A prepaid expense is expenditure you incur for things to be done in a later income year, for example lease payments.

Generally, a prepaid expense is deductible over the ‘eligible service period’, which cannot exceed 10 years. However, a prepaid expense may be immediately deductible in the year that it’s paid if the 12-month rule applies, or if it’s excluded expenditure.

The 12-month rule is available to small businesses with an aggregated turnover of less than $10 million.

Claiming small business tax deductions

Steps Progress

What are deductions and what can I claim?

5 mins

Accounting for private use of assets

9 mins

Expenses you can never deduct

1 mins

Expenses you can deduct over time

10 mins

Stock and asset records

5 mins

Expenses you can deduct immediately

5 mins

Other deductions records

1 mins

Motor vehicle deductions

4 mins

Motor vehicle deductions records

2 mins

Related courses

1 mins

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