13. New sections 14ZK and 14ZL

Subject to this section, for the purpose of ascertaining the income of a person carrying on a trade or business during the basis period for the year of assessment 2027 or 2028, there is allowed in respect of all of the person’s trades and businesses, a deduction for qualifying AI expenditure incurred for the purposes of those trades and businesses computed in accordance with the formula A × B%, where —

A is the lower of the following:

the qualifying AI expenditure incurred during the basis period for that year of assessment;

$50,000; and

B is —

where such expenditure is allowable as a deduction under section 14 — 300%; or

where such expenditure is not allowable as a deduction under section 14 — 400%.

For the purposes of subsection (1), where an individual carrying on a trade or business through 2 or more firms (excluding partnerships) has, during the basis period for the year of assessment 2027 or 2028, incurred qualifying AI expenditure in respect of such firms for the purposes of the individual’s trade or business, the deduction that may be allowed to the individual for that expenditure in respect of all of the individual’s trades and businesses must not exceed the amount computed in accordance with subsection (1) for that year of assessment.

For the purposes of subsection (1), where a partnership carrying on a trade or business has, during the basis period for the year of assessment 2027 or 2028, incurred qualifying AI expenditure for the purposes of the partnership’s trade or business, the aggregate of the deductions that may be allowed to all the partners of the partnership for that expenditure in respect of all of the trades and businesses of the partnership must not exceed the amount computed in accordance with subsection (1) for that year of assessment.

Where a person —

incurs a single expenditure part of which is not qualifying AI expenditure (for instance, because the AI system for which the single expenditure is incurred includes both software and hardware); and

is unable, despite reasonable efforts, to obtain evidence as to which part of the expenditure is qualifying AI expenditure,then, for the purpose of claiming the deduction, the person must apportion the expenditure between expenditure that is qualifying AI expenditure and other expenditure in a manner that is reasonable in the circumstances.

If the Comptroller is not satisfied that an apportionment under subsection (5) is reasonable in the circumstances, the Comptroller may, according to his or her best judgment, apportion the expenditure in a manner that he or she considers to be reasonable in the circumstances. (7) No deduction is allowed to a person under this section in respect of —

any expenditure for which a deduction is given under section 14A, 14C, 14D, 14EA, 14EB, 14U or 14ZG;

any qualifying AI expenditure for an AI system incurred during the basis period for a year of assessment where —

the AI system is sub‑licensed to another person during that basis period; or

an allowance has been made in a previous year of assessment to that person under section 19 or 19A in respect of the same AI system; or

such expenditure as may be prescribed by rules made under section 7.

For the purposes of this section, any qualifying AI expenditure incurred by a person prior to the commencement of that person’s trade or business is treated as having been incurred by that person on the first day that the person carries on that trade or business, but a deduction for such expenditure is subject to section 14X.

A reference in this section to qualifying AI expenditure excludes any expenditure to the extent that it is or is to be subsidised by any grant or subsidy from the Government or a statutory board.”.

This section applies for the purpose of ascertaining, for the basis period for the year of assessment 2027 or a subsequent year of assessment, an individual’s income that is derived from one or more trades, businesses, professions or vocations that is chargeable to tax under section 10(1)(a) (called in this section specified income), and in respect of which there are outgoings or expenses that are deductible under this Part.

For the purposes of this section, “specified income” excludes any income derived by an individual from carrying on any trade, business, profession or vocation —

to which section 14ZA, 14ZB or 14ZH applies; or

as a partner in a partnership.

A is 20% or such other percentage as may be prescribed by rules made under section 7; and

B is the gross amount of the individual’s specified income derived in the basis period.

Subsection (3) does not apply to the individual’s specified income from any one trade, business, profession or vocation in that basis period if the gross amount of that specified income exceeds $50,000, or such other amount as may be prescribed by rules made under section 7.

Subsection (3) does not apply if the individual makes an election to the Comptroller, in such form and manner and within such time as the Comptroller may determine, to disapply that subsection —

if the individual derives specified income from only one trade, business, profession or vocation in that basis period — to all of his or her specified income that is derived in that basis period; or

if the individual derives specified income from more than one trade, business, profession or vocation in that basis period — to all of his or her specified income derived from one or more of those trades, businesses, professions or vocations as specified by him or her, that is derived in that basis period.”.