Issue
Whether the taxpayer is allowed a deduction for capital expenditure on the production of a film as an investment when in fact the film is not produced.
Decision
Where a deduction is claimed in the year in which the investment in the film is made and either the money is not expended in producing the film, or not expended within the two year timeframe, the taxpayer is expected to amend the income tax return for the year in which the deduction was originally claimed.
Facts
The taxpayer invested $100 000 in the 1994 financial year in a film. The financier defaulted on the arrangement, and went into liquidation. The film was consequently not produced.
The taxpayer was informed in 1995 that the film would not be made. At that stage the taxpayer had not submitted the 1994 tax return.
Reasons For Decision
The taxpayer invested $100 000 in the 1994 financial year in a film which qualified for the purpose of Division 10BA Income Tax Assessment Act 1936 (ITAA 1936).
If no money is expended in making the film, no deduction is allowed (paragraph 124ZAG(1)(c) (ITAA 1936)). In addition, there is a two year limit within which the film, must be produced and the expenditure made (section 124ZAFA (ITAA 1936)).