Week 5 - General Deductions Flashcards
1
Q
can you have deductions if you have no Income?
A
no
2
Q
two tests in the general deduction formula?
A
- s11a = positive test
AND - s23g = negative test
3
Q
preamble of s11a?
A
- trade MUST be carried on
- income must be derived from such trade
if the amount meets these requirements = look at s11a
4
Q
requirements of s11a?
A
deductions are allowed for an amt that is:
- exp and losses
- actually incurred
- during the YOA
- in the production of income
- not of a capital nature
5
Q
trade according to s11?
A
- adopt widest possible meaning
- not passive income
- business, employment, venture, etc
6
Q
expenditure and losses?
A
- cash flows
- liabilities which may be settled in cash or otherwise
- exp = loss = the same = involuntary exp
7
Q
things that are not actually incurred as an expense?
A
- provision
- issues of shares so a company can acquire an asset
8
Q
summary of actually incurred?
A
- unconditional legal obl = actually incurred
- conditional = not incurred till conds met
- quantifiable = incurred
- paid = incurred
9
Q
in the production of income?
A
- closely enough connected with the actions that produce income
- if inevitable concomitant of trade = naturally accompanying, no negligence
10
Q
lump sum paid in terms of general policy?
A
deductible
11
Q
loan procured?
A
- if used to produce income (buy cap assets) = deductible
- if used to pay dividends or something = not deductible
12
Q
take out a loan to buy shares?
A
- not deductible bc shares produce dividends
13
Q
non-contractual, non-policy retirement payment?
A
not deductible = person is retiring = no more income from them
= only deductible if policy to motivate employees
14
Q
capital in nature?
A
- floating capital and inc earning operations = rev
- fixed capital and inc earning structure = capital
- enduring benefit
- adds to inc earning structure
15
Q
are royalties capital in nature?
A
- if royalties are paid to procure use of intellectual property = revenue
- don’t create/preserve a capital asset
