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  • What expenditure is excluded from the tax shelter rules?



    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    The following prepaid expenditure is excluded from the application of the tax shelter rules:

    • premiums for building insurance, contents insurance or rent protection insurance
    • interest on money borrowed to acquire:
      • real property or an interest in real property
      • shares listed on an approved stock exchange, or
      • units in a widely held unit trust which has at least 300 beneficiaries

    provided the arrangement is conducted at arm's length and that you have or can reasonably expect to obtain rent, dividends or trust income. Additionally, you must not have obtained and will not obtain any other kind of assessable income (except a capital gain or insurance receipt) from the arrangement.

    Also specifically excluded from the application of the tax shelter rules are:

    • certain expenditure that is an allowable deduction under the infrastructure borrowing rules
    • expenditure incurred under a contract (requiring prepayment for something to be done under the agreement) entered into before 1.00pm (by legal time in the ACT) on 11 November 1999 that you cannot avoid by your own actions
    • expenditure under an agreement which, before 1.00pm (by legal time in the ACT) on 11 November 1999, had obtained or had applied for and later obtained a favourable ATO product ruling or
    • any prepaid expenditure which is excluded expenditure; that is, an amount below $1,000, an amount required to be incurred by a law or a court order, or an amount of salary or wages.

    Note: If you incur prepaid expenditure that is not subject to the tax shelter rules because of one of the above exceptions, your deduction must be determined in accordance with the other rules explained in this publication.

    Last modified: 10 Dec 2019QC 27429