Income tax: over what period are two or more prepayments apportioned in terms of section 82KZM of the Income Tax Assessment Act 1936?

A prepayment is not apportioned but is allowed in full as a deduction in the year in which it is incurred if all the services in respect of the prepayment are to be provided within 13 months of incurring the expenditure.

Under section 82KZM, if a prepayment is made under an agreement entered into after 25 May 1988 for the doing of a thing that is not to be wholly done within 13 months after the day on which the expenditure is incurred, then the prepayment is apportioned over the period to which it relates, unless it is excluded expenditure as defined in subsection 82KZL(1).

If two or more prepayments of less than $1,000 each are made to exploit the threshold for avoiding the application of subsection 82KZM, then the general anti-avoidance provisions of Part IVA may be invoked.

If two or more prepayments greater than $1,000 each are made under an agreement, the period to which each payment relates has to be identified to determine whether the Subdivision applies.