• Summary of rules

    • If you are carrying on a business and are not a small business entity taxpayer, you must apportion your deduction for prepaid business expenditure over the eligible service period or 10 years, whichever is less.
       
    • Prepaid expenditure that is subject to the tax shelter rules is apportioned over the eligible service period or 10 years, whichever is less. For more information see our fact sheet Prepaid expenses - investments in tax shelter arrangements - fact sheet.
       
    • However, certain prepaid expenditure incurred under a plantation forestry managed agreement is deductible under a 12-month rule if:
       
      • the prepaid expenditure is incurred on or after 2 October 2001 and on or before 30 June 2008
         
      • the eligible service period for the expenditure is 12 months or less, and
         
      • the period ends on or before the last day of the income year following the year in which the expenditure was incurred.
         
    • If you are not an individual or a small business entity taxpayer, your deduction for prepaid non-business expenditure is apportioned over the eligible service period or 10 years, whichever is less. For more information see our fact sheet Prepaid expenses - taxpayers incurring deductible non-business expenditure other than individuals or small business entities.
       
    • If you are an individual, your prepaid non-business expenditure is immediately deductible under the 12-month rule if:
       
      • the eligible service period for the expenditure is 12 months or less, and
         
      • the period ends no later than the last day of the income year following the year in which the payment is made.
         
    • If you are an individual, your deduction for prepaid non-business expenditure is apportioned over the eligible service period or 10 years, whichever is less, if the eligible service period is more than 12 months or it ends after the last day of the next income year.

      For more information see our fact sheet Prepaid expenses - individual taxpayers with deductible non-business expenditure - fact sheet
      Last modified: 25 Jun 2008QC 16667