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General deductions - Coggle Diagram
General deductions
11 - Trade test
requires
1) trade to be carried on = active step
is there a continuity act
is the long term objective to generate profit
2) income to be derived from trade
Non-trade act
pension & & annuities received --> not from trade
investments in div and interest-bearing stock= outside trade definition
Definition includes
employment
calling
business
occupation or venture
trade
including letting of any property and the use of any patent/design. trade mark/ copyright
every profession
pre-trade expenditure = capital when spent to set income earning structure
11A allows deduction in year trade commences
11(a) Positive test [1-5=def]
3 during YoA - from case law
not mentioned 11(a) determined by case law
expenditure in previous tax year not deductible current year
exception: 23H prohibits deduction where expense incurred in 1 tax yr but benefits not enjoyed in full deferred until benefit received
4 in production of income
dual purpose is possible
in production of income doesn't mean expenditure may only be deducted once income been produces
identifiable purpose
expenditure after income has been earned
2 actually incurred
deduction not determined cash basis
not necessarily actually paid as long as liability incurred
actually incurred vs necessarily incurred
not actually incurred if acc provision for future expenditure
5 not of a capital nature
1 expenditure and losses
difference between 2 = unclear
expenditure = voluntarily
refers to cash outflow, liabilities --> settled in cash or otherwise
Losses is possible expenditure involuntarily
23(g) Negative test - prohibits deduction if doesn't trade
23H prepaid expenditure limits deduction