Unless a business is using the cash basis (see ¶5505), taxable business income is calculated by deducting all allowable expenses incurred in the income year from the total assessable income earned during that year (see ¶5000).

Losses or outgoings of a capital nature, even though incurred in the course of producing assessable income, are not generally deductible. Expenses or losses of a private or domestic nature are not deductible at all.

As to the treatment of trading stock for tax accounting purposes, see ¶5700ff.