The following notes are provided as a guide for our assessment purposes only.
Only expenses necessarily incurred in earning business income are allowed as deductions.
For example, travel expenses incurred as part of business operations are allowable, but costs of
personal travel are not. Where the expenses are incurred for part business and part personal reasons,
only that part which relates to your business may be deducted from your business income.
Deductions for superannuation paid to an employee’s accounts are allowable in certain
circumstances. Ask us for more information.
Some legitimate deductions under tax law are not allowed for our income assessment
purposes. These include:
• Prior year losses (section 8-1 of the Income Tax Assessment Act 1997 )
• Offsetting of losses
Losses can be offset only in some situations. Ask us for more information.
• Superannuation contributions for the sole trader or partners of the partnership
• Borrowing expenses
• Industry concessions/incentives
– Income Equalisation Deposits/Farm Management Bonds
– income averaging
– provisions to defer taxation
– forced disposal of livestock (section 36AAA or sub-sections 36(3) to (7)
Income Tax Assessment Act 1936 (ITAA 1936))
– double wool clip (section 26BA ITAA 1936), and
– insurance received for timber or stock losses (section 26B ITAA 1936).
Private health insurance or premiums paid on term life, endowment or disability policies.
• Capital expenditure deductions
Some capital expenses related to primary production that are allowed for tax purposes are not
allowed as deductions for our purposes. These include:
• Equal annual deductions over 10 years under section 75A of the ITAA 1936 for expenditure before
23 August 1983 on such items as:
– clearing and preparation of land for agriculture and farming
– drainage of swamps
– soil conservation measures
– flood mitigation measures
• Water storage and reticulation expenditure (section 75B ITAA 1936)
• Fences for disease control (section 75C ITAA 1936)
• Prevention of land degradation (section 75D ITAA 1936)
• A deduction from taxable income under section 36AAA of the ITAA 1936.
• Union fees
Section 51(1) of the ITAA 1936 provides for a deduction against gross business income in respect
of union membership fees. Union fees are not allowed as a deduction for the Department of
Human Services income test assessment purposes, unless membership is a requirement for
undertaking business activities in the applicable industry.
Income of recipient
Amount paid and claimed as an expense item may need to be declared as income of the recipient.
For example, if the business pays rent or wages to you or your partner, you will need to declare the
amount as income.
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