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Specific Deductions

Tax related expenses

s.25-5 allows a deduction for any expenditure incurred in connection with the administration or management of a taxpayer’s income tax affairs

e.g. tax agent’s fees, payment of interest in relation to late/under payments of tax, fees for advice on tax matters, costs of providing information to the ATO

Repairs

s.25-10 allows a deduction for repairs, not being of a capital nature, to any premises, plant, tools, machinery, etc. used or held to produce assessable income

e.g. repairs to restore an asset to its modern equivalent, minor or incidental improvements to part of an asset

Capital repairs are not deductible. Capital repairs:
  • involve replacing the entire asset
    or
  • involve substantial improvements by addition, remodelling, extending or altering the character of the asset

Parliamentary election expenses

s.25-60 allows a deduction regardless of the candidate’s success or failure

Excessive Payments to Relatives

s.26-35 restricts the amount deductible for payments made to associated persons to an amount that the ATO considers reasonable

This is based on type of work, hours worked, award rates

Gifts and Donations

Division 30A allows a deduction for gifts, donations and contributions of $2 or made to certain nominated funds, institutes or bodies

e.g. charities, aid relief agencies, public hospitals

Payments of taxes

Payments of income tax - not deductible
e.g. PAYG

Payments of other taxes - deductible
  • Payroll tax
  • Fringe Benefits tax
  • Land tax



Under s.8-5 a specific deduction is a loss or outgoing for which the ITAA specifically allows a deduction

Examples of specific deductions:
  • s.25-5 Tax related expenses

  • s.25-10 Repairs

  • s.25-20 Lease document expenses

  • s.25-25 Borrowing expenses

  • s.25-35 Bad Debts

  • s.25-45 Loss due to theft or embezzlement by employees

  • s.25-55 Subscriptions to associations

  • s.25-60 Election expenses – state and federal government

  • s.26-35 Excessive payments to relatives

  • s.30-15 Gifts, donations

  • s.40-25 Decline in value expense

  • s.74A Election expenses – ITAA36 local government

Bad Debts

s.25-35 allows a deduction for actual bad debts written off

Bad debts expense arising from a provision account entry have not been incurred and are, therefore, not a deduction

Losses through theft or embezzlement

s.25-45 allows a deduction where such losses are due to an employee However, a loss due to theft or robbery by a non-employee is deductible under s.8-1(1)

Borrowing expenses

s.25-25 allows a deduction for expenses incurred in borrowing money to be used for producing assessable income as follows:

Expenses < or equal to $100 – immediate deduction

Expenses > $100 – must be apportioned over the life of the loan but a maximum 5 year life

Subscriptions

s.25-55 allows a deduction for payments for membership of trade, business or professional associations up to a maximum of $42 for each person

However, the excess is deductible under s.8-1(1)

Local government election expenses

s.74A ITAA36 allows a maximum deduction of $1,000 for expenses in seeking election to local government