Accrued expenses are expenses that have been incurred, but not yet paid. They are recognised for accounting purposes in the financial statements before being paid.
For tax purposes a small business entity (SBE) taxpayer can generally claim a deduction at June 30th for expenses that have been incurred, but not paid (or even invoiced).
In TR 97/7 the ATO advises that a SBE business taxpayer will incur an expense where:
• The taxpayer has a presently existing liability to pay a sum. This applies even if the amount of the liability cannot be precisely ascertained, provided it is capable of reasonable estimation.
• The taxpayer is completely subjected to the loss or outgoing.
The following are possible accrued expenses for SBE businesses:
• Interest – owing at 30th June.
• Telephone, legal, accounting, etc. – that have been invoiced but not paid at 30th June.
• Commissions – owing to sales-people, but not paid.
• Directors’ fees – if authorised by shareholder resolution prior to 30th June (See Tax Strategy 120).
• Staff bonuses – where the liability exists.
• Salary and wages – accrued up to 30th June but not paid until July.