LAWS3101 Study Guide - Midterm Guide: Circulating Capital, Ordinary Income, Liability Insurance
Document Summary
In relation to income, a taxpayer needs to apply either the cash or the accruals basis as a tax accounting system. But, irrespective of whether the taxpayer uses the accruals or cash basis, losses and outgoings may be claimed when incurred. To incur a loss or outgoing doesn"t mean that it must be paid. As long as the loss or outgoing represents a present debt, it will be incurred. The cash or receipts basis is mainly used by taxpayers who are: Non-business income derived from knowledge or the exercise of skill. Business income derived from the provision of knowledge or the exercise of skill in the provision of services. Income from investments (with the exception of interest derived from a business of money- lending). Rent or royalties (except where they are business income). Note potl case study 16. 1 | recoverable debt does not justify the use of the cash basis.
