Capital Allowances: business related costs – business transfer arrangement establishing rights to intellectual property

The ATO has published its decision (ATO Interpretative Decision; ATO ID 2009/3) on the question:

Is some part of the price the taxpayer paid to acquire a business of franchising, capital expenditure on
acquiring confidential information, trade secrets and know-how of the business for which a deduction may be allowable under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997)?

According to the ATO, the answer to the question is:

No. No part of the price the taxpayer paid to acquire a business of franchising is capital expenditure on
acquiring confidential information, trade secrets and know-how of the business, because the character of the transaction and the nature of the assets acquired prescribe that the purchase price was paid to acquire the various rights that collectively constitute the business acquired. The whole of the capital expenditure incurred by the taxpayer was incurred on those rights and, therefore, is excluded from deduction under section 40-880 of the ITAA 1997 by the operation of paragraphs 40-880(5)(a) and 40-880(5)(f) of the ITAA 1997.

ATO – Capital Allowances: business related costs – business transfer arrangement establishing rights to intellectual property

Published:
12.01.09
Category:
Confidential information, Trade Marks, Trade Practices