Document ID: chunk:federal_register_of_legislation:C2025C00029:section:6:p6
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 6 (pt 6/9)
Character Range: 349852–352431

Note: You cannot deduct anything for that income year if you do not use the money for that purpose at all during that income year.

Maximum deduction for an income year
 (4) You work out as follows the maximum amount that you can deduct for the expenditure for an income year:

      Method statement
           Step 1. Work out the remaining expenditure as follows:

                • For the income year in which the *period of the loan begins, it is the amount of the expenditure.
                • For a later income year, it is the amount of the expenditure reduced by the maximum amount that you can deduct for the expenditure for each earlier income year.

           Step 2. Work out the remaining loan period as follows:

                • For the income year in which the *period of the loan begins, it is the period of the loan (as determined at the end of the income year).
                • For a later income year, it is the period from the start of the income year until the end of the period of the loan (as determined at the end of the income year).

           Step 3. Divide the remaining expenditure by the number of days in the remaining loan period.
           Step 4. Multiply the result from Step 3 by the number of days in the remaining loan period that are in the income year.
Example: To continue the example in subsection (2): suppose the original period of the loan is 4 years starting on 1 September 1997. What is the maximum amount you can deduct for the expenditure for 1997‑98?
 Applying the method statement:
 After Step 1: the remaining expenditure is $1,500 (the amount of the expenditure).
 After Step 2: the remaining loan period is 4 years from 1 September 1997 (1,461 days).
 After Step 3: the result is $1,500 divided by 1,461 = $1.03.
 After Step 4: the result is $1.03 multiplied by 302 days = $310.06.
 Suppose you repay the loan early, on 31 December 1998. What is the maximum amount you can deduct for the expenditure for 1998‑99?
 Applying the method statement:
 After Step 1: the remaining expenditure is $1,500 (the amount of the expenditure) reduced by $310.06 (the maximum amount you can deduct for 1997‑98) = $1,189.94.
 After Step 2: the remaining loan period is the period from 1 July 1998 to 31 December 1998 (183 days).
 After Step 3: the result is $1,189.94 divided by 183 days = $6.50.
 After Step 4: the result is $6.50 multiplied by 183 days = $1,189.94.

Meaning of period of the loan
 (5) The period of the loan is the shortest of these periods:
 (a) the period of the loan as specified in the original loan contract;