Income and deductions for small business

Claiming expenses you pay in advance

There are different rules for expenses you pay in advance (prepaid expenses). A prepaid expense is one you incur now for goods or services you will receive (in whole or in part) in a later income year.

As a small business, you can use the prepayments concession. This means you can claim a deduction for the total expense you prepaid if you receive the goods or services in full within 12 months. This applies even if the 12-month period extends into the next income year.

If you will not receive the goods or services in full within 12 months, you must apportion the expense across the whole supply or service period (to a maximum of 10 years).

For more information, see Small business entity concessions - home or refer to Concessions for small business entities (NAT 71874).

Sections within Working out your allowable deductions

• Non-business or part-year use
• When you can claim an expense
• Claiming expenses you pay in advance
• Expenses you can claim in the income year you incur them
• Expenses you can claim over time
• Expenses you can never claim
• Special deductions
• Tax concessions for primary producers
• Research and development (R&D) tax concessions
• Businesses that run at a loss
• Non-commercial loss rules
• How non-commercial loss rules affect you