Who can claim
This deduction is available to individuals and companies.
- The activity is carried on by you or for you to prevent, fight or remedy pollution, or to treat, clean up, remove or store waste.
- The pollution or waste results or is likely to result from your earning activity, is on or from its site, or is on or from the site of a business you acquired and carry on substantially unchanged.
- A proposed earning activity can qualify when you intend to carry it on when the expenditure is incurred and the statutory pollution, waste and site connection is satisfied.
- The expenditure is incurred for the sole or dominant purpose of carrying on the qualifying environmental protection activity.
What you cannot claim
- Land acquisition; constructing a building, structure or structural improvement; a bond or security; and an environmental impact assessment are not deductible under this rule.
- An activity that is only generally beneficial to the environment, merely enables unspecified future protection or is incidentally protective is not enough.
- Private, domestic and unrelated capital expenditure is excluded.
- An amount deductible under another provision is not also deductible under the environmental protection rule.
How the amount is worked out
If an invoice or other evidence distinctly separates qualifying environmental protection activities from other activities, claim the specifically allocated qualifying amount. If one indivisible outlay serves mixed objectives, claim the whole amount only when environmental protection is its sole or dominant purpose; otherwise no amount is deductible under section 40-755. Cap non-arm's-length capital expenditure at the market value of the activities and include deductible recoupments in assessable income.
Records the ATO expects
- Environmental report
- Detailed invoices separating each activity
- Evidence of the sole or dominant purpose
- Site and earning-activity history
- Related-party market-value evidence
- Recoupment records
Where this rule comes from
Primary source: ATO TR 2020/2 environmental protection activities (TR 2020/2). Reviewed 30 July 2026. Covers the 2025-26 and 2026-27 income years.