Money
Issue No. 29 - June/July 2006
Black hole reform leaves grey areas
Australian businesses now have a better legislative framework to address their so-called 'black hole expenditure' but there are still grey areas when claiming some types of business expenses, according to chartered accounting and advisory firm BDO.
BDO national tax director, Nick Gangemi, says new rules are a welcome addition to the Tax Law and will provide relief for most types of BHE, but getting some of that
expenditure recognised will continue to be difficult.
“While most of the black hole has been plugged, ‘grey hole’ expenditure that relates only to a capital gains tax asset and can only be claimed as a capital loss at a time well after the expenditure is incurred, can still cause headaches,” Nick says.
Changes to take retroactive effect from 1 July 2005 include a new five-year write-off for business capital expenditure not recognised elsewhere in the Tax Law. A five-year write-off for lease and licence surrender payments incurred in carrying on or in ceasing a business was also introduced.
“Prior to the introduction of these new rules, relief would not be available for certain items of expenditure that are capital in nature, as they are usually not deductible under the general deduction provisions contained in section 8-1 of the 1997 Tax Act,” Nick says.
“While some expenses may be deducible under the capital allowances provisions, allowing a deduction over time, this only applies to a specific l...
