INCOME TAX ASSESSMENT ACT 1997
|CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION
|PART 2-5 - RULES ABOUT DEDUCTIBILITY OF PARTICULAR KINDS OF AMOUNTS
Div 25 inserted by No 121 of 1997.
You can deduct expenditure you incur to the extent that it is for:
(a) managing your *tax affairs; or
(b) complying with an obligation imposed on you by a *Commonwealth law, insofar as that obligation relates to the *tax affairs of an entity; or
To find out whether a trustee of a deceased estate can deduct expenditure under this section, see subsection 69(7) of the Income Tax Assessment Act 1936.
If you receive an amount as recoupment of the expenditure, the amount may be included in your assessable income: see Subdivision 20-A.
S 25-5(1) amended by No 64 of 2017, s 3 and Sch 1 item 4, by inserting para (cb), applicable in relation to quarters starting on or after 1 July 2017.
S 25-5(1) amended by No 75 of 2005, No 167 of 2001, No 73 of 2001, No 58 of 2000, No 178 and No 11 of 1999 and No 16 of 1998.
No deduction for certain expenditure
You cannot deduct under subsection (1):
(a) *tax; or
(c) expenditure for *borrowing money (including payments of interest) to pay an amount covered by paragraph (a) or (b); or
(d) expenditure for a matter relating to the commission (or possible commission) of an offence against an *Australian law or a *foreign law; or
(e) a fee or commission for advice about the operation of a *Commonwealth law relating to taxation, unless that advice is provided by a *recognised tax adviser.
S 25-5(2) amended by No 179 of 1999.
No deduction for expenditure excluded from general deductions
You cannot deduct expenditure under subsection (1) to the extent that a provision of this Act (except section 8-1) expressly prevents or limits your deducting it under section 8-1 (about general deductions). It does not matter whether the provision specifically refers to section 8-1.
No deduction for capital expenditure
You cannot deduct capital expenditure under subsection (1). However, for this purpose, expenditure is not capital expenditure merely because the *tax affairs concerned relate to matters of a capital nature.
Under this section, you can deduct expenditure you incur in applying for a private ruling on whether you can depreciate an item of property.
Use of property taken to be for income producing purpose
Under some provisions of this Act it is important to decide whether you used property for the *purpose of producing assessable income. For provisions of that kind, your use of property is taken to be for that purpose insofar as you use the property for:
(a) managing your *tax affairs; or
(b) complying with an obligation imposed on you by a *Commonwealth law, insofar as that obligation relates to the *tax affairs of another entity.
You buy a computer to prepare your tax returns. The expenditure you incur in buying the computer is capital expenditure and cannot be deducted under this section.
However, to the extent that you use the computer in preparing your income tax return, you will be able to deduct the decline in value of your computer under Division 40. That is because, under this subsection, the computer is property that you are taken to use for the purpose of producing assessable income.
S 25-5(5) (example) amended by No 77 of 2001, No 16 of 1998.
If another provision of this Act expressly provides that a particular use of property is not taken to be for the *purpose of producing assessable income, that provision overrides subsection (5).
No double deduction for general interest charge on a running balance account
If you deduct *general interest charge that applies to an RBA deficit debt, you can't also deduct the corresponding general interest charge on *tax debts that have been allocated to the RBA.
RBAs (running balance accounts) are dealt with in Part IIB of the Taxation Administration Act 1953.
S 25-5(7) amended by No 41 of 2011, s 3 and Sch 5 item 78, by substituting "*tax debts" for "tax debts", effective 27 June 2011.
S 25-5(7) inserted by No 178 of 1999.
Expenditure by trustee of deceased estate
(a) after you die, the trustee of your deceased estate incurs expenditure; and
(b) had you incurred the expenditure before you died, you could have deducted it under subsection (1);
for the purposes of assessing the trustee for the income year in which you died, the expenditure is a deduction under that subsection.
S 25-5(8) amended by No 14 of 2009, s 3 and Sch 4 item 13, by substituting "a deduction" for "an allowable deduction", effective 26 March 2009.
S 25-5(8) inserted by No 101 of 2006, s 3 and Sch 2 item 659, effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive.
S 25-5 inserted by No 121 of 1997.