Can you claim a tax deduction for cleaning up an environmental mess?
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
Broadly yes, provided the expenditure is for the sole or dominant purpose of environmental protection activities that are sufficiently linked to your earning activities.
You can claim an immediate tax deduction for the costs of environmental protection activities which are undertaken by you, or on your behalf, to:
- prevent, fight or remedy pollution or
- treat, clean up, remove or store waste
where that pollution or waste results from or is likely to result from:
- your earning activity
- the site of your earning activity, or
- a site where a business was carried on and you acquired and continue to carry on the business as your earning activity, substantially unchanged.
Also, the use of plant for such environmental protection activities will also give rise to a deduction for depreciation.
An earning activity is one that you carry on, used to or plan to carry on, for the purposes of producing assessable income, exploration or prospecting or mine site rehabilitation.
You cannot claim a tax deduction under this environmental protection section for:
- purchasing land
- constructing a building, structure, improvement, extension or alteration
- a bond or security for performing environmental protection activities
- environmental impact assessment for your project
- expenditure that can be claimed under another section of the tax rules, nor
- non-arm’s length expenditure in excess of the market value of what was purchased.
In a recent draft tax ruling the Tax Office indicates that a mining company cannot deduct a large lump sum payment where the counter-party assumes all liabilities in respect of mining land, tenements and environmental law and provides an indemnity.
You should keep detailed records of the environmental protection expenditure including the purpose(s) and seek advice from a tax agent that considers your specific circumstances.
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