Agents include talent agents, employment agents, recruitment agents, modelling agents and booking agents.
You can't claim a deduction for the upfront costs of joining or using the services of an employment and recruitment agency or an agent to get work. This is because the expense is incurred before you start employment.
If your employment contract allows for renegotiation, review or extension of the contract, any costs of doing so will be an allowable deduction. These expenses are incurred in earning your employment income.
Example: agent fees
Zahra joins an acting agency to help further her career. She pays a setup fee as part of joining the agency. Zahra is offered a contract to be one of the leads in a TV series for one year, with a mutual option to extend the contract. The show turns out to be a success and her agency negotiates to extend the contract for another year.
Zahra can't claim a deduction for the cost of joining the agency as it enables her to get work. She can claim a deduction for the cost to renegotiate her contract as it is part of her employment activity.End of example
If you pay an agency a commission for work you've gained, you can claim a deduction for the commission you actually incur. To claim the deduction you must either pay the commission to the agency separately or the agency must deduct the commission from the fee you receive.
Example: agency commission
Geoff is an employee agency nurse. He works one night at a hospital and is paid $600. He pays a commission of $48 to the agency.
Geoff declares the $600 as income in his tax return and can claim a deduction for the $48 commission. He incurs the cost of the commission in the course of earning his wages as an agency nurse.End of example
If you're an employee earning commission-only income, you may be able to claim a deduction if you pay someone to provide services and assistance directly relating to your employment activities.
You need to show that:
- the arrangement is not a private arrangement
- hiring the person allows you to earn additional income from your employment activities.
Example: genuine support to earn additional income
Claire is employed as a regional wine sales executive and works on a commission-only basis. She hires Jake as an administration support person for 4 hours a day, 5 days a week.
Jake's duties are to:
- ensure Claire's sales orders are processed and sent to her customers
- book her appointments with clients
- undertake other administrative tasks.
Hiring Jake allows Claire to earn more income from selling wine, as she has more time to see potential customers and promote the product she is selling. Claire can claim a deduction for the cost of Jake's wages as there is a clear connection with her employment activity.End of example
Example: private arrangement
Pawel is an employee computer systems salesperson and works on a commission-only basis. He pays his son $100 a week to answer the home phone when he isn't around.
Pawel doesn't expect his son to be at home at certain times and if his son doesn't answer the phone, it will divert to Pawel's mobile. He rarely gives his home phone number out to clients.
Pawel can't claim a deduction for the expense of paying his son as there is no connection between the expense and his employment activities.End of example
If you are paying wages to a relative, the amount you can claim as a deduction is limited to what would be a reasonable payment for the service performed. A reasonable payment is the amount an employer would be expected to pay to an unrelated person who had similar skills and experience in the same role.
Verity is an employee real estate agent on a commission-only basis. She pays her son $50 an hour to deliver advertising leaflets in the region in which she operates. The market rate for such a service is $21 an hour.
Verity can only claim a deduction of $21 an hour for the wage expenses.End of example