Since the Henderson Case it has been clear that there is only one appropriate way to return income for a year – either cash or accruals. TR 98/1 covers which one is correct for each year.
But what happens to your debtors when in year one you were correctly on cash and in year two you will correctly be on accruals? This is exactly what Henderson covered as it concluded the $170k of debtor just never got taxed. The court Correctly concluded there is nothing in the Tax Acts to pick this income up…
And this is obvious as when the old STS optional cash method was available there were specific rules to make sure debtors were picked up.
So as long as you are not forcing the change from cash to accruals to avoid tax (see Part IVA and Commercial Union) or looking to increase the debtors on 30 June to take a larger gain (Part IVA), it appear the debtors just never get taxed.
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