Prepaid expenses - investments in tax shelter arrangements - fact sheet

The prepayment rules determine how much you can claim in an income year for certain prepaid expenses. This fact sheet explains the general prepayment rules and the special rules that apply to prepayments under tax shelter arrangements.

What is a prepaid expense?

A prepaid expense is expenditure you incur for things to be done under an agreement (in whole or in part) in a later income year. If expenditure is incurred for something to be done in full within the same income year, it is not a prepaid expense to which the prepayment rules apply.

Example: expenditure constituting a prepayment

Jasmin enters into a tax shelter arrangement. On 1 June 2008, she pays $1,500 for management fees covering the period 1 June 2008 to 31 May 2009. Because the thing to be done under the agreement - the provision of management services - will not be wholly done within the expenditure year, the prepayment rules will apply.