• When an expense is incurred

    You can generally claim a deduction for an expense you incur in the everyday running of your business, in the year you incur it. You generally incur an expense when you have a current legal obligation to pay for the goods or services. An invoice is not necessary for an expense to have been incurred.

    See also:

    TR 97/7 Income tax: section 8-1 – meaning of 'incurred' – timing of deductions

    Claiming expenses you pay in advance

    There are different rules for expenses you pay in advance – that is, expenses you incur now for goods or services you will receive (in whole or in part) in a later income year.

    If you're a small business, you can use the prepayments concession. This means you can claim a deduction for the total expense you prepaid if you receive the goods or services in full within 12 months. This applies even if the 12-month period extends into the next income year.

    If you won't receive the goods or services in full within 12 months, or you're not a small business, you will usually need to apportion the expense across the whole supply or service period where the expense is $1,000 or more.

    See also:

    Small business entity concessions

    Last modified: 08 Feb 2017QC 33714