Week 5: General Deductions

Question 1

What does apportionment mean?

Answer 1

“Extent that”: loss/outgoing becomes partly deductible

Question 2

What is the 1st kind of item expertise that require apportionment?

Answer 2

undivided items of expenditure in respect of things or services of which distinct and severable parts are devoted to gaining or producing assessable income and distinct and severable parts to some other cause

Question 3

What is the 2nd kind of item expertise that require apportionment?

Answer 3

those involving a single outlay or charge which serves both objects indifferently.’ (Ronpibon Tin)

Question 4

What requirement must there be In order to come within the positive limbs?

Answer 4

Nexus Requirement

Question 5

What does Nexus requirement mean?

Answer 5

sufficient nexus between a loss or outgoing and:

the gaining or production of the taxpayer’s assessable income, or

the carrying on of the taxpayer’s business

Question 6

Particular _____ and outgoings are ____ required to be ____ to specific amounts of ____

Answer 6

losses

NOT

matched

AI

Question 7

What requirement does a loss/outgoing not have to meet to be deductible in a year?

Answer 7

does not have to produce income in that year

– it’s sufficient if designed to earn income in future years

Question 8

It is ____ necessary to show a _____ between an outgoing and any particular ____ of income – it is sufficient if the outgoing is a ‘____ towards the production of income’ (Ash)

Answer 8

NOT

connection

item

step

Question 9

When is the nexus requirement satisfied?

Answer 9

where loss or outgoing is incurred ‘in the course of’ gaining or producing assessable income.

Question 10

For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the AI it must be:

Answer 10

be incidental and relevant to that end

Question 11

What is essential character?

Answer 11

For an outgoing to satisfy the positive limbs it must have the essential character of a ‘working’ or ‘business’ expense (Lunney)

Question 12

What is temporal connection?

Answer 12

Losses/ outgoings

‘preliminary’ to commencement of an income-producing/business activity = NOT deductible

Question 13

Regarding temporal connection when can loss/outgoing be deductible?

Answer 13

loss or outgoing can be traced to business operations that were carried by taxpayer with purpose of gaining AI

Question 14

What does Negative limbs mean?

Answer 14

Even though a loss or outgoing may satisfy the nexus requirements of the positive limbs

• it will NOT be deductible under if it falls within one of 4 negative limbs

Question 15

What are the 4 negative limbs?

Answer 15

1. Capital losses and outgoings
2. Private or domestic losses or outgoings
3. Losses or outgoings incurred in gaining exempt income or non-assessable non-exempt income
4. Losses or outgoings that are not deductible under ITAA36/97

Question 16

What does capital losses and outgoings?

Answer 16

Only revenue losses or outgoings may be deducted

NOT ‘Capital losses’

Question 17

What are the 3 tests under the 1st negative limb to identify whether losses are ‘capital’ or ‘revenue’ in nature?

Answer 17

Once and for all
enduring benefit
business entity

Question 18

What expenses are described whether they are deductible or NOT?

Answer 18

Clothing

Travel

Self Education Expense

Home Office

Legal Expenses

Interest Expenses

Question 19

When is a loss/outgoing incurred?

Answer 19

depends on the existence of a liability, includes:

The taxpayer must have completely subjected itself to the loss or outgoing (James Flood)

presently existing liability must exist (Nilsen Development Laboratories)

Must be more that a mere impending, threatened, or expected liability (New Zealand Flax Investments)

Question 20

What is the advance payments regime?

Answer 20

Requires taxpayers to spread deductions for expenditure under certain agreements over ‘eligible service period’

Question 21

When does the advance payments regime NOT apply?

Answer 21

excluded expenditure (eg expenditure that is less than $1,000)