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Chapter 7 Taxpayers carrying on a business - not small business or STS taxpayers

Last updated 9 December 2019

To find out if you are a small business taxpayer, see chapter 6 and if you are an STS taxpayer, see chapter 5.

If you are carrying on a business and are not a small business taxpayer or an STS taxpayer, the following rules apply to your prepaid expenditure.

Summary of rules

  • 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 chapter 2.
  • However, certain prepaid expenditure incurred under a plantation forestry managed agreement is deductible under the 12-month rule where:
    • the eligible service period for the expenditure is 12 months or less
    • the 12-month period ends on or before the last day of the income year following the year in which the payment was incurred.
     

For more information, see chapter 3.

  • If you are carrying on a business and are not a small business taxpayer or an STS taxpayer, you must apportion your deduction for prepaid business expenditure over the eligible service period or 10 years, whichever is less. However, where the eligible service period ends not more than 13 months after you incur the expenditure, transitional rules may apply to allow part of the expenditure that would otherwise be deductible in a future year to be deductible in the expenditure year. There is an upper limit (cap) on the amount that is subject to this concessional treatment under the transitional rules.
  • If you are not an individual or an STS taxpayer, your deduction for prepaid non-business expenditure is apportioned over the eligible service period or 10 years, whichever is less. However, where the eligible service period ends not more than 13 months after you incur the expenditure, transitional rules may apply to allow part of the expenditure that would otherwise be deductible in a future year to be deductible in the expenditure year. There is no upper limit (cap) on the amount that is subject to this concessional treatment under the transitional rules.

For more information, see chapter 8.

  • If you are an individual, your prepaid non-business expenditure is immediately deductible under the 12-month rule where:
    • the eligible service period for the expenditure is 12 months or less
    • the 12-month period ends no later than the last day of the income year following the year in which the payment is made.
     

For more information, see chapter 4.

  • 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, where 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 chapter 4.

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