Private ruling: Deduction for environmental protection activities
Date of advice: 9 March 2020
Published: April 2020
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the payment of compensation for environmental protection activities be an allowable as an immediate deduction? | A1: Yes. It is arguable that this expenditure is deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as it was necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income but could be seen at capital in nature. If a deduction is not allowed under section 8-1 of the ITAA 1997, it will be immediately deductible under section 40-755 of the ITAA 1997 as the expenditure meets the requirements of that section. It is accepted that the compensation would be expenditure that was incurred for the sole or dominant purpose of carrying on environmental protection activities.

Relevant facts and circumstances: You carry on a business. A fire broke out and waste oil was discharged onto your business premises and into a nearby drain. An environmental authority issued a direction to a third party to clean up the oil, and paid the costs of this service in full. The environmental authority issued you with an Intention to Seek Compensation Order for the amount of the costs.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 40-755