Broadly yes, provided the expenditure is for the sole or dominant purpose of environmental protection activities that are sufficiently linked to your earning activities.
You can claim an immediate tax deduction for the costs of environmental protection activities which are undertaken by you, or on your behalf, to:
- prevent, fight or remedy pollution or
- treat, clean up, remove or store waste
where that pollution or waste results from or is likely to result from:
- your earning activity
- the site of your earning activity, or
- a site where a business was carried on and you acquired and continue to carry on the business as your earning activity, substantially unchanged.
Also, the use of plant for such environmental protection activities will also give rise to a deduction for depreciation.
An earning activity is one that you carry on, used to or plan to carry on, for the purposes of producing assessable income, exploration or prospecting or mine site rehabilitation.
You cannot claim a tax deduction under this environmental protection section for:
- purchasing land
- constructing a building, structure, improvement, extension or alteration
- a bond or security for performing environmental protection activities
- environmental impact assessment for your project
- expenditure that can be claimed under another section of the tax rules, nor
- non-arm’s length expenditure in excess of the market value of what was purchased.
In a recent draft tax ruling the Tax Office indicates that a mining company cannot deduct a large lump sum payment where the counter-party assumes all liabilities in respect of mining land, tenements and environmental law and provides an indemnity.
You should keep detailed records of the environmental protection expenditure including the purpose(s) and seek advice from a tax agent that considers your specific circumstances.