18.104.22.168 Allowable & Non-allowable Deductions
Date of effect
This topic has effect to controlled private trusts and controlled private companies from 1 January 2002.
This topic contains information on:
- allowable deductions, and
- non-allowable deductions.
Allowable deductions from the business income of a private trust or private company are as follows:
- incurred while earning taxable income, OR
- necessary for the conduct of a business with the purpose of earning taxable income,
- allowed on plant and equipment actually used, or ready to be used, in producing assessable income,
- NOT allowed on plant and equipment which ONLY provides an external environment for the income producing activity,
- superannuation deductions paid to a complying superannuation fund (as per SIS),
- interest of no more than 10% p.a. paid in respect to GENUINE non-commercial loans,
- rent or mortgage interest, when business is conducted from the income support recipient's home,
- a deduction is allowed from the gross income, ONLY for rent or mortgage interest on the portion of the premises actually involved in conducting the business, and
- environmental impact assessments.
Act reference: SSAct section 7(2) An Australian resident is…
Non-allowable deductions from the business income of a private trust or private company are as follows:
- prior year losses ITAA,
- offsetting losses from unrelated businesses,
- building depreciation,
- borrowing expenses (ITAA sections 67 and 67A),
- contributions to non-complying (as per SIS) superannuation funds,
- donations (ITAA section 78(1)(a)),
- income equalisation deposits/farm management bonds (ITAA sections 159GA - 159GDA),
- double wool clip (ITAA section 26BA),
- forced disposal of livestock (ITAA sections 36AAA or 36(3)(7)),
- trading stock valuation adjustments (ITAA section 28),
- premiums for personal life insurance policies or funds,
- private health insurance premiums,
- obsolescence (ITAA section 31(2)),
- industry concessions/incentives,
- amortisation of intangible assets,
- provisions to defer taxation,
- capital expenditure deductions,
- entertainment, and
- deductions for research and development.
For the legal authority and a complete list of the non-allowable deductions, please see the Disallowable Instrument, Social Security (Attribution of Income - Ineligible Deductions) Determination 2017.