(upbeat drum music)
-: In addition to the general deduction provision
of section 8-1, we also have section
8-5, which sets out provisions
for deductibility of amounts that another provision
of the Act, excluding division 8, allows you to deduct.
This is subject to provisions in the Act
that prevent or limit and amount being deducted.
Any amount that is deducted under another provision
pursuant to section 8-5
is called a specific deduction.
Under section 8-10 there are no double deductions.
Meaning you can only deduct under the provision
that is most appropriate.
This is usually taken to mean the specific provision.
There are a number of major provisions
that relate to specific deductions.
Division 25 contains a number of small provisions.
For example, repairs of a non capital nature,
which mirrors section 8-1.
Lease establishment costs or borrowing costs
which are associated with capital expenditure,
and some costs that are not directly related
to earning assessable income such as tax compliance costs.
Division 28 sets up the provisions for specific deductions
for cars and individuals, and provides the methods
available for calculation of the deduction amount.
To encourage charitable giving division 30 allows
for gifts and donations to be deducted.
The key points to remember for division 30
are that the recipient of the gift must be endorsed
by the commissioner as a deductible gift recipient.
For example, a registered charity.
Section 30-15 provides a table of gifts
or contributions that can be deducted.
A key thing to remember here, is that the gift amount
must have a value of $2 or more
with no material benefit received in return.
There are also a number of requirements that relate
to gifts of property, trading stock or shares,
and how the value of the deduction should be calculated.
Division 36 covers the deductibility
of prior year tax losses.
Deduction for current year tax loss is covered
in Section 36-10, and is calculated using
the current year surplus deductions less net exempt income.
The rules for applying tax loss as a deduction
in a future year are covered in Section 36-15.
The requirements are,
that you apply current year deductions first.
Then apply carry forward tax losses in the order made,
but you apply carry forward tax loss only after reducing
the loss by any net exempt income from the Current year.
Note that there are special rules for companies,
where companies can choose to deduct a lesser amount
of a tax loss in order to avoid excess franking credits.
Not withstanding eligibility under general
or specific deduction provision.
Another specific provision may limit
or deny that deduction.
Division 26 sets out a number of amounts
that you cannot deduct, or you cannot deduct in full.
For example, fines or penalties for breaches of a law
are excluded entirely in Section 26-5.
Payments to related entities are reduced
to what is deemed to be a reasonable amount
by the commissioner under Section 26-35.
Accrued employee leave entitlements are deferred
until the year in which they are actually paid
by section 26-10.
Division 32 specifically excludes
entertainment expenses from being deductible.
This means the provision of food, drink or recreation,
maybe entertainment depending on the context.
Such that entertainment may be provided,
even if business discussions occur, for example,
an off premises business lunch.
We need to note that costs associated with overnight
business travel, restaurant meals are not considered
entertainment under Section 32-10.
Key things to consider when looking at whether
an expense is entertainment include,
is it provided offsite, out of working hours?
Is it elaborate as opposed to mere sustenance?
And does it have a social purpose?
There are some exceptions to be aware of,
for example, provision of a fringe benefit
per section 32-20.
And the table of exceptions is provided in subdivision 32B.
You should also be aware of the exceptions and limitations
to deductibility relating to non commercial business losses,
thin capitalization and prepayments for services,
which are covered in more detail in separate clips.
To recap, section 8-5 refers to specific
deductions, which are provided for in other provisions
in the income tax legislation.
There are a number of divisions relating to specific
deductions that you need to be aware of.
And you need to ensure that in accordance
with section 8-10, you do not double deduct.
You also need to be aware of the specific exclusions
and limitations as set out in the Act.