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New ATO Ruling Facilitates Tax Deductions for Asbestos Removal

04 September 2020

A recent ruling from the Australian Taxation Office (reference TR2020/2) has introduced the concept of asbestos removal as a tax-deductible activity through being classified as an ‘environmental protection activity’.

 

What are environmental protection activities?

From the ruling, 'environmental protection activities' are defined as activities carried on by or for you:

  • to prevent, fight or remedy pollution
    • resulting, or likely to result, from your earning activity
    • of or from the site of your earning activity
    • of or from a site where an entity was carrying on any business that you have acquired and carry on substantially unchanged as your earning activity, and
  • to treat, clean up, remove or store waste
    • resulting, or likely to result, from your earning activity
    • on or from the site of your earning activity
    • on or from a site where an entity was carrying on any business that you have

 

Asbestos Removal as a Tax Deduction

Applicable to both individuals and companies, this ruling encourages the identification, removal, and disposal of asbestos in properties used for commercial purposes (including rental properties) by allowing the owner to claim the costs associated with removal as a deduction in their annual income tax assessment. This is to the exclusion of capital expenditure incurred in undertaking structural changes to the building.

By incentivising the removal of asbestos, the ruling could bring about a boost to the asbestos removal industry and a reduction in future instances of asbestos-related disease due to more proactive and widespread removal works in properties.

It is important to note that it is ultimately the decision of the investor to decide what their tax outcomes are. There are limits as to what is deductible, and advice should be sought from official sources and experts in taxation.

For further information, visit the ATO website’s overview of TR2020/2