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Income tax: can section 82KZM of the Income Tax Assessment Act 1936 apply to a prepayment for a service to be provided over a 12 month period?

Yes. Section 82KZM applies to prepaid expenditure incurred under an agreement for a thing to be done over a 12 month period, if the agreement does not require the thing to be wholly done within 13 months after the day on which the prepaid expenditure is incurred.

Subdivision H of Division 3 of Part III comprising section 82KZL to section 82KZO has the effect of denying an immediate deduction for certain prepaid expenditure (except excluded expenditure as defined in subsection 82KZL(1) ) which is incurred under an agreement entered into after 25 May 1988. This expenditure which would otherwise be deductible under subsection 51(1) must be apportioned over the eligible service period.

The 'eligible service period' is defined in subsection 82KZL(1).

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