Section 40-880 provides a deduction for certain business capital expenditure (i.e. blackhole expenditure) on a straight-line basis over a 5-year period.

Section 40-880 only applies to capital costs incurred in relation to a past, present, or proposed business that is not otherwise dealt with under income tax law. Therefore, section 40-880 is a ‘provision of last resort’.

Capital expenditure is generally not deductible under section 40-880 to the extent that the expenditure:

  • Is private or domestic in nature.
  • Non-deductible under the income tax laws.
  • Can be deducted under some other provision of the ITAA 1997.
  • Forms part of the cost of land.
  • Forms part of the cost of depreciating assets.
  • Taken into account in calculating a capital gain or loss.

Business capital costs that may be deductible under section 40-880 include:

  • Costs of establishing the business structure (e.g. company incorporation costs).
  • Cost to raise equity for the business (prospectus costs).
  • Business relocation costs.
  • Market research reports for new businesses.

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