Generally, you can claim a deduction for most expenses you incur in running your business as long as they are directly related to earning your assessable income. Working or operating expenses (for example, advertising or accounting fees and wages) can be claimed in the year you incur them. However, capital expenses (such as buying plant and equipment) are claimed over time.

In 2002 the ATO issued a Taxation Ruling which discussed several issues as to the application of the tax laws to certain classes of persons, such as operators and residents, in respect of various operations and activities in the retirement village industry.

The ATO stated that the payment to outgoing residents of a retirement village is capital in nature. However, recently the ATO have issued a Decision Impact Statement as a result of an AAT decision where the payments to outgoing residents of a retirement village were found to be deductible as ordinary expenses incurred in carrying on the business. These payments represent a share of any increase in the entry price payable by a new resident (i.e., the difference between the initial entry price paid by the outgoing resident and the entry price payable by the new resident).

Properly claimed allowable deduction can significantly reduce your business’ tax liability. The accountants at The Quinn Group have years of experience preparing and lodging income tax returns to ensure our clients receive the maximum benefit. Call us today on 9223 9166 or submit an online enquiry to find out how we can help you.