Private ruling: Deductibility of expenditure on realignment of assets
Date of advice: 7 April 2020
Published: May 2020
Ruling period: 1 April 2016 to 31 March 2021
Date scheme commenced: 1 April 2016

Ruling: Q1: Are the costs incurred by Company A to undertake the Works deductible pursuant to section 8-1 of the ITAA 1997? | A1: Yes.

Relevant facts and circumstances: Companies A and B are Australian tax resident companies. Company B, an entity unrelated to Company A, requested that Company A realign a portion of its assets (the Works). Company B will reimburse Company A in full for the costs incurred in delivering the Works.

Relevant legislative provisions: Section 8-1 of the Income Tax Assessment Act 1997 | Section 8-2 of the Income Tax Assessment Act 1997

Reasons for decision: Summary: The costs incurred by Company A for the Realignment Works do not amount to improvements or change in character of its assets. The costs are not outgoings that are capital or of a capital nature and are therefore deductible under section 8-1 of the ITAA 1997.