The prepaid expenses measure introduced in the New Business Tax System (Integrity and Other Measures) Act 1999 has changed the rules that allow immediate deductibility for expenditure incurred in respect of things to be done within 13 months of the expenditure being incurred. For many businesses, most prepaid expenditure-that would otherwise be a general deduction in the expenditure year-incurred after 11.45am [by legal time in the Australian Capital Territory (ACT)] on 21 September 1999 must be apportioned over the period the prepayment covers. This is consistent with the treatment of prepayments for periods exceeding 13 months.
Transitional rules-which are explained in part B-apply to reduce the initial impact of this measure.
Note: The transitional rules do not apply to prepaid expenses incurred under a tax shelter arrangement after 1.00pm (by legal time in the ACT) on 11 November 1999-see part F.