General Deductions

Question 1

Trade

Answer 1

• widest definition
• includes any profitable activity even if its a single activity, must have continuity
• passive income is not a trade
• selling stock during liquidation is not a trade

Question 2

expenditure and losses

Answer 2

• expenditure (voluntary) and losses (involuntary)

* if there is a liability or obligation to pay the amount then it is not an expenditure (not s11a)

Question 3

actually incurred

Answer 3

• unconditional and certain
• if uncertain, but unconditional then estimate and deduct
• unresolved dispute will not be deducted until it is resolved

Question 4

during the YOA

Answer 4

• deduct in the YOA actually incurred
• cannot be carried forward or back
• exceptions = pre-paid expenditure (23H) and unquantified amounts (24M)

Question 5

in the production of income

Answer 5

• 1: what is the purpose of the expenditure?
• 2: is the expenditure closely related to the income-producing activity?
• expenditure paid by an ER to incentivise EEs to stay in employment is deductible
• expenditure paid to old EEs is not deductible
• income can be generated in a subsequent year to when the expenditure is incurred, still deduct in year of incurral
• Income = GI - exempt income. So any expenditure incurred in the production of exempt income is not deductible (23f)
• expenditure with a dual purpose must be apportioned

Question 6

not of a capital nature

Answer 6

• fixed capital = capital in nature, floating = income
• laying of eggs = expenditure caused by the income earning operations, goose = expenditure incurred to improve or establish the income earning structure
• if an expense provides an enduring benefit then its capital