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The prepayment rules only apply to expenditure which would otherwise qualify for immediate deduction under the general deduction provisions of section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) or, for eligible companies, under the research and development provisions in sections 73B, 73BA, 73BH or 73Y of the Income Tax Assessment Act 1936 (ITAA 1936).
The general deduction provisions generally allow you to deduct from your assessable income any loss or outgoing to the extent that it is either incurred in gaining or producing your assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. Expenditure of a capital, private or domestic nature, or expenditure incurred in gaining exempt income, is specifically excluded from being deductible under these provisions. The prepayment rules do not apply if the expenditure is deductible under a specific deduction provision of the tax law other than those for research and development referred to in the previous paragraph.
Unless specifically stated otherwise, the terms 'expense' and 'expenditure' used throughout this guide refer to expenditure that is only allowable as a deduction under the general deduction provisions of section 8-1 of ITAA 1997 or, for eligible companies, under the research and development provisions in section 73B 73BA, 73BH or 73Y of ITAA 1936.
Last modified: 18 Jun 2002QC 27429