20‑40 If the expense is deductible over 20‑40 If the expense is deductible over 2 or more income years

20‑40 If the expense is deductible over 2 or more income years

(1) This section includes an amount in your assessable income if: (a) you receive in the *current year an *assessable recoupment of a loss or outgoing for which you can deduct amounts over 2 or more income years; or (b) you received in an earlier income year an *assessable recoupment of a loss or outgoing of that kind (unless all of the recoupment has already been included in your assessable income for one or more earlier income years by this section or a *previous recoupment law). (This section applies even if the recoupment was received before the first of those income years.)

Note: Recoupment of a loss or outgoing that is only partially deductible is covered by section 20‑50.

(2) Work out as follows how much is included in your assessable income for the *current year because of one or more *assessable recoupments of the loss or outgoing.

Note: The method statement ensures that assessable recoupments are included:

Note: only so far as they have not already been included for an earlier income year; and

Note: only to the extent of your total deductions to date for the loss or outgoing.

Method statement

Step 1. Add up all the *assessable recoupments of the loss or outgoing that you have received (in the *current year or earlier). The result is the total assessable recoupment.

Step 2. Add up the amounts (if any) included in your assessable income for earlier income years, in respect of the loss or outgoing, by this section or a *previous recoupment law. The result is the recoupment already assessed. (If no amount was included, the recoupment already assessed is nil.)

Step 3. Subtract the recoupment already assessed from the total assessable recoupment. The result is the unassessed recoupment.

Step 4. Add up each amount that you can deduct for the loss or outgoing for the *current year, or you have deducted or can deduct for the loss or outgoing for an earlier income year. The result is the total deductions for the loss or outgoing.

Note: The total deductions may be reduced if an amount has been included in your assessable income because of a balancing adjustment: see section 20‑45.

Step 5. Subtract the recoupment already assessed from the total deductions for the loss or outgoing. The result is the outstanding deductions.

Step 6. The unassessed recoupment is included in your assessable income, unless it is greater than the outstanding deductions. In that case, the amount of the outstanding deductions is included instead.