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- If your prepaid expense is incurred in respect of seasonally dependent agronomic activities that occur during the establishment period it 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 prepayment was incurred.
- If your prepaid expense is not incurred in respect of seasonally dependent agronomic activities that occur during the establishment period, or the 12-month rule is not satisfied, your deduction for the expenditure is determined in accordance with either the tax shelter or general prepayment rules discussed elsewhere in this publication.
Deduction for expenditure in a plantation forestry managed agreement
Donald made a prepaid investment of $10,000 in a plantation forestry managed agreement on 1 June 2002. The prepaid activities are carried out within 12 months of the expenditure being incurred. An amount of $4,000 is for seasonally dependent agronomic activities that occur within the establishment period. This component of the prepaid expense is deductible in the 2001-02 income year.
The remaining $6,000 continues to be subject to the other prepayment rules. For example, under the rules applicable to tax shelter arrangements the deduction for that expenditure will need to be apportioned over the eligible service period.
Last modified: 18 Jun 2002QC 27429