a Pty Ltd with more than $50 million turnover prepaid workers compensation insurance premium on 30 June 2022, recording a journal at 30 June 2022 (dr prepayment, cr cash) and expensed the prepayment on the 1 July 2023 (dr insurance expense, cr prepayment). Does s 82KZL ITAA 1936 apply? is it a deduction in FY23? what should I deal with the expense in tax reconciliation at 30 June 2023?
Hi @Wenxuan21,
I understand you're asking whether the prepayment rules apply to workers compensation insurance premiums.
Workers compensation insurance is required under Australian law and as such would be excluded expenditure and the prepayment rules under the Income Tax Assessment Act 1936 would not apply. The company will be able to claim the full amount under the general deduction rules in the 2021-2022 financial year, the year the premiums expense was incurred.
As there is a timing mismatch between the accounting and tax treatments, in the 2022-2023 accounting and tax reconciliation. You would remove the prepaid workers compensation insurance premiums which is an accounting expense in the 2022-23 year from the tax reconciliation, as you would have claimed the premium in the 2021-2022 financial year for tax purposes.
You can find further information on prepaid expenses here.
Hi @Wenxuan21
We're doing some research and we'll let you know what we find.
Hi @Wenxuan21,
I understand you're asking whether the prepayment rules apply to workers compensation insurance premiums.
Workers compensation insurance is required under Australian law and as such would be excluded expenditure and the prepayment rules under the Income Tax Assessment Act 1936 would not apply. The company will be able to claim the full amount under the general deduction rules in the 2021-2022 financial year, the year the premiums expense was incurred.
As there is a timing mismatch between the accounting and tax treatments, in the 2022-2023 accounting and tax reconciliation. You would remove the prepaid workers compensation insurance premiums which is an accounting expense in the 2022-23 year from the tax reconciliation, as you would have claimed the premium in the 2021-2022 financial year for tax purposes.
You can find further information on prepaid expenses here.
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