• Summary of rules

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    • Prepaid expenditure that is subject to the tax shelter rules is apportioned over the eligible service period or 10 years, whichever is less. For more information, see chapter 2.
    • However, certain prepaid expenditure incurred under a plantation forestry managed agreement is deductible under the 12-month rule where:
      • the eligible service period for the expenditure is 12 months or less
      • the 12-month period ends on or before the last day of the income year following the year in which the payment was incurred.
       

    For more information, see chapter 3.

    • If you are a small business taxpayer and are not participating in the STS, your deduction for prepaid business expenditure is spread over the eligible service period or 10 years, whichever is less. However, where the eligible service period ends not more than 13 months after you incur the expenditure, transitional rules apply to allow part of the expenditure that would otherwise be deductible in a future year to be deductible in the expenditure year.
    • If you are not an individual and are a small business taxpayer not participating in the STS, your deduction for prepaid non-business expenditure is treated in the same way as your prepaid business expenditure.
    • If you are an individual, your prepaid non-business expenditure 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 payment is made.
       

    For more information, see chapter 4.

    • If you are an individual your deduction for prepaid non-business expenditure is apportioned over the eligible service period or 10 years, whichever is less, where the eligible service period is more than 12 months or it ends after the last day of the next income year. For more information, see chapter 4.
    Last modified: 18 Jun 2002QC 27429