General permissions and limitations

Question 1

What is general permission?

Answer 1

allowed a deduction to an expenditure or loss, including depreciation, to the extent that the person incurred the loss in the course of deriving assessable income

Question 2

What are general limitations?

Answer 2

Denies a deduction of specific nature; Or incurred in. deriving income of a particular kind

Question 3

private limitation

Answer 3

Expenses that relate to domestic or private needs e.g., Being a member of society, clothing, meals, medical costs

Question 4

Exempt income limitation

Answer 4

Exempt income is not assessable income therefore there is no tax on it meaning there is no need for deduction e.g., Charity operating op shop

Question 5

Employment limitation

Answer 5

Cannot claim deductions for suits for work, work shoes, cost of travel to work etc.

Question 6

Capital limitation

Answer 6

a deduction is denied for capital expenditure

Question 7

6 test to determine is it is a capital expenditure?

Answer 7

1. Reccurent or once and for all payment ?
2. Does the expenditure have an enduring benefit?
3. Is it fixed or circulating capital, (money continues to circulate)
4. Profit making structure or profit-making process (expenditure of materials or expenditure of building?)
5. Identifiable asset (Would it be a new asset on FS) E.g., expense to extend factory or expense to acquire land to build a new Factory
6. How would the expndeiture be treated in account standards

Question 8

What are Specific deductions?

Answer 8

If a general permission allows a deduction but a general limitation denies it, a specific deduction can override the limitation.

Question 9

Items that have specific deductions?

Answer 9

Interest, Bad debts, Legal expenses, motor vehicle expenditure