According to Australian taxation law, Australian taxpayers could only claim the deductions and rebates (also called offsets) to which they are entitled. S8-1(1) ITAA97 illustrates that the taxpayer could deduct any loss or outgoings which incurred or necessarily incurred in gaining or producing assessable income. In this section, the meaning of "incurred" is fundamental and essential. In this essay, we will firstly discuss different opinions concerning the meaning of "incurred" with the related case law, and then analyze the case of "ANZ Banking Group v FCT" to determine whether this case breaks the particular term.
2. Meaning of "incurred"
Taxation Ruling TR 97/7 officially explains the meaning of "incurred". First of all, there is no statutory explanation for the term "incurred", because the Australian Taxation Office (ATO) cannot waste time to define millions of simple terms like this. In addition, it is common to believe that there is no time issues for an expense is incurred and paid in the same year of income. However, it may arise time issues if the outgoing is unpaid at the year end, or the expenditure is derived from two or more income years.
There are five conditions should be considered: presently existing liability, payment made without money, defeasible, accounting practice, properly referable. Presently existing liability means that for the purpose of Section 8(1), even though the money is not paid, the outgoing or expense is still may be incurred. In the case "W Nevill & Company Ltd v. FC of T (1937)", it states that the reason why the word is used by "incurred" rather that "paid" is because an outgoing may be incurred even it is not actually been paid. Furthermore, defeasible requires a taxpayer must have completely nexus with the outgoing, for example, a taxpayer take good on approval cannot be treated as the taxpayer's purchase. In addition, if the payment is not real money, for instance, gift, insurance premiums,...
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