Income Tax Assessment Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-5 - RULES ABOUT DEDUCTIBILITY OF PARTICULAR KINDS OF AMOUNTS  

Division 25 - Some amounts you can deduct  

Operative provisions  

SECTION 25-5   Tax-related expenses  

25-5(1)    

You can deduct expenditure you incur to the extent that it is for:

(a) managing your *tax affairs; or

(b) complying with an obligation imposed on you by a *Commonwealth law, insofar as that obligation relates to the *tax affairs of an entity; or

(c) the *general interest charge or the *shortfall interest charge; or

(ca) a penalty under Subdivision 162-D of the *GST Act; or

(cb) levy under the Major Bank Levy Act 2017 ; or

(d) obtaining a valuation in accordance with section 30-212 or 31-15 .

Note 1:

To find out whether a trustee of a deceased estate can deduct expenditure under this section, see subsection 69(7) of the Income Tax Assessment Act 1936 .

Note 2:

If you receive an amount as recoupment of the expenditure, the amount may be included in your assessable income: see Subdivision 20-A .

No deduction for certain expenditure

25-5(2)    
You cannot deduct under subsection (1):

(a) *tax; or

(b) an amount withheld or payable under Part 2-5 or Part 2-10 in Schedule 1 to the Taxation Administration Act 1953 ; or

(c) expenditure for *borrowing money (including payments of interest) to pay an amount covered by paragraph (a) or (b); or

(d) expenditure for a matter relating to the commission (or possible commission) of an offence against an *Australian law or a *foreign law; or

(e) a fee or commission for advice about the operation of a *Commonwealth law relating to taxation, unless that advice is provided by a *recognised tax adviser.

No deduction for expenditure excluded from general deductions

25-5(3)    
You cannot deduct expenditure under subsection (1) to the extent that a provision of this Act (except section 8-1 ) expressly prevents or limits your deducting it under section 8-1 (about general deductions). It does not matter whether the provision specifically refers to section 8-1 .

No deduction for capital expenditure

25-5(4)    
You cannot deduct capital expenditure under subsection (1). However, for this purpose, expenditure is not capital expenditure merely because the *tax affairs concerned relate to matters of a capital nature.

Example:

Under this section, you can deduct expenditure you incur in applying for a private ruling on whether you can depreciate an item of property.

Use of property taken to be for income producing purpose

25-5(5)    
Under some provisions of this Act it is important to decide whether you used property for the *purpose of producing assessable income. For provisions of that kind, your use of property is taken to be for that purpose insofar as you use the property for:

(a) managing your *tax affairs; or

(b) complying with an obligation imposed on you by a *Commonwealth law, insofar as that obligation relates to the *tax affairs of another entity.

Example:

You buy a computer to prepare your tax returns. The expenditure you incur in buying the computer is capital expenditure and cannot be deducted under this section.

However, to the extent that you use the computer in preparing your income tax return, you will be able to deduct the decline in value of your computer under Division 40 . That is because, under this subsection, the computer is property that you are taken to use for the purpose of producing assessable income.

25-5(6)    
If another provision of this Act expressly provides that a particular use of property is not taken to be for the *purpose of producing assessable income, that provision overrides subsection (5).

No double deduction for general interest charge on a running balance account

25-5(7)    

If you deduct *general interest charge that applies to an RBA deficit debt, you can ' t also deduct the corresponding general interest charge on *tax debts that have been allocated to the RBA.

Note:

RBAs (running balance accounts) are dealt with in Part IIB of the Taxation Administration Act 1953 .

Expenditure by trustee of deceased estate

25-5(8)    

If:

(a) after you die, the trustee of your deceased estate incurs expenditure; and

(b) had you incurred the expenditure before you died, you could have deducted it under subsection (1);

for the purposes of assessing the trustee for the income year in which you died, the expenditure is a deduction under that subsection.