Publication date: 17 Mar 98 |
Source: THE TAX INSTITUTE
The Taxation Institute of Australia has labelled the Tax Office 'pikers' when it comes to
the Year 2000 issue as it has delayed in making a final determination regarding allowing
Australian business to claim costs associated with upgrading technology to deal with
this vitally important issue.
"The Year 2000 issue is hitting businesses with a double-whammy," said Taxation
Institute of Australia President Mr Richard Gelski.
"Not only are businesses faced with meeting the expenses associated with fixing their
technology, including the hiring of consultants to advise on the most effective solution
for their business and establishing suitable record-keeping procedures for material which
can no longer be stored electronically, the Tax Office is delaying in announcing whether
theses costs can be deducted," he said.
The United Kingdom Inland Revenue last week announced that any expenditure on
software or on hiring consultants to sort out the Year 2000 Bug computer problems will be
treated as a revenue expense rather than capital expenditure. Legislation to this effect is
expected to be contained in the UK Budget to be delivered today (March 17, 1998).
"Australia should follow the example set in the United Kingdom and put in place specific
legislation to allow Year 2000 expenses to deducted," Mr Gelski said.
"A precedent has been set for this type of legislation. When Australian businesses had
to incur costs in relation to the changeover to decimal currency, a special provision
was inserted into the Income Tax Assessment Act to deal with the issue," he said.
"This provision, which was inserted into the Act in 1965, deemed the cost of converting
equipment to the decimal currency system to be deductible in the year the costs were
incurred. These costs were specifically deemed not to be capital."
"The same tax treatment should be provided for costs incurred by taxpayers in ensuring
that their computer equipment is not affected by the millenium bug."
"This would be consistent with the tax treatment proposed in the UK," Mr Gelski said.