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Australian Taxation Office Consulting on Guidance on Labour Costs Incurred in Relation to Construction or Creation of Capital Assets — Orbitax Tax News & Alerts

The Australian Taxation Office (ATO) is consulting on draft Tax Ruling (TR) 2019/D6, which explains when certain labour costs related to constructing or creating capital assets (tangible or intangible) cannot be deducted under section 8-1 of the Income Tax Assessment Act 1997 because of the capital exclusion in paragraph 8-1(2)(a).

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Consultation: draft TR 2019/D6 Guidance on labour costs incurred in relation to construction or creation of capital assets

We have released draft Taxation Ruling TR 2019/D6 Income tax: application of paragraph 8-1(2)(a) to labour costs related to the construction or creation of capital assets for consultation.

We encourage you to provide your feedback on this tax ruling by 14 February 2020.

While TR 2019/D6 (PDF 165KB) affects primarily the infrastructure, energy production and distribution, oil, gas and mining industries, it has broader implications to any business constructing or creating capital assets.

The ruling explores section 8-1 of the Income Tax Assessment Act 1997 and confirms the ATO’s long standing view that labour costs incurred specifically for the creation or construction of capital assets may be capital in nature. It provides examples to assist taxpayers in understanding the implications of the ruling in a relatable manner.

The ruling is proposed to apply both before and after its date of issue. If you have immediately deducted labour costs incurred in relation to the creation or construction of capital assets we encourage you to:

Next step:

Provide your feedback on TR 2019/D6 by 14 February 2020.