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Derivation of Income (Cash v Accrual (Business (ATO's View (Trading,…
Derivation of Income
Cash v Accrual
choice
Switching permitted
Switch at beginning of the year
Frequent Switching Allowed
Individuals
Cash/receipts
Business
ATO's View
Trading
Non-trading
Judged on facts
98/1:
cases
Henderson v FCT
Other issues
Prepayments
Arthur Murray v FCT
Derived when earned
Lay-by method
Derived when title passes to buyer
Dividend income
Derived when paid
Not when declared
Brookton Co-Op v FCT
disputes
Derived when dispute resolved
Timing
Deductibility
Expenses
S8-1 ITAA 97
Scenarios
No income generated
Business ceases
Matching Principle
Provisions
LSL & AL
Deduct only when paid
Bad debts
Insurance Companies