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Tax Office 'piking-out' on Year 2000 issue and business will pay the price

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.