Income tax: is establishment expenditure incurred by a company preparatory to listing its shares on an Australian or foreign stock exchange deductible under section 8-1 of the Income Tax Assessment Act 1997?

No. There is insufficient connection between establishment expenses incurred by a company and the derivation of assessable income from its income producing activities for the expenses to be deductible under the first limb of section 8-1. The costs are not incidental or relevant to the operations or activities regularly carried on by a company for the production of its assessable income ( Ronpibon Tin NL v FC of T (1949) 78 CLR 47).

Establishment expenses are not necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income under the second limb of section 8-1. The expenses do not have the character of a working expense or form part of the cost of a company's trading operations ( John Fairfax & Sons Pty Ltd v FC of T (1959) 101 CLR 30).

Establishment expenses are outgoings on the business entity, structure or organisation or its ownership and are not deductible under section 8-1. They are outgoings of capital or of a capital nature. Section 8-1 of the Income Tax Assessment Act 1997, to which this Determination refers, expresses the same ideas as subsection 51(1) of the Income Tax Assessment Act 1936. Note: The Addendum to this Determination that issued on 5 May 1999 applies in relation to the 1997-98 or a later income year.