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Abstract

There are indications that the courts are moving away from a strict legalistic interpretation of s 51(1) of the Income Tax Assessment Act (1936) (as amended), to one based on commercial and accounting principles. This article reviews the development of the courts' interpretation of when an expense has been 'incurred' for s 51(1) and puts forward the case for allocating prepayments in accordance with the principles of accruals accounting. This paper confines its discussion to taxpayers who are currently returning their income on an 'accruals basis'.

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