Derivation of Income

Question 1

When is income derived under the cash basis?

Answer 1

When it is actually or constructively received

Question 2

When is income derived under the accrual basis?

Answer 2

Income is allotted to the income year in which events that determine the right to receive income occurred

Question 3

When are prepayments derived?

Answer 3

Only derived when the obligation to provide service is discharged.

Question 4

When do matching rules apply?

Answer 4

Applies when a person has trading stock at the end of the year. Value of trading stock = Income of a person

Question 5

Who does Income equalization apply to?

Answer 5

Farmers, Fisherman, foresters

Question 6

What is income Equalisation?

Answer 6

Modifies income derivation for good and bad periods.

Deposit income into equalization account and income won’t be derived until withdrawn

Question 7

Who can use income spreading?

Answer 7

Business involved in:

• Timber
• Right to timber
• Landing with standing timber

Question 8

What period can income spreading be applied to?

Answer 8

May allocate income between:
- Income year when derived
AND
- Anyone or more of the previous 3