Stop: Do not include the following expense items on your schedule:
- interest and dividend income expenses – claim deductible expenses at item D7 on your tax return
- farm management deposits – take them into account as required at item 16 on your tax return
- rental expenses – claim deductible expenses at item 20 on your tax return
- expenses and losses relating to foreign source income – take them into account as required at item 19 or, in the case of certain debt deductions, claim them at item D15 on your tax return.
- expenses relating to your personal services income shown at item P1 on your schedule
- low-value pool deduction where the pool contains assets used for work-related, self-education or rental purposes – read question D6 in TaxPack 2004.
You need to complete all items that relate to your business or businesses. You can deduct business expenses if the expenses were necessary to carry on your business for the purpose of earning assessable income.
If you are a primary producer you will need a primary production worksheet to help you work out some of the amounts in this section. This worksheet is included in the publication Information for primary producers 2003–04. Complete the worksheet before proceeding.
Note: Except for:
- the values of opening and closing stock – which are to be shown at tax values and
- depreciation expenses for STS taxpayers only – which are to be shown at tax values
the amounts to be included in the INCOME and EXPENSES sections item P8 are amounts derived from your accounting system or financial statements. Any adjustments to these amounts for tax purposes should be dealt with in the reconciliation items section of item P8.
If you are registered or required to be registered for GST, exclude from the deductions any input tax credit entitlements that arise in relation to outgoings. If you pay GST by instalments and incurred a penalty for underestimating a varied GST instalment, you can claim a deduction for the penalty at item D10 on your tax return. Do not show the penalty on your 2004 business and professional items schedule for individuals. For more information, see TaxPack 2004.
If you made a prepayment of $1,000 or more for something to be done (in whole or in part) in a future income year, the timing of your deduction may be affected by the rules relating to prepayments. Generally, you will need to apportion your deduction for prepaid business expenditure over the service period or 10 years, whichever is less. There are some exceptions under the 12-month rule for STS taxpayers, the special rules relating to plantation forestry managed agreements, and certain transitional provisions. For more information, see the publication Deductions for prepaid expenses 2003–04.
Where expense labels at item P8 include prepaid expenses which differ from the amounts allowable as deductions in the 2003–04 income year, make an expense reconciliation adjustment at H item P8.
You must keep your business expenses records for five years after you prepared or obtained them, or five years after you completed the transactions or acts to which they relate, whichever is the later.