What is excluded expenditure?

Certain types of expenditure are excluded from the prepayment rules. These are:

  • amounts of less than $1,000
  • amounts required to be incurred by a law, or by an order of a court, of the Commonwealth, a State or a Territory
  • payments of salary or wages (under a contract of service), or
  • amounts that are capital, private or domestic in nature.

Example: amount required to be paid under state law

John operates a cartage business and paid $1,700 on 31 December 2007 to register his truck for 12 months from 1 January 2008 to 31 December 2008. The truck is used exclusively for business purposes. Although the registration fee is in excess of $1,000 and it covers a period spreading across more than one income year, it is excluded expenditure. This is because the registration fee is required to be paid under state or territory law. The prepayment rules do not apply to this type of expenditure and the fee is deductible in the year in which it is incurred.

    Last modified: 25 Jun 2008QC 16667