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DB 42: Property misappropriated by employees or service providers
or “What happens when employees or contractors steal from your business”
You could also call this:

“Claiming tax deductions for losses caused by a partner's theft”

If you are in a business partnership and one of your partners takes property that doesn’t belong to them, you might have to pay to make up for what they took. This applies when the property belonged to someone who isn’t part of your partnership or married to a partner. The property must have been received by the partnership or its partners as part of the business.

If you are legally required to pay for what your partner took, you can deduct that amount from your taxes. You can only deduct this in the tax year when you actually pay the money.

This rule adds to the general permission for tax deductions and overrides the capital limitation. However, other general limitations on deductions still apply.

Remember, this rule doesn’t apply if you or your spouse, civil union partner, or de facto partner is the one who took the property. It’s only for when other partners in your business do this.

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Next up: DB 44: Restitution of stolen property

or “Tax deductions when returning stolen property you paid tax on”
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Part D Deductions
Specific rules for expenditure types

DB 43Making good loss from misappropriation by partners

  1. This section applies when a person carrying on a business in partnership pays an amount to make good a loss that arises from a partner, other than the person or the person’s spouse, civil union partner, or de facto partner, misappropriating property that—

  2. belongs to another person who is neither a partner in the partnership nor the spouse, civil union partner, or de facto partner of a partner; and
    1. is received in the course of the business either by the partnership or 1 or more of its partners.

      1. The person is allowed a deduction for the amount if the person is under a legal liability to make good the loss.

      2. The deduction is allocated to the income year in which the amount is paid.

      3. This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.

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