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.