General deduction and R&D provisions
The prepayment rules apply only 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)
- notional deduction for eligible companies, under the R&D provisions in sections 355-205 (R&D expenditure) or 355-480 (earlier year associate R&D expenditure) of the ITAA 1997.
You cannot apply the prepayment rules for R&D expenditure incurred to an associate unless it is paid, and would otherwise qualify for a notional deduction under section 355-480.
The prepayment rules don't apply where the expenditure is deductible under a specific deduction provision of the tax law other than those for R&D (that is, other than sections 355-205 or 355-480 of the ITAA 1997).
The general deduction provisions generally allow you to deduct from your assessable income any loss or outgoing incurred in either:
- gaining or producing your assessable income
- carrying on a business.
You can't claim a deduction under these provisions for expenditure that is either:
- of a capital, private or domestic nature
- incurred in gaining exempt or non-assessable non-exempt income.
Unless specifically stated otherwise, expense and expenditure refer to expenditure that is only allowable as a deduction under the general deduction provisions of section 8-1 of the ITAA 1997 or, for eligible companies, under the R&D provisions in sections 355-205 or 355-480 of the ITAA 1997.
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