Environmental protection activities (EPA) are undertaken to prevent, fight or remedy pollution or to treat, clean up, remove or store waste from the business earning activities.
A business can deduct expenditure incurred on environmental protection activities. The business can also claim a deduction for cleaning up a site on which a predecessor carried on substantially the same business activity.
For the expenditure to be deductible the business earnings activities must be for:
- Producing assessable income (excluding capital gains).
- Exploration or prospecting.
- Mining site rehabilitation.
- A deduction is not available for:
- EPA bonds.
- Expenditure for acquiring land or constructing buildings.
- Expenditure to the extent that it can be deducted under another provision.
In addition, rental property owners are also allowed a deduction for environmental protection activities. In ATO ID 2004/720 the ATO interpretative decision detailed that a taxpayer was entitled to a deduction under section 40-755 of the ITAA 1997 for expenditure incurred in demolishing and removing a shed constructed of asbestos from a rental property.