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Income tax: does an annual payment under an agreement that is high in relation to subsequent annual payments under the same agreement have to be apportioned in terms of section 82KZM of the Income Tax Assessment Act 1936?

Preamble

Yes, where an annual payment is high in relation to subsequent annual payments under the same agreement, which is entered into after 25 May 1988, then it is subject to the provisions of section 82KZM. This high payment has the effect of reducing the subsequent payments and the section applies to spread the deductibility of this high payment over the period to which it relates.

Section 82KZM does not apply to excluded expenditure which is defined in subsection 82KZL (1) as an amount of expenditure: (a) less than $1,000; (b) required to be incurred by a law, or by an order of a court, of the Commonwealth, a State or a Territory: (c) under a contract of service; or (d) to the extent that it is of a capital, private or domestic nature.

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