Show download pdf controls
  • Eligible service period ending more than 13 months later

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    If you are a small business taxpayer and you are not participating in the STS, your deduction for prepaid business expenditure (and prepaid non-business expenditure if you are not an individual) is apportioned over the eligible service period where the eligible service period ends more than 13 months after the expenditure has been incurred. Transitional rules do not apply in these situations. For each year of income containing the eligible service period, the deduction must be worked out using the following formula:

    A × (B ÷ C)

    Where:

    A is expenditure

    B is number of days of eligible service period in the expenditure year

    C is total number of days of eligible service period

    Example: Deduction for expenditure where the eligible service period is more than 13 months

    Roger is a small business taxpayer who does not enter the STS. On 31 December 2002, Roger pays $15,000 rental for the use of business premises covering the period 1 January 2002 to 31 March 2003.

    Because the eligible service period is longer than 13 months, Roger cannot claim an immediate deduction for the prepayment nor do the transitional rules apply. Instead, the deduction must be apportioned over the eligible service period. Roger is entitled to the following deductions:

    2001-02

    $15,000 × (181 ÷ 455) (1 January 2002 to 30 June 2002) = $5,967

    2002-03

    $15,000 × (274 ÷ 455) (1 July 2002 to 31 March 2003) = $9,033

    The total deduction allowed proportionately over the 2002 and 2003 income years will be $15,000.

    End of example
    Last modified: 10 Dec 2019QC 27429