Tax Tip 106: Deductibility of Expenses – General Concepts

Discussion in 'Accounting & Tax' started by Terry_w, 1st Apr, 2016.

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  1. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

    18th Jun, 2015
    Deductibility of Expenses – General Concepts

    Expenses such as interest, and other costs, can be deductible because of section 8-1 of the Income Tax Assessment Act 1997. Check it out here

    INCOME TAX ASSESSMENT ACT 1997 - SECT 8.1 General deductions

    This section allows costs “incurred in gaining or producing your assessable income” to be deducted from your assessable income.

    However subsection 2 of 8-1 restricts this ability to deduct expenses saying that a loss or outgoing cannot be deductible to the extent that

    So where an expense is capital it cannot be claimed. Capital items would include the costs of purchase price of the property, conveyancing, stamp duty etc.

    Where an expense is private or domestic it cannot be claimed. The wording of subsection (2) says “to the extent that”. This means that where an expense relates partially to investment and partially private then the investment portion could be deducted. – this would include interest on a loan on a property that you were living in but also renting rooms for example.

    If an expense is incurred in gaining or producing exempt income then it cannot be deducted. Exempt income may include certain NRAS payments. This is why the full interest on loans used to purchase NRAS properties cannot be claimed.

    If there is some other section preventing a claim then you cannot claim it. An example of this is the section 25-25 which relates to borrowing costs. Borrowing costs incurred in producing assessable income must be apportioned over 60 months because of this section.
    samiam likes this.
  2. datto

    datto Well-Known Member

    23rd Jun, 2015
    Mt Druuiitt
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