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Wednesday, 20 May 1936

Senator A J McLACHLAN (SOUTH AUSTRALIA) (Postmaster-General) . - The present section in both the Commonwealth and State acts provides a rigid test in that the expenditure to be allowed as deductions must be " wholly and exclusively " incurred in the production of assessable income. In the bill before us the general allowance clause in respect of business deductions has been widened considerably. The bill also combines in one clause both the general allowance and the general disallowance sections of the present act. The clause as drafted was accepted only after the most careful consideration. Although the word " necessarily " does not appear in the New South Wales bill, it does appear in the uniform bills drafted for the acceptance of other State parliaments. The representatives of the States were persuaded to accept the clause in the interests of taxpayers only if the word " necessarily " were included: It must be borne in mind that there are taxpayers who will exploit the provision by claiming exemption from taxation oh the ground that the deductions which they claim relate to expenses incurred for business purposes. Tor example, expenditure incurred in entertaining prospective clients would be claimed as an allowable deduction. Any deduction which is not allowed is as much a subject of appeal against the Commissioner's decision as is any other item of expenditure. In England a deduction is not allowed if the expenditure is not wholly and exclusively laid out for the purpose of the business. It has been held in that- country that for an expenditure to be deductible it must he " essential " to the earning of the gross receipts. In the United States of America the law provides that " business expenses deductible from the gross income include the ordinary and necessary expenditure directly connected with or appertaining to the taxpayer's trade or business ". I admit that one State has not yet come into line in this matter, but the Government is not without hope that it will do so, in the interests of uniformity.

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