible environmental protection activities. These activities include the preventing, fighting or remedying of pollution (which includes contamination of the environment by harmful or such potentially dangerous substances as asbestos) in the circumstances specified in paragraph 40-755(2)(a) of the ITAA 1997. Also included are activities in treating, cleaning up, removing or storing of waste in the circumstances specified in paragraph 40-755(2)(b) of the ITAA 1997. The pollution or waste must be of, on or from a site on which the taxpayer carried on, carries on, or proposes to carry on an activity for the purpose of producing assessable income. In your case, a government authority found that your business caused the site that it was operated on to become polluted. You contributed to the cost of remedial action to clean up the pollution. Therefore you are entitled to a deduction under section 40-755 of the ITAA 1997 for the expense incurred in contributing to the cost of cleaning-up the pollution damage of the site where your business was carried on.

Relevant facts: You operated a business on a site for several years. | A government authority found that your business resulted in the site being polluted. | You paid an amount as a contribution to the cost of cleaning up the pollution.