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General Deduction - Coggle Diagram

- - - - An expense must be deducted in the year of assessment that
        it is incurred, even if it will only produce income in future years.
      - An expense has to be claimed in the year that it is incurred. It
        cannot be claimed in later years.
    - - Amount can only be deducted in year of assessment the expense was actually incurred.
  - - - Damages paid were due to negligence and it was not indicated that negligence was an inevitable consequence of the company's operations. Expenditure is therefore not deductible as it was not incurred in the production of income.
    - - Expenditure incurred to induce the employees to enter and
        remain in the service of the taxpayer may qualify as a deduction since the purpose is to produce current or future income.
      - Amounts paid in terms of an employment contract are deductible.
    - - The damages paid were an inevitable consequence of the income-producing activities, thus incurred in the production of income.
    - - Where audit fees are incurred for a dual
        purpose, apportionment has to take place
      - If an expense is necessary in order to trade effectively it will not be capital in nature and will be allowed as a deduction.
      - Incurring audit fees is necessarily attached to the performance
        of the taxpayer’s income earning operations. audit fees
        are incurred in the production of income.
  - - - Principle: An expense can only be deducted once there is an
        unconditional legal obligation to pay the expense.
      - Judgement: The obligation to pay turnover rental is contingent
        until the turnover is determined and cannot be deducted until it is determined.
    - - PRINCIPLE: Where an obligation to pay an amount is in dispute, the expense can only be actually incurred when the dispute is settled with regards to the obligation and the amount thereof.
    - - JUDGEMENT: The bonus is payable in the future only if the employee was still employed by the company
      - This is an uncertain future event, and the expense can only be actually incurred on this future date.
      - PRINCIPLE: It a payment is contingent upon the happening of an uncertain future event, the expense and corresponding liability can only be actually incurred once the conditions are met.
  - - - Cost of establishing/ improving/adding income earning plant
        (fixed capital) is capital in nature and therefore not deductible.(On the property therefore, Permanent assets)
      - Cost of performing income-earning operations (floating capital)
        which is revenue in nature and therefore deductible. (outside the property and therefore not a permanent asset)
    - - JUDGEMENT: The management contract did not generate
        income in itself, yet created the opportunity to generate income.
      - PRINCIPLE: Expenditure incurred to obtain an income earning right or structure will be capital in nature
  - - - Legal Costs are not part of the legal-earning operations and that deduction will be disallowed
      - The compensation paid is deductible and naturally in the production of income
    - - Losses are probably expenditure of an involuntary nature