Taxation Ruling

TR 95/20

Income tax: employee performing artists - allowances, reimbursements and work-related expenses

  • Please note that the PDF version is the authorised version of this ruling.

FOI status:

may be releasedFOI number: I 1016381

contents para
What this Ruling is about
1
Class of person/arrangement
Date of effect
11
Previous Rulings
14
Ruling
15
Allowances
Reimbursements
Deductions
Explanations
26
Deductibility of work-related expenses
Common work-related expense claims
Alternative views
212
Index of explanations
216

Preamble

This Ruling, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953, is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Ruling is a public ruling and how it is binding on the Commissioner.

What this Ruling is about

Class of person/arrangement

1. This Ruling applies to employee performing artists. For the purposes of this Ruling a 'performing artist' is a person who is a musician, actor, variety artist, singer, dancer or circus performer.

2. Whether a performing artist is an employee in respect of a particular contract of employment depends on the facts of the case. It is expected that in most instances the contract of employment will result in the performing artist being an employee.

3. The Ruling does not cover the expenses of journalists, including radio and television presenters, radio and television journalists, nor the expenses of directors, producers, script writers, composers, choreographers and support personnel.

4. The Ruling deals with:

(a)
the assessability of allowances and reimbursements received by employee performing artists; and
(b)
deductions for work-related expenses generally claimed by employee performing artists.

5. The Ruling discusses the assessability of allowances and reimbursements received under section 25 and paragraphs 26(e) and 26(eaa) of the Income Tax Assessment Act 1936 (the Act).

6. The Ruling also discusses whether deductions are allowable or are specifically excluded (or limited) under subsections 51(1), 51(4) or 51(6), or sections 51AB, 51AE, 51AF, 51AG, 51AGA, 51AH, 51AL, 53, 54, 55, 57AF, 61 or 82A of the Act.

7. The tax treatment of allowances and reimbursements received is examined at paragraphs 15 to 22 in the Ruling section.

8. The common work-related expenses incurred by employee performing artists and the extent to which they are allowable deductions are discussed, in alphabetical order, at paragraph 25 in the Ruling section. The substantiation provisions are not discussed in depth in this Ruling.

9. Further explanation about specific deduction items in the Ruling section is contained in the Explanations section at the paragraph references indicated.

10. Each year the Australian Taxation Office (ATO) carries out audits of taxpayers' returns. This Ruling will be used by the ATO when it undertakes audits of the returns of employee performing artists. Where there is a tax shortfall, any penalties will be imposed in terms of Taxation Ruling TR 94/3 on the basis that the views of the ATO on the correct operation of the law have been expressed in a public ruling.

Date of effect

11. This Ruling applies to years commencing both before and after its date of issue. However, the Ruling does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Ruling (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

12. To the extent that a taxpayer relied on the principles expressed in Taxation Ruling IT 124, this Ruling will only apply to 1995-1996 and later income years. However, Taxation Ruling IT 124 was subject to the substantiation provisions of the Act which apply in relation to expenses incurred by a taxpayer during a year of income commencing on or after 1 July 1986.

13. If a taxpayer has a more favourable private ruling (whether legally or administratively binding), this Ruling applies to that taxpayer to the extent of the inconsistency only from and including the 1995-1996 year of income.

Previous Rulings

14. This Ruling withdraws Taxation Rulings IT 124, IT 181 and IT 187.

Ruling

Allowances

15. The receipt of an allowance does not automatically entitle an employee performing artist to a deduction. The term 'allowance' does not include a reimbursement (paragraphs 19 to 22).

16. If received, allowances fall into the following categories:

(a)
fully assessable to the employee with a possible deduction allowable, depending upon individual circumstances (not normally paid to employee performing artists);
(b)
fully assessable to the employee with no deduction allowable even though an allowance is received;
(c)
fully assessable to the employee with a deduction allowable for expenses incurred subject to special substantiation rules (paragraph 18);
(d)
not assessable to the employee because the employer may be required to pay Fringe Benefits Tax. A deduction is not allowable to the employee for expenses incurred against such an allowance (not normally paid to employee performing artists).

Allowances - possible deduction

17. Travel allowances received by performing artists are fully assessable and deductions may be allowable depending on individual circumstances (see Travel expenses , paragraphs 202 to 206).

Reasonable allowances

18. The Commissioner of Taxation publishes annually a Taxation Ruling that indicates amounts considered reasonable in relation to the following expenses:

(a)
overtime meal expenses;
(b)
domestic travel expenses; and
(c)
overseas travel expenses.

Allowances received in relation to these expenses are fully assessable. If an allowance is received and the amount of the claim for expenses incurred is no more than the reasonable amount, substantiation is not required. If the deduction claimed is more than the reasonable amount, the whole claim must be substantiated, not just the excess over the reasonable amount.

Reimbursements

19. If an employee performing artist receives a payment from his or her employer for actual expenses incurred, the payment is a reimbursement and the employer may be subject to Fringe Benefits Tax. Generally, if an employee performing artist receives a reimbursement, the amount is not required to be included in his or her assessable income and a deduction is not allowable (see Taxation Ruling TR 92/15).

20. However, if motor vehicle expenses are reimbursed by an employer on a cents per kilometre basis, the amount is included as assessable income of the employee performing artist under paragraph 26(eaa) of the Act. A deduction may be allowable in relation to motor vehicle expenses incurred (see Transport expenses , paragraphs 176 to 201).

21. If the reimbursement by an employer is for the cost of a depreciable item (e.g., tools and equipment), a deduction is allowable to the employee performing artist for depreciation (Taxation Determination TD 93/145 and Depreciation of equipment , paragraphs 92 to 99).

22. If a payment is received from an employer for an estimated expense, the amount received by the employee performing artist from an employer is considered to be an allowance (not a reimbursement) and is fully assessable to the employee performing artist ( Allowances , paragraphs 15 to 18).

Deductions

23. A deduction is only allowable if an expense:

(a)
is actually incurred (paragraph 27);
(b)
meets the deductibility tests (paragraphs 28 to 35); and
(c)
satisfies the substantiation rules (paragraphs 36 to 37).

24. If an expense is incurred partly for work purposes and partly for private purposes, only the work-related portion is an allowable deduction.

25. The common work-related expenses incurred by employee performing artists and the extent to which they are allowable deductions are discussed below, in alphabetical order.

Agent's fees: A deduction is allowable for commissions paid to theatrical agents. A deduction is not allowable for up-front fees or joining fees paid to an agent (paragraphs 38 to 42).

Audition expenses: A deduction is not allowable for the costs of preparing for and attending auditions (paragraph 43).

Bank fees: A deduction is allowable as a work-related expense, for Financial Institutions Duty that relates to the direct depositing of salary and wages into a performing artist's bank account. A deduction is not allowable for any other bank fees as a work-related expense (see Taxation Ruling IT 2084).

Child care: A deduction is not allowable for child care expenses (paragraphs 44 to 46).

Clothing, uniforms and footwear: A deduction is allowable for the cost of buying, hiring or replacing clothing, uniforms or footwear (clothing) if these items are:

(a)
protective;
(b)
occupation specific;
(c)
compulsory and meet the requirements of Taxation Ruling IT 2641;
(d)
non-compulsory and entered on the Register of Approved Occupational Clothing or approved in writing by the ATO before 1 July 1995. These transitional arrangements cease to have effect from 1 July 1995. A deduction will not be allowable for expenditure incurred after 30 June 1995 in relation to clothing approved under the transitional arrangements; or
(e)
conventional, but satisfy the deductibility tests as explained in Taxation Ruling TR 94/22;

Expenditure on clothing, uniforms and footwear must satisfy the deductibility tests in subsection 51(1) of the Act and must not be private or domestic in nature (paragraph 47).

A deduction is not allowable for the cost of evening wear for orchestra members (see Taxation Determination TD 93/111 and paragraph 57).

A deduction is allowable for the cost of buying or hiring costumes, e.g., a clown costume.

A deduction is allowable for the cost of conventional clothing bought or hired as a costume for a role (see TR 94/22). Whether apportionment is necessary depends on the particular facts of the case (paragraph 24).

A deduction is not allowable for the cost of an employee performing artist's conventional street wear worn at work (paragraphs 70 to 75).

A deduction is allowable for the cost of a dancer's special tights and dancing pumps.

Coaching classes: acting, singing, dancing, etc.: A deduction is allowable for the cost of classes taken to maintain existing skills or obtain related skills. A deduction is allowable for the cost of lessons to acquire skills for use in a particular role or performance (paragraphs 77 to 81).

Computers and software: A deduction is allowable for depreciation on the cost of computers and related software, if purchased together, which are used for income-producing purposes. If the software is bought separately from the computer a deduction is allowable in full in the year of purchase. The deduction must be apportioned between work-related and private use (paragraphs 82 to 85).

Conferences seminars and training courses: A deduction is allowable for the costs of attending conferences, seminars and training courses to maintain or increase an employee performing artist's knowledge, ability or skills in the profession. There must be a relevant connection between the conference etc. and the current income-producing activities of the employee performing artist (paragraphs 86 to 91).

Depreciation of equipment: A deduction is allowable for depreciation only to the extent of the work-related use of the equipment. An item of equipment bought on or after 1 July 1991 can be depreciated at a rate of 100% if its cost is not more than $300, or if its effective life is less than three years (section 55 of the Act)(paragraphs 92 to 99).

Driver's licence: A deduction is not allowable for the cost of acquiring or renewing a driver's licence (paragraphs 100 to 102).

Fares: A deduction is allowable for the cost of using public transport for work-related travel (paragraph 103) (see also Transport expenses paragraphs 176 to 201).

Fines: A deduction is not allowable for fines imposed under a law of the Commonwealth, a State, a Territory or a foreign country, or by a court (paragraph 104).

Fitness expenses, including chiropractic/massage/physiotherapy: A deduction is allowable for fitness expenses only if it can be shown that the employee performing artist is required to undertake physical fitness and physical activity as an essential element of the income-producing activities and are the means by which the employee performing artist derives his or her income (paragraphs 105 to 106).

Gifts: A deduction is not allowable for the cost of gifts such as flowers or alcohol for fellow performers, producers or directors (paragraph 107).

Glasses and contact lenses: A deduction is not allowable for the cost of buying prescription glasses or contact lenses. A deduction is allowable for the cost of tinted contact lenses to alter eye colour, or special spectacle frames required for a role. Whether apportionment is necessary depends on the particular facts (paragraph 108).

Grooming: A deduction is generally not allowable for grooming expenses such as hairdressing, make-up and facials. A deduction is allowable for the cost of a particular hairstyle if an employee performing artist is required to have a particular hairstyle for a role. The cost of hairdressing incurred specifically to maintain a required hair length as part of a costume, e.g., for continuity purposes, is an allowable deduction. Similarly, a deduction is allowable for the cost of make-up bought by an employee performing artist for stage, film or television performances (paragraphs 109 to 111).

Hairdressing: See Grooming .

Home office/home studio expenses: See paragraphs 112 to 118.

Place of business: A deduction is allowable for a proportion of running and occupancy expenses if an area of the home has the character of a place of business (paragraphs 113 to 115).

Private study/studio: A deduction is allowable for the running expenses of a private study or studio to the extent that it is used for work performed at home (paragraphs 116 to 118).

Insurance of equipment: A deduction is allowable for the cost of insurance of equipment to the extent of its work-related use.

Laundry and maintenance of clothing, uniforms and footwear: A deduction is allowable for the cost of laundry and maintenance of supplied or purchased clothing, uniforms or footwear if these items are of a kind described under Clothing, uniforms and footwear (paragraphs 119 and 120).

Make-up: See Grooming .

Meals: A deduction is not allowable for the cost of meals eaten during a normal working day (paragraphs 121 to 126). A deduction may be allowable if an award overtime meal allowance has been paid (paragraph 126). A deduction may be allowable for the cost of meals incurred by an employee performing artist who travels for income-producing purposes ( Travel expenses , paragraphs 202 to 207).

Motor vehicle expenses: A deduction is allowable for costs associated with using a motor vehicle for work-related travel (paragraph 127). See also Transport expenses (paragraphs 176 to 201).

Newspapers: A deduction is not allowable for the cost of newspapers (paragraph 128).

Overtime meal expenses: A deduction is allowable for the cost of meals bought while working overtime if an award overtime meal allowance is received. Special substantiation rules apply (paragraphs 129 to 132).

Parking fees: A deduction is allowable for parking fees (but not fines), paid by an employee performing artist while travelling in the course of employment, e.g., between work venues (paragraphs 133 and 134).

Photographs: A deduction is allowable for the cost of maintaining a photographic portfolio for publicity purposes. A deduction is not allowable for the initial cost of preparing the portfolio (paragraph 135).

Professional library: A deduction is allowable for depreciation of a professional library that includes books, tapes, compact discs, records and videos, to the extent of its work-related use. The content of the reference material must be directly relevant to the income-earning activities of the performing artist (paragraphs 136 to 141).

Removal and relocation expenses: A deduction is not allowable for the cost of taking up a transfer in existing employment or an appointment with a new employer (paragraphs 142 to 147).

Research expenses: A deduction is allowable for costs incurred in researching a role or character that a performing artist is employed to play (paragraphs 148 and 149).

Self education expenses: A deduction is allowable for the cost of self education if there is a direct connection between the self education and the current income-earning activities. Self education costs include fees, travel, books and equipment (paragraphs 150 to 154).

If self education expenses are allowable but also fall within the definition of 'expenses of self-education' in section 82A of the Act, the first $250 is not an allowable deduction (paragraphs 155 and 156).

Social functions: A deduction is not allowable for the cost of attending award nights or other social events, whether there is an entertainment industry connection or not (paragraphs 157 to 159).

Tapes/compact discs/cassettes: A deduction is allowable for the work-related portion of the cost of audio and video tapes and compact discs (see also comments under Professional library , paragraphs 136 to 141 ) . A deduction is allowable for the cost of tapes and cassettes used for a rehearsal or for maintaining a portfolio (paragraph 160).

Technical or professional publications: A deduction is allowable for the cost of buying or subscribing to journals, periodicals and magazines that have a content specifically related to an employee performing artist and are not general in nature (paragraphs 161 to 163).

Telephone, mobile phone, pager, beeper and other telecommunications equipment expenses: A deduction is not allowable where these items are supplied by the employer. If they are not supplied, a deduction is allowable for the rental cost or for depreciation on the purchase price to the extent of the work-related use of the item.

Cost of calls: A deduction is allowable for the cost of work-related calls (paragraphs 164 and 165).

Installation or connection costs: A deduction is not allowable for the cost of installing or connecting a telephone, etc., (paragraphs 166 and 167).

Rental costs: A deduction is allowable for a proportion of telephone/equipment rental costs if the employee performing artist can demonstrate that he or she is 'on call', or required to telephone their employer on a regular basis (paragraphs 168 and 169).

Silent telephone number: A deduction is not allowable for the cost of obtaining a silent telephone number (paragraph 170).

Television receivers, video recorders and compact disc players: A deduction is allowable for depreciation of these items to the extent of their use for income-producing purposes (paragraph 171). See also Tapes/compact discs/cassettes (paragraph 160) and Depreciation of equipment (paragraphs 92 to 99).

Theatre/film tickets: A deduction is allowable for the cost of theatre and film tickets if the show is directly relevant to the income-earning activities of the performing artist (paragraphs 172 to 174). See also Research expenses (paragraphs 148 and 149) and Self education expenses (paragraphs 150 to 156).

Tolls: A deduction is allowable for bridge and road tolls paid by an employee performing artist when travelling in the course of employment, e.g., between work venues (paragraph 175).

Transport expenses: Transport expenses include public transport fares, and the running costs associated with using motor vehicles, motor cycles, bicycles, etc. They do not include accommodation, meals and incidental expenses (see Travel expenses , paragraphs 202 to 207). The treatment of transport expenses incurred by an employee performing artist when travelling is considered below.

Travel between home and work: A deduction is not allowable for the cost of travel between home and the normal work place as it is generally considered to be a private expense. This principle is not altered by the performance of incidental tasks en route and the principle is not changed if the travel is outside normal working hours or includes a second or subsequent trip (paragraphs 178 to 180).

Travel between home and the normal work place transporting bulky equipment: A deduction is allowable if the transport expenses can be attributed to the necessary transportation of bulky equipment rather than to private travel between home and work. A deduction is not allowable if the equipment is transported to and from work by the performing artist as a matter of convenience (paragraphs 181 to 183).

Travel between two separate work places if there are two separate employers involved: A deduction is allowable for the cost of travelling directly between two places of employment (paragraphs 184 and 185).

Travel from the normal work place to an alternative work place while still on duty and back to the normal work place or directly home: A deduction is allowable for the cost of travel from the normal work place to other work places. A deduction is also allowable for the cost of travel from the alternative work place back to the normal work place or directly home. This travel is undertaken in the course of gaining assessable income and is an allowable deduction (paragraphs 186 to 188).

Travel from home to an alternative work place for work-related purposes and then to the normal work place or directly home: A deduction is allowable for the cost of travel from home to an alternative work place and then on to the normal work place or directly home (paragraphs 189 and 190).

Travel between two places of employment or between a place of employment and a place of business: A deduction is allowable for the cost of travelling directly between two places of employment or a place of employment and a place of business, provided that the travel is undertaken for the purpose of carrying out income-earning activities (paragraphs 191 to 196).

Travel in connection with self-education: See Self education expenses (paragraphs 152 to 156).

Depreciation cost limit for motor vehicles: Section 57AF of the Act imposes a limit on the depreciable cost base of a motor vehicle (paragraph 198).

Calculation of motor vehicle balancing adjustment: A depreciation balancing adjustment may be necessary on the disposal of a motor vehicle that has been used for work-related activities (see Taxation Ruling IT 2493 and paragraph 199).

Motor vehicle provided by employer: A deduction is not allowable for car expenses incurred by an employee performing artist in certain circumstances where a motor vehicle is provided by an employer (paragraphs 200 to 201).

Travel expenses: A deduction is allowable for the cost of travel expenses (fares, accommodation, meals and incidentals) incurred by an employee performing artist when travelling in the course of employment (paragraphs 202 to 207). Special substantiation rules apply (paragraphs 204 to 206).

Travel accompanied by a relative: Section 51AG of the Act may affect the deduction that may be claimed for relatives if work-related travel is undertaken (paragraph 207).

Union fees and professional association fees: A deduction is allowable for annual fees paid to unions and professional associations, although a deduction is not allowable for joining fees. A deduction is not allowable for contributions to staff social clubs or associations (paragraph 208 to 211).

Explanations

Deductibility of work-related expenses

26. In short, a deduction is allowable if an expense:

(a)
is actually incurred;
(b)
meets the deductibility tests; and
(c)
satisfies the substantiation rules.

Expense actually incurred

27. The expense must actually be incurred by the employee performing artist to be considered for deductibility. A deduction is not allowable for expenses not incurred by an employee performing artist, e.g., if items are provided free of charge. Under section 51AH of the Act, a deduction is not generally allowable if expenses are reimbursed see paragraphs 19 to 22 for exceptions to this rule).

Expense meets deductibility tests

28. The basic tests for deductibility of work-related expenses are in subsection 51(1) of the Act. It says:


'All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature, or are incurred in relation to the gaining or production of exempt income.'

29. A number of significant court decisions have determined that, for an expense to satisfy the tests in subsection 51(1) of the Act:

(a)
it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T ; Hayley v. FC of T (1958) 100 CLR 478; [1958] ALR 225; 11 ATD 404 (Lunney's case)).
(b)
there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v. FC of T (1949) 78 CLR 47; 8 ATD 431);
(c)
it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore & Co (WA) Pty Ltd v. FC of T (1956) 95 CLR 344; 11 ATD 147; 6 AITR 379; FC of T v. Cooper (1991) 29 FCR 177; 91 ATC 4396; (1991) 21 ATR 1616 (Cooper's case); Roads and Traffic Authority of NSW v. FC of T (1993) 43 FCR 273; (1971) 125 FCR 494; 93 ATC 4508; (1993) 26 ATR 76; FC of T v. Hatchett (1971) 125 CLR 494; 71 ATC 4184; 2 ATR 557 (Hatchett's case)).

30. A deduction will be denied under the exception provisions of subsection 51(1) of the Act if the expense is incurred for an item that is either:

(a)
private or domestic in nature (e.g., sunscreen or driver's licence);
(b)
capital, or capital in nature (e.g., purchase of a computer); or
(c)
incurred in earning tax exempt income (e.g., expenses related to membership of the Army Reserve).

31. Private or domestic expenditure is considered to include costs of living such as food, drink, shelter and clothing. In Case T47 18 TBRD (NS) 242; 14 CTBR (NS) Case 56 , J F McCaffrey (Member) stated (TBRD at 243; CTBR at 307):


'In order to live normally in our society, it is requisite that individual members thereof be clothed, whether or not they go out to work. In general, expenditure thereon is properly characterised as a personal or living expense...'

32. The fact that an expense is voluntarily incurred by a performing artist does not preclude it from being an allowable deduction (Taxation Ruling IT 2198).

33. Example: Andre, a dancer, is supplied with dancing tights by his employer and also voluntarily buys another pair. The cost of the tights and the laundry costs of both pairs are allowable deductions.

34. The fact that an expense is incurred by an employee performing artist at the direction of his or her employer does not mean that a deduction is automatically allowable.

35. In Cooper's case a professional footballer was denied the cost of purchasing food and drink. His coach had instructed him to consume additional food, so he would not lose weight during the football season. The character of the expense was private.

Hill J said (FCR at 200; ATC at 4414; ATR at 1636):


'...the fact that the employee is required, as a term of his employment, to incur a particular expenditure does not convert expenditure that is not incurred in the course of the income producing operations into a deductible outgoing.'

Expense satisfies the substantiation rules

36. The income tax law requires substantiation of certain work-related expenses. If the total of these expenses is $300 or less, the performing artist can deduct the amount without getting written evidence (except for certain car, travel allowance and meal allowance expenses), although a record must be kept of how the claim was calculated.

37. A deduction is not allowable if the substantiation requirements are not met.

Common work-related expense claims

Agent's fees

38. A deduction is allowable for commissions actually paid to theatrical agents.

39. Example: Kate, a singer, obtains a one week gig at a nightclub and the total remuneration is $1,000. Kate must pay 10% commission to her agent, which is $100. Her assessable income will include the $1,000 and the $100 commission is an allowable deduction.

40. Example: With the same facts as paragraph 39, however, the nightclub pays Kate $1,000 and then pays the agent his commission of $100. In this situation a deduction is not allowable to Kate for the $100 as the expense has been incurred by the nightclub and not Kate.

41. A deduction is not allowable for an up-front joining or search fee paid to an agent. It is incurred too soon to be regarded as incurred in producing assessable income. It is a cost of obtaining employment rather than a cost incurred in the course of employment. This will be so, regardless of how any such fee is described. In FC of T v. Maddalena 71 ATC 4161; 2 ATR 541 (Maddalena's case), Barwick CJ stated (ATC at 4162; ATR at 548):


'The costs to an employee of obtaining his employment does not form an outgoing in the course of earning the wages payable in the employment.'

42. The cost of engaging an agent to negotiate the terms and conditions of a contract is also a capital expense and not an allowable deduction (see Taxation Determination TD 93/162).

Audition expenses

43. A deduction is not allowable for the costs of preparing for and attending auditions. These costs are incurred too soon to be incurred in producing assessable income. The expenses are incurred in getting work rather than doing work (see Maddalena's case and paragraph 41 above). If an employee performing artist receives an amount for attending an audition it is considered not to be assessable income but rather it is a reimbursement.

Child care

44. A deduction is not allowable for child care expenses, even if it is a prerequisite for an employee performing artist to obtain and pay for child care so that he or she can go to work and earn income. These expenses are also not allowable if incurred by an employee performing artist to undertake studies relevant to his or her employment.

45. The High Court held in Lodge v. FC of T (1972) 128 CLR 171; 72 ATC 4174; 3 ATR 254 that child care expenditure was neither relevant nor incidental to gaining or producing assessable income and was therefore not an allowable deduction. The expenditure was also of a private or domestic nature (see also Jayatilake v. FC of T 101 ALR 11; 91 ATC 4516; (1991) 22 ATR 125).

46. Taxation Determination TD 92/154 provides further information about these expenses.

Clothing, uniforms and footwear

47. A deduction is allowable for the cost of buying, hiring or replacing clothing, uniforms and footwear ('clothing') if:

(a)
the clothing is protective in nature;
(b)
the clothing is occupation specific and not conventional in nature;
(c)
the clothing is a compulsory uniform and satisfies the requirements of Taxation Ruling IT 2641;
(d)
the clothing is a non-compulsory uniform or wardrobe that has been either:
(i)
entered on the Register of Approved Occupational Clothing; or
(ii)
approved in writing by the ATO under the transitional arrangements contained in Taxation Laws Amendment Act No 82 of 1994 . These transitional arrangements cease to have effect from 1 July 1995. A deduction will not be allowable for expenditure incurred after 30 June 1995 in relation to clothing approved under the transitional arrangements; or
(e)
the clothing is conventional and the taxpayer is able to show that:
(i)
the expenditure on the clothing has the essential character of an outgoing incurred in gaining or producing assessable income;
(ii)
there is a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income; and
(iii)
the expenditure is not of a private nature

(see Taxation Ruling TR 94/22 covering the decision in FC of T v. Edwards (1994) 49 FCR 318; 94 ATC 4255; (1994) 28 ATR 87 (Edwards case)).

48. Expenditure on clothing, uniforms and footwear must satisfy the deductibility tests in subsection 51(1) of the Act and must not be private, capital, or domestic in nature.

Protective clothing

49. A deduction is not allowable for the cost of items that provide protection from the natural environment (e.g., sunglasses, sunhats, sunscreen, wet weather gear and thermal underwear). The cost of these items is considered to be a private expense. This view is supported in Case Q11 83 ATC 41; 26 CTBR (NS) Case 75 and in Case N84 81 ATC 451; 25 CTBR (NS) Case 43 . See also Taxation Ruling IT 2477 and Taxation Determination TD 93/244.

50. In Case Q11 the taxpayer was a self-employed lawn mowing contractor. Amongst other things, he claimed the cost of transistor batteries and sun screen lotions. Dr G W Beck (Member) said (ATC at 43; CTBR at 525):


'...a man catering for his desire to listen to music and protecting himself from skin damage is acting in a private capacity and the expenditure is thus of a private nature and excluded by sec. 51...'

Although this taxpayer was self-employed, the same deductibility tests as set out in paragraphs 28 to 35 applied.

Occupation specific clothing

51. Occupation specific clothing is defined in subsection 51AL(26) of the Act. It distinctly identifies the employee as belonging to a particular profession, trade, vocation, occupation or calling. It is not clothing that can be described as ordinary clothing of a type usually worn by men and women regardless of their occupation. Examples of clothing that are considered to be occupation specific are female nurses' traditional uniforms, chefs' checked pants and religious clerics' ceremonial robes.

52. It is not considered that employee performing artists would wear clothing that is occupation specific clothing.

Compulsory uniform or wardrobe

53. A 'corporate' uniform or wardrobe (as detailed in Taxation Ruling IT 2641) is a collection of inter-related items of clothing and accessories that are unique and distinctive to a particular organisation. Paragraph 10 of IT 2641 lists the factors that should be considered in determining whether clothing constitutes a corporate wardrobe or uniform.

54. In Case R55 84 ATC 411; 27 CTBR (NS) Case 109 , K P Brady (Chairman), J E Stewart and D J Trowse in a joint statement of reasons came to the following conclusions (ATC at 416; CTBR at 874):


'...conventional clothing of a particular colour or style does not necessarily, because of those factors alone, assume the character of a uniform. Likewise, ordinary clothing is not converted into a uniform by the simple process of asserting that it fills that role or by the wearing of a name plate, etc. attached to clothing.'

55. In Case U95 87 ATC 575, a shop assistant employed by a retail merchant was to dress according to the standard detailed in the staff handbook. The prescribed dress standards were as follows (ATC at 577):


'Selling Staff: Female Staff - To wear a plain black tailored dress, suit or skirt, plain black or white blouse, either long or short sleeved. No cap sleeved, or sleeveless dresses or blouses to be worn.'

56. The deduction for clothing was denied, because there was (ATC at 580):


'...nothing distinctive or unique about the combination of clothing that would identify the wearer' as [name of employer] shop assistant or even a shop assistant from another department store. The colour combination of the clothing would be included in the range of acceptable street dress unassociated with business or employment, as well as a combination of colours sometimes worn by female or food waiting staff.'

57. A deduction is not allowable to orchestra members for the cost of buying or hiring dinner suits (including tails), evening gowns, shirts and blouses, black trousers, shoes and bow ties. Taxation Determination TD 93/111 provides further information.

Non-compulsory uniform or wardrobe

58. A deduction is not allowable for the purchase and maintenance costs of a non-compulsory uniform or wardrobe unless the conditions outlined in section 51AL of the Act are met. Section 51AL provides that expenditure on a non-compulsory uniform or wardrobe will be allowable under subsection 51(1) of the Act, only if the design of the clothing has been entered on the Register of Approved Occupational Clothing, or if the design of the clothing is approved in writing by the ATO under the transitional arrangements. These transitional arrangements cease to have effect from 1 July 1995. A deduction will not be allowable for expenditure incurred after 30 June 1995 in relation to clothing approved under the transitional arrangements.

59. If performing artists are provided with uniforms by their employers, that bear the employer's logo, and it is not compulsory to wear the uniform, no deduction is allowable for maintenance costs unless the uniform satisfies the requirements of section 51AL of the Act.

Conventional clothing

60. The views of the ATO on the treatment of costs of buying and maintaining conventional clothing are set out in Taxation Ruling TR 94/22. That Ruling sets out our views on the implications of the decision of the Full Federal Court of Australia in Edwards case. Ms Edwards was the personal secretary to the wife of a former Queensland Governor. She was able to establish that her additional clothing expenses were allowable in her particular circumstances. In most cases, expenses for conventional clothing will not meet the deductibility tests of subsection 51(1) of the Act as they are of a private nature (see also paragraph 31).

61. There are a number of cases that support the general principle that the costs of conventional clothing do not meet the deductibility tests of subsection 51(1) of the Act.

62. In Case 48/94 94 ATC 422; AAT Case 9679 (1994) 29 ATR 1077, a self-employed professional presenter and speaker was denied a deduction for the cost of conventional clothing. The taxpayer gave evidence that she maintained a separate wardrobe to meet her work requirements, and that she used this wardrobe exclusively in relation to her work. Sometimes, a client would request that she dress in a specific manner when performing a presentation. Her image was of vital importance in both securing and performing her duties, and her clothes were an aspect of her image. The taxpayer submitted to the tribunal that her matter could be paralleled to the facts in the Edwards case.

63. Senior Member Barbour distinguished this case from Edwards case on the basis of the emphasis placed by the Tribunal and Court on Mrs Edwards' additional changes of clothes throughout a work day - a fact not present in this one - and found the essential character of the expense to be private, saying (ATC at 427; ATR at 1083):


'While the A list clothes [those used exclusively for work] assisted in creating an image compatible with the applicant's perceptions of her clients' and audiences' expectations, her activities productive of income did not turn upon her wearing A list clothes, however important the applicant may have perceived these clothes to be in her presentation activities. There is not the requisite nexus between her income-earning activities and the A list clothing expenses.'

Senior Member Barbour went on to say (ATC at 428; ATR at 1084):


'For it was essential that the applicant wear something to her income producing activities...the applicant's clothing needed to be suitable for the purpose of wearing to that presentation, but this does not change its character to a business expense, and I find the nature of the expense is essentially private.'

64. In Case U80 87 ATC 470 a shop assistant was denied a deduction for the cost of black clothes. Senior member McMahon stated (ATC at 472):


'The fact that the employer requires garments of a particular colour to be worn and would even terminate the employment if another colour was substituted, does not in any way detract from the character of the garments as conventional attire, the cost of which must be regarded as a private expense.'

65. In Case K2 78 ATC 13; 22 CTBR (NS) 178 Case 21 , an employee solicitor was required as part of his duties to appear in various courts. It was not his practice to wear a suit. On one occasion a barrister called him as a witness and, although he was neatly dressed, the judge admonished him for not wearing a suit. From that date he wore a suit when involved in litigation work. On the days that he wore a suit, he wore it to and from the office and while at the office. It was held that the expenditure in respect of the suit was not incurred in gaining or producing assessable income and that it was of a private nature.

66. Nevertheless, if a direct connection exists between the expenditure on conventional clothing and the employee performing artist's income-earning activities the expenditure may be an allowable deduction. Taxation Ruling TR 94/22 gives the following two illustrations of instances where this nexus exists.

67. Example: Cameron is a professional actor who buys clothing to wear on stage as a costume in a particular production. A direct nexus exists between Cameron's expenditure on clothing and his income-producing activities as an actor, even though the clothing purchased to play a part may be conventional in nature. Cameron's clothing expenditure is directly related to his performing his employment activities in the clothing to earn his income, and is an allowable deduction. Whether apportionment is necessary depends upon the particular facts.

68. Example: Lauren is a television game show hostess who attends a studio every Tuesday to tape multiple episodes of the show for the week. Her employer does not provide her with clothing to wear on the show. She buys evening wear and formal wear to complement the sets and prize showcases.

69. Lauren's expenditure on clothing worn in these activities, even though it may be conventional clothing, has a direct nexus with her work-related activities as spokesmodel on the game show. Lauren's clothing expenditure is an allowable deduction as it is directly related to, and contributes to, the performance of her employment activities in the clothing. Whether apportionment is necessary depends on the particular facts. Claims by other models, whether appearing on television or not, would need to be determined on their own facts.

70. A deduction is not allowable for the cost of purchasing a range of conventional clothing which might be used for stage or film work. As there is no connection with income-earning activities when the clothing is purchased it is a private expense.

71. If equipment is used partly for income-producing purposes and partly for private purposes then depreciation should be apportioned between the two purposes (section 61 of the Act). Depreciation may be claimed on an item of clothing from a performing artist's private wardrobe used as a costume, for the period that it is used for income-producing purposes. Depreciation in these circumstances is based on the notional depreciated value of the item at the time it was first used for work-related purposes. The notional depreciated value is the original cost of the item, less depreciation which would have been allowed if it had been used for income-producing purposes (see FC of T v. Anderson (1956) 11 ATD 115).

72. Example: Rocco has a part in a weekly television drama. He has a dark suit in his wardrobe which he wears on camera as required. Rocco may claim depreciation on his suit for the period of time it is used in the drama. If the suit cost $600 one year ago and has an assumed depreciation rate of 10%, the notional depreciated value is $540, i.e., $600 less $600 multiplied by 10%. If Rocco uses the suit in the drama for 6 months then his depreciation claim is $27, i.e., $540 multiplied by 10% multiplied by 6/12.

73. In Case U80 87 ATC 470, a shop assistant was denied a deduction for the cost of black clothes. Senior Member McMahon stated (ATC at 472):


'The fact that the employer requires garments of a particular colour to be worn and would even terminate the employment if another colour was substituted, does not in any way detract from the character of the garments as conventional attire, the cost of which must be regarded as a private expense'.

74. In Cooper's case, Hill J said (ATC at 4414; ATR at 1636):


'...the fact that the employee is required, as a term of his employment, to incur particular expenditure does not convert expenditure that is not incurred in the course of the income producing operations into a deductible outgoing'.

75. Example: Sandra is a violinist with a State symphony orchestra and is required to wear a black evening gown for performances. A deduction is not allowable for the cost of buying, cleaning, repairing or replacing the dress.

Laundry and maintenance

76. See Laundry and maintenance (paragraphs 119 and 120).

Coaching classes: singing, acting, dancing, etc.

77. A deduction is allowable for the cost of training to maintain existing skills or to acquire or improve related skills. This is so even if the training is undertaken between engagements.

78. The nature of the entertainment industry is such that an employee performing artist may have a number of employers during a year and there may be regular periods between engagements where no income is earned. As Senior Member Roach observed in Case W39 89 ATC 395; AAT Case 5073 (1989) 20 ATR 3523 (ATC at 397; ATR at 3526):


'...it is not essential for treatment that, when expense is incurred by a person as an employee rather than as a self employed person, the person be concurrently employed.'

79. Employee performing artists need a range of related skills. An employee performing artist may also have to acquire a specific skill for a particular role. A deduction is allowable for the cost of acquiring specific skills.

80. Example: Emily, an actress, decides to undertake singing and dancing lessons. These skills merely complement her acting ability and do not open up a new field of employment. A deduction is allowable for the cost of the singing and dancing lessons.

81. Example: Geoff, an actor, obtains a part that requires him to play a professional tennis player. He takes tennis lessons from a professional tennis coach in order to look proficient when playing the scenes. A deduction is allowable for the cost of the tennis lessons.

Computers and software

82. A deduction is allowable under subsection 54(1) of the Act for depreciation of computers and related software owned and used by performing artists for income-producing purposes (see Taxation Ruling IT 26). If the related software is bought separately from the computer, a deduction is allowable in full for its cost under subsection 51(1) of the Act to the extent that it is used for income-producing purposes. Paragraphs 92 to 99 of this Ruling provide further information on the treatment of Depreciation of equipment .

83. A deduction is allowable under section 53 of the Act for the cost of repairs to the extent that the equipment is used for income-producing purposes.

84. A deduction is allowable for interest on money borrowed to finance the cost of a computer to the extent that the computer is used for income-producing purposes.

85. For example, employee performing artists may use computers to study scripts or arrange musical scores. A computer may also be used for self-education purposes (paragraphs 150 to 156 of this Ruling provide further information on the treatment of Self education expenses ).

Conferences, seminars and training courses

86. A deduction is allowable for the costs of attending conferences, seminars and training courses designed to maintain or increase knowledge, ability or skills in the performing artist's profession. There must be a relevant connection between the conference etc., and the income-earning activities of the employee. The conferences, courses or seminars may be held in Australia or overseas.

87. In FC of T v. Finn (1961) 106 CLR 60; 12 ATD 348, an architect voluntarily studied architectural development overseas. The High Court held that (CLR at 70; ATD at 352):


'...a taxpayer who gains income by the exercise of his skill in some profession or calling and who incurs expenses in maintaining or increasing his learning, knowledge, experience and ability in that profession or calling necessarily incurs those expenses in carrying on his profession or calling...'

88. A deduction is allowable for travel expenses (fares, accommodation and meal expenses), registration and conference materials costs incurred in attending work-related conferences and seminars (paragraphs 202 to 207).

89. If part of the cost of a conference, seminar or training course represents the cost of food and drink that is provided, the cost is an allowable deduction according to the terms of section 51AE of the Act. Taxation Determination TD 93/195 explains the extent to which a seminar registration fee is an allowable deduction according to section 51AE of the Act, in circumstances where part of the fee represents the cost of food and drink provided at the seminar.

90. If the dominant purpose in incurring the cost is the attendance at the conference, seminar or training course then the existence of any private activity would be merely incidental and the cost would be fully deductible. If the attendance at the conference, seminar or training course is only incidental to a private activity (e.g., a holiday) then only the costs directly attributable to the conference, seminar or training course are an allowable deduction. The cost of accommodation, meals and travel directly relating to the private activity is not an allowable deduction under subsection 51(1) of the Act.

91. Information on Self-education expenses can be found in Taxation Ruling TR 92/8 and at paragraphs 150 to 156 of this Ruling.

Depreciation of equipment

92. A deduction is not allowable under subsection 51(1) of the Act for the cost of equipment as it is considered to be a capital expense.

93. A deduction is allowable under subsection 54(1) of the Act for depreciation on equipment owned and used by an employee performing artist during the year for income-producing purposes. In addition, a deduction for depreciation is also allowable on items of equipment that are not actually used during the year for income producing purposes, but are installed ready for use for that purpose and held in reserve.

94. There are two methods to calculate depreciation. These are the prime cost method and the diminishing value method. Depreciation using the prime cost method is calculated as a percentage of the cost of the equipment. Depreciation using the diminishing value method is calculated initially as a percentage of the equipment's cost and thereafter as a percentage of the written down value.

95. Any item of equipment bought on or after 1 July 1991 can be depreciated at a rate of 100% if its cost is $300 or less, or if its effective life is less than three years (section 55 of the Act). This means an immediate deduction is available for the cost of each item of equipment in the year in which it is purchased. However, the item may be depreciated at a rate less than 100% if the taxpayer so elects (subsection 55(8) of the Act). The current depreciation rates are set out in Taxation Ruling IT 2685.

96. Example: Scott, a pop musician, purchases a guitar case that is used only for work, for $290. The amount of $290 is an allowable deduction in the year of purchase.

97. If equipment is used partly in the course of employment and partly for other purposes, then the depreciation should be apportioned based on an estimate of the percentage of income-producing use (section 61 of the Act).

98. If the equipment used is bought part way through the year, the deduction for depreciation should be apportioned on a pro-rata basis.

99. An arbitrary figure is not acceptable when determining the value of equipment for depreciation purposes (Case R62 84 ATC 454; 27 CTBR (NS) Case 113 ). In determining the value of an item to be depreciated, its opening value is the original cost to the taxpayer less the amount of any depreciation that would have been allowed if the unit had been used, since purchase, to produce assessable income (Taxation Determination TD 92/142).

Driver's licence

100. A deduction is not allowable for the cost of obtaining or renewing a driver's licence. The cost associated with obtaining a driver's licence is a capital or private expense. The cost of renewing a licence is a private expense.

101. In Case R49 84 ATC 387; 27 CTBR (NS) Case 104 , it was held that even though travel was an essential element of the work to be performed by the taxpayer, a driver's licence was still an expense that was private in nature and therefore not an allowable deduction under subsection 51(1) of the Act.

102. This principle is not altered if the holding of a driver's licence is a condition of employment (Taxation Determination TD 93/108).

Fares

103. A deduction is allowable for the cost of using public transport for work-related travel ( Transport expenses , paragraphs 176 to 201).

Fines

104. A deduction is not allowable for fines imposed under a law of the Commonwealth, a State, a Territory, a foreign country, or by a court (subsection 51(4) of the Act).

Fitness expenses including chiropractic/massage/physiotherapy

105. A deduction is not allowable for the costs of maintaining general fitness or body shape. A deduction may be allowable if a performing artist can show that physical fitness and physical activity are essential elements of the income-earning activities and are the means by which the performing artist earns his/her income (see Taxation Determination TD 93/114).

106. Example: Albin, a circus trapeze artist, regularly attends a gymnasium to maintain fitness and strength to perform his rigorous aerial routines. Albin's fitness costs have the essential character of an income producing expense. The cost of attending the gymnasium has a direct nexus to the earning of assessable income and is an allowable deduction.

Gifts

107. A deduction is not allowable for the costs of gifts such as flowers or alcohol for fellow performers, producers or directors, as it is a private expense. There is no connection between this cost and the employee performing artist's income-earning activities.

Glasses and contact lenses

108. A deduction is not allowable for the cost of buying prescription glasses or contact lenses as the expense relates to a personal medical condition and is private in nature.. The cost of tinted contact lenses to alter eye colour or special spectacle frames e.g., 'Buddy Holly' type glasses required for a part, is an allowable deduction. Whether apportionment is necessary depends on the particular facts.

Grooming

109. A deduction is generally not allowable for grooming expenses such as hairdressing, make-up and facials. A deduction is allowable for the cost of a particular hairstyle for a role. The cost of maintaining a particular style or length of hair as part of a costume for purposes of continuity, is an allowable deduction. Similarly, a deduction is allowable for the cost of make-up, including cleansing materials to remove stage make-up. A deduction is not allowable for the cost of cleansing materials to relieve skin conditions, as the expense relates to a personal medical condition and is private in nature.

110. Example: Sophie is an actress in a television series. She has regular hair styling and beauty treatments to present a well groomed image to the public. These costs relate to Sophie's personal care and are private and not allowable.

111. Example: Alex obtains a role as a policeman in a stage play. He is required to have his normally shoulder length hair cut short and maintained that way, as part of his costume, for the duration of the play. He also supplies his own make-up to wear on the stage. Alex can claim a deduction for the cost of both the haircuts and the make-up because a direct nexus exists between the expenditure and his income-earning activities as an actor.

Home office/home studio expenses

112. A comprehensive explanation of the treatment of home office/home studio expenses is contained in Taxation Ruling TR 93/30. Key points include:

(a)
Costs associated with the home are normally of a private or domestic character (Thomas v. FC of T 72 ATC 4094; 3 ATR 165 and FC of T v. Faichney (1972) 129 CLR 38; 72 ATC 4245; 3 ATR 435 (Faichney's case)).
(b)
There are two exceptions. A deduction is allowable if:
(i)
part of the home is used for income-producing activities and has the character of a 'place of business'; or
(ii)
part of the home is used in connection with the taxpayer's income-earning activities and does not constitute a 'place of business'.
(c)
There are two types of expenses associated with the home:
(i)
Occupancy expenses relating to ownership or use of a home and are not affected by the taxpayer's income-earning activities. These include rent, mortgage interest, repairs to the home, municipal and water rates and house insurance premiums; and
(ii)
Running expenses relating to the use of facilities in the home and may be affected as a result of income-producing activities. These include heating/cooling and lighting expenses, cleaning costs, depreciation, leasing charges and the cost of repairs to furniture and furnishings in the home office.

A deduction is not allowable for the cost of occupancy expenses for an employee performing artist who maintains an office or study at home, if they carry out income-producing activities at home as a matter of convenience. This is clearly established by the High Court decisions in Handley v. FC of T (1981) 148 CLR 182; 81 ATC 4165; 11 ATR 644 and FC of T v. Forsyth (1981) 148 CLR 203; 81 ATC 4157; 11 ATR 657.

Place of business

113. A deduction is allowable for a portion of both the running and occupancy expenses. Whether an area of a home has the character of a 'place of business' is a question of fact. Paragraphs 5, 7, 11, 12 and 13 of Taxation Ruling TR 93/30 provide information on whether or not an area set aside has the character of a 'place of business'. It is not considered that an employee performing artist in their capacity as an employee would use part of their home as a 'place of business'. However, an employee performing artist may also conduct a business from home.

114. Example: Lam is an employee pianist who also gives piano lessons in a room at his home that he uses exclusively for this purpose. The room is 10% of the home, based on floor area. He receives tuition fees for these music lessons. Lam is entitled to a deduction for a portion of the running expenses and 10% of the occupancy expenses provided the room is characterised as a place of business. However, if the room is also used for private or domestic purposes only a proportion of the running expenses is an allowable deduction.

115. If an area set aside has the character of a 'place of business', then a capital gain may accrue or capital loss may be incurred on the disposal of the home by the taxpayer. The amount of the capital gain or capital loss will depend on the extent to which, and the period for which, the home was used for the purpose of gaining or producing assessable income (see Taxation Ruling IT 2673).

Private study/studio (if home is not a 'place of business')

116. Employee performing artists may maintain a study or studio at home as a matter of convenience. For example, a musician may practice in his or her study at home.

117. A deduction for running expenses is not allowable if the taxpayer merely shares a room with his or her family (e.g., the lounge room) and at the same time does some work-related activity. Running expenses retain their private or domestic character (Faichney's case). A deduction for running expenses is allowable if the taxpayer uses the room for work-related purposes at a time when others are not present (paragraphs 24 and 25 of Taxation Ruling TR 93/30 set out a formula for calculating additional running expenses).

118. A deduction is allowable for the additional running expenses, e.g., lighting, heating and cooling, associated with the use of a separate room or studio used for income-producing activities. This reflects the fact that running costs of that part of the home result from the taxpayer carrying out work at home. The extra expenditure must relate to facilities provided exclusively for the taxpayer's benefit while he or she works. To calculate additional running expenses resulting from using the home study/studio for work-related purposes see paragraphs 19 to 25 of Taxation Ruling TR 93/30.

Laundry and maintenance of clothing, uniforms and footwear

119. A deduction is allowable for the cost of cleaning and maintaining clothing that falls into one or more of the categories of deductible clothing listed in paragraph 47. This applies whether the clothing is purchased by the employee performing artist or supplied by the employer.

120. Further information can be found in Taxation Ruling IT 2452 and Taxation Determination TD 93/232.

Meals

121. A deduction is not allowable for the cost of meals consumed by employee performing artists in the normal course of a working day. It is our view that the cost of meals will not have sufficient connection with the income-producing activity and, in any case, the cost is a private expense and fails to meet the tests of deductibility described in paragraphs 28 to 35.

122. The Full Federal Court considered the treatment of food costs in Cooper's case . In that case, a professional footballer had been instructed to consume large quantities of food during the off-season to ensure his weight was maintained. By majority, the Full Federal Court found that the cost of additional food to add to the weight of the taxpayer was not allowable. Hill J (FCR at 199-200; ATC at 4414; ATR at 1636) said:


'The income-producing activities to be considered in the present case are training for and playing football. It is for these activities that a professional footballer is paid. The income-producing activities do not include the taking of food, albeit that unless food is eaten, the player would be unable to play. Expenditure on food, even as here "additional food" does not form part of expenditure related to the income-producing activities of playing football or training.'

Hill J went on to say at (FCR at 201; ATC at 4415; ATR at 1638):


'Food and drink are ordinarily private matters, and the essential character of expenditure on food and drink will ordinarily be private rather than having the character of a working or business expense. However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those illustrated of work-related entertainment or expenditure incurred while away from home.'
123. We do not accept that the cost of meals can be apportioned between what the cost of a home-made meal would be and the cost of a meal purchased during an ordinary working day.

124. A deduction is generally not allowable for the cost of food or meals consumed while on duty. These costs fail to meet the tests of deductibility described in paragraphs 28 to 35, and are considered to be private in nature.

125. In Case Y8 91 ATC 166; AAT Case 6587 (1991) 22 ATR 3037, a police officer claimed a deduction for the cost of meals while performing special duties away from his normal place of residence. It was held that the cost of these meals was private in nature and no deduction was allowable under subsection 51(1) of the Act.

126. A deduction is allowable for the cost of meals bought while working overtime, if an award overtime meal allowance is received and included in assessable income (see also Overtime meal expenses , paragraphs 129 to 132).

Motor vehicle expenses

127. A deduction is allowable for the costs of using a motor vehicle for work-related travel ( Transport expenses , paragraphs 176 to 201).

Newspapers

128. A deduction is generally not allowable under subsection 51(1) of the Act for the cost of newspapers and magazines, as it is a private expense. Even though an employee performing artist may be able to use part of the information in the course of his or her work, the benefit gained is usually remote and the proportion of the expense that relates directly to work is incidental to the private expenditure. This view is supported in Case P30 82 ATC 139; 25 CTBR (NS) Case 94 and Case P114 82 ATC 586; 26 CTBR (NS) Case 47 .

Overtime meal expenses

129. A deduction is allowable for the cost of meals bought while working overtime if an award overtime meal allowance is received and the expenditure meets the deductibility tests in paragraphs 28 to 35.

130. An overtime meal allowance is paid under a law or industrial award for the purpose of enabling an employee to buy food and drink at meal or rest breaks while working overtime.

131. The general rule is that no deduction is allowed for work-related expenses unless written evidence, such as a receipt, is obtained. However, special substantiation rules apply to overtime meal expenses if a performing artist receives an overtime meal allowance paid under an industrial award. A deduction is allowable without substantiation for expenses incurred, provided the claim does not exceed the amount considered reasonable by the Commissioner of Taxation. Reasonable amounts are published annually by the Commissioner in a Taxation Ruling.

132. If the deduction claimed is more than the reasonable amount the whole claim must be substantiated, not just the excess over the reasonable amount.

Parking fees and tolls

133. A deduction is allowable for parking fees (but not fines) and tolls if the expenses are incurred while travelling:

(a)
between two separate places of work;
(b)
to a place of education for self education purposes (if the self education expenses are an allowable deduction); or
(c)
in the normal course of duty and the travelling expenses are allowable deductions.

This decision is supported by Case Y43 91 ATC 412; AAT Case 7273 (1991) 22 ATR 3402.

Note: A deduction is denied to an employee performing artist for certain car parking expenses if the conditions outlined in section 51AGA of the Act are met.

134. A deduction is not allowable for parking fees and tolls incurred when employee performing artists are travelling between their home and their normal place of employment (see Case C47 71 ATC 219; 17 CTBR (NS) Case 44 ). The cost of that travel is a private expense and the parking fees and tolls have that same private character. A deduction is allowable for parking fees and tolls if the travel is not private, e.g., travel between home and work transporting bulky equipment (paragraphs 181 to 183).

Photographs

135. A deduction is allowable for the cost of maintaining a photographic portfolio for publicity purposes. A deduction is not allowable for the initial cost of preparing the portfolio as it is incurred too soon to be part of the income-earning activities (see Maddalena's case and paragraph 41 of this Ruling).

Professional library

136. A deduction is allowable under subsection 54(1) of the Act for depreciation of a professional library. If individual reference material is purchased on or after 1 July 1991, and the cost of each item is $300 or less or its effective life is less than 3 years, it may be depreciated at 100% in the year of purchase under section 55 of the Act (see Taxation Determination TD 93/159).

137. For depreciation purposes, reference material may only be included in the professional library if its content is directly relevant to the duties performed. Encyclopaedia and general reference books are considered too general and no deduction is allowed for their cost. Similarly, tapes, records and compact discs or videos need to have a content directly relevant to the income-earning activities of an employee performing artist for a portion of their cost to be allowable.

138. In Case P26 82 ATC 110; 25 CTBR (NS) Case 90 , a university lecturer was allowed a claim for depreciation expenses on legal books, but was denied a deduction for depreciation on general reading and fiction books. The Board of Review stated (ATC at 116; CTBR at 666):


'No doubt the illustrations and anecdotes which he was able to use did serve as useful teaching aids but in my view these were not plant or articles within the meaning of section 54 of the Act, as they were not used or installed ready for use for the purposes of producing assessable income.'

139. A distinction must be drawn between textbooks purchased for use in a course of study and books forming part of a professional library. A student's books will generally be used only during the course of study and in most cases only during the year of purchase. A deduction is allowable for the cost of the books in the year of purchase providing there is a connection between the study and the earning of assessable income.

140. If the cost of a textbook has been claimed as a deduction previously, its cost may not subsequently be added to the value of a professional library and depreciated. For example, an employee performing artist may have claimed a deduction for cost of a textbook as part of his/her self-education expenses. The cost of this textbook is not able to be included in the value of a professional library for depreciation purposes.

141. Paragraphs 92 to 99 of this Ruling provide further information on Depreciation of equipment .

Removal and relocation expenses

142. A deduction is not allowable under subsection 51(1) of the Act for removal or relocation expenses incurred by an employee performing artist to take up a transfer in existing employment or to take up an appointment with a new employer. This applies whether the transfer of employment is voluntary or at the employer's request. If the employee performing artist receives an allowance, it is assessable under subsection 25(1) or paragraph 26(e) of the Act and no deduction for these expenses is allowable under subsection 51(1) of the Act (paragraphs 15 to 18). If removal or relocation expenses are reimbursed by the employer, the reimbursement is not assessable and no deduction is allowable (see paragraph 19).

143. The view of the Commissioner is that if a taxpayer transfers employment from one locality to another, expenditure in moving to a new residence to take up duties of the new position, is not incurred in gaining or producing assessable income and is not an allowable deduction under subsection 51(1) of the Act. These expenses come at a point of time too early to be regarded as being incurred in gaining or producing assessable income. The taxpayer is travelling to his or her work and not between two places of employment.

144. In Fullerton v. FC of T 91 ATC 4983; (1991) 22 ATR 757, the taxpayer worked for the Queensland Forest Service (QFS) as a professional forester for over 20 years. In that time, QFS transferred him to a number of different locations. As a result of a reorganisation his position ceased to exist. He had no choice but to accept a transfer as he may have been retrenched. The QFS reimbursed a portion of the relocation expenses and the taxpayer claimed the remainder as a tax deduction. It was held that the expenditure on the taxpayer's domestic or family arrangements was not an allowable deduction under subsection 51(1) of the Act, even though the expenditure had a causal connection with the earning of income.

145. In Case U91 87 ATC 525, the taxpayer, a Commonwealth public servant, was transferred at the request of his employer from a State office to the central office of the department in Canberra. He was denied a deduction for expenses incurred in attempting to auction his house. It was held that the expenses were too remote from the income-producing process to be incurred in gaining or producing assessable income.

146. Taxation Rulings IT 2406, IT 2481, IT 2566 and IT 2614 provide further information on the treatment of these expenses.

147. Example: Dominic is an opera singer who lives in Adelaide and is employed part time with the State Opera Company. He obtains a full time position with an Australian Opera Company based in Sydney. Dominic moves with his family to live permanently in Sydney. Dominic's costs of relocating to Sydney are not an allowable deduction.

Research expenses

148. A deduction is allowable for costs incurred by an employee performing artist in researching a role or character that he or she is employed to play. Costs could include books, videos, theatre tickets and other reference material containing information on the character, era or event.

149. Example: Barry is to play the role of a former Prime Minister in an historical drama. He purchases several biographies of the Prime Minister and hires a video documentary on the Prime Minister's years in Government. The cost of the biographies and video hire is an allowable deduction. He also visits the film archives. The cost of admission and travel is an allowable deduction.

Self education expenses

150. A comprehensive explanation of the treatment of self-education expenses is contained in Taxation Ruling TR 92/8. Key points include:

(a)
A deduction is allowable for self-education expenses if the education is directly relevant to the taxpayer's current income-earning activities. This particularly applies if an employee performing artist's income-earning activities are based on skill/knowledge and the education enables him or her to maintain or improve that skill/knowledge.
(b)
A deduction is allowable if the education is likely to lead to an increase in the performing artist's income from his or her current income-earning activities.
(c)
A deduction is not allowable if the education is designed to enable an employee performing artist to get employment, to obtain new employment or to open up a new income-earning activity (Maddalena's case).
(d)
Self education includes courses undertaken at an educational institution (whether leading to a formal qualification or not), attendance at work-related conferences or seminars, self-paced learning and study tours.
(e)
Self education expenses include fees, travel expenses (e.g., attending a conference interstate), transport costs, books and equipment.

151. Example: Con is an employed actor who would like to form a production company. He is doing a part-time course in Business Administration. Con is not allowed any deduction for the costs of this course as the course does not relate to his current income-earning activities.

152. A deduction is allowable for transport costs in connection with a course of education in the following situations:

(a)
the cost of travel between home and the place of education and then back home;
(b)
the first leg of the trip, if a taxpayer travels from home to the place of education and then on to work (the cost of travelling from the place of education to work is not a self education expense);
(c)
the first leg of the trip, if a taxpayer travels from work to a place of education and then home (the cost of travelling from the place of education to home is not a self education expense);
(d)
the cost of travel between work and the place of education and then back to work.

A summary of items (a) to (d) is contained in the following table:

deductions allowable for travel in connection with education

153. Example: Gina is a member of the Adelaide Symphony Orchestra and attends a master class held interstate. She incurs seminar fees of $150 and travel and accommodation expenses of $500. This course is related to her current income-earning activities. She is allowed a deduction for the cost of travel to and from her place of education, overnight accommodation, meals and incidentals.

154. The following expenses related to self education are not allowable under subsection 51(1) of the Act:

(a)
a Higher Education Contribution Scheme (HECS) payment (subsection 51(6) of the Act);
(b)
meals purchased by a taxpayer while attending a course at an educational institution other than as part of travel expenses.

Limit on deductibility

155. If self education expenses are allowable under subsection 51(1) of the Act but also fall within the definition of 'expenses of self-education' in section 82A of the Act, only the excess of the expenses over $250 is an allowable deduction, i.e., the first $250 is not an allowable deduction.

156. 'Expenses of self-education' are defined in section 82A of the Act as all expenses (other than HECS payments, Open Learning charges and debt repayments under the Tertiary Student Financial Supplement Scheme) necessarily incurred by a taxpayer in connection with a prescribed course of education. 'A prescribed course of education' is defined in section 82A as a course provided by a school, college, university or other place of education and undertaken by the taxpayer to gain qualifications for use in the carrying on of a profession, business or trade, or in the course of any employment.

Social functions

157. A deduction is not allowable for the cost of attending award nights or other social events as this expense is considered to be private. If the cost of the ticket provides for food, drink or recreation, it qualifies as an entertainment expense under section 51AE of the Act and therefore is not am allowable deduction under subsection 51(1). Subsection 51AE(4) of the Act applies irrespective of who pays for the entertainment and/or who receives the entertainment or whether the attendance at these functions is in connection with the duties of any office or employment. Even if no food or drink is provided, the connection between the expenditure and the income-earning activities is too remote and it is essentially a private expense. The expenditure is not allowable under subsection 51(1) of the Act.

158. In Case Y11 91 ATC 184; AAT Case 6641 (1991) 22 ATR 3063, a senior officer in the Australian Defence Force involved in negotiations to buy defence equipment was disallowed a deduction for expenditure incurred in attending a range of lunches, cocktail parties, dinners and other forms of social contact relevant to the performance of his duties. Direct business was done on many of those occasions. It was held that subsection 51AE(4) of the Act operated to deny the deduction. It did not matter that the expenditure was directly relevant to business transactions.

159. In Frankcom v. FC of T (1982) 65 FLR 25; 82 ATC 4599; 13 ATR 636, a magistrate was denied a deduction for the costs of attending a cocktail party hosted by the Bar Association and Law Society and dinners given by the Queensland Stipendiary Magistrates' Association. The taxpayer's duties as a magistrate did not necessitate his attendance at social functions. The expenses were not incidental and relevant to the taxpayer gaining his assessable income and were of a private nature.

Tapes/compact discs/cassettes

160. A deduction is allowable for the work-related portion of the costs of audio and video tapes and compact discs (see also comments under Professional library , paragraphs 136 to 141). A deduction is allowable for the cost of tapes and cassettes used solely for rehearsal or for portfolio purposes (but not for initial portfolio).

Technical or professional publications

161. A deduction is allowable under subsection 51(1) of the Act for the purchase or subscription cost of journals, periodicals and magazines that have a content specifically related to an employee performing artist's work and are not general in nature. For example, the cost of magazines such as Encore , Cinema Papers , Theatre Australia and Opera News is allowable. The cost of magazines such as TV Week or Rolling Stone Magazine is not allowable as they are general interest publications.

162. In Case P124 82 ATC 629; 26 CTBR (NS) Case 55 , an air traffic controller was not allowed a deduction for the purchase of aviation magazines. Dr G W Beck (Member) said (ATC at 633-634; CTBR at 422):


'There might be some tenuous connection between the cost of aviation magazines and the maintenance of knowledge necessary for holding a flying licence...but it seems to be that the possible connection is altogether too remote.'

163. This can be contrasted with Case R70 84 ATC 493; 27 CTBR (NS) Case 124 , where an accountant employed with the Public Service was allowed a deduction for the cost of publications produced by a business and law publisher. The nexus between the expense and the accountant's occupation was established as the publications contained current technical information that related to her day-to-day work. She was, however, not allowed a deduction for the purchase cost of daily newspapers.

Telephone, mobile phone, pager, beeper and other telecommunications equipment expenses

Cost of calls

164. A deduction is allowable for the cost of telephone calls made by an employee performing artist in the course of carrying out his or her duties.

165. Work-related calls may be identified from an itemised telephone account. If such an account is not provided, a reasonable estimate of call costs, based on diary entries of calls made over a period of one month, together with relevant telephone accounts, will be acceptable for substantiation purposes.

Installation and connection costs

166. A deduction is not allowable for the cost of installing or connecting a telephone, etc. as it is considered to be a capital expense (see Taxation Ruling IT 85) and/or a private expense.

167. In Case M53 80 ATC 357; 24 CTBR (NS) Case 29 , Dr P Gerber (Member) stated (ATC at 359; CTBR at 236):


'...on payment of the connection fee, this taxpayer brought into existence an advantage for the enduring benefit of his newly established medical practice...It follows that it is "like" an expenditure of a capital nature.'

Rental costs

168. The situations where telephone rental will be an allowable deduction, especially for employees, are identified in Taxation Ruling IT 85. It states that taxpayers who are either 'on call' or required to contact their employer on a regular basis may be entitled to a deduction for some portion of the cost of telephone rental.

169. If the telephone is not used 100% for work-related purposes, then only a proportionate deduction will be allowable. The proportion can be calculated using the following formula:

Business calls (incoming and outgoing) / Total calls (incoming and outgoing).

Silent telephone number

170. A deduction is not allowable for the cost of obtaining a silent number listing as it is a private expense (Taxation Determination TD 93/115).

Television receivers, video/audio cassette recorders and compact disc players

171. A deduction is allowable for depreciation of these items if their use can be related to income-earning activities. Apportionment will be necessary if the items are used for private purposes (see also Tapes/compact disc/cassettes (paragraph 160) and Depreciation of equipment (paragraphs 92 to 99)).

Theatre/film tickets

172. A deduction is allowable under subsection 51(1) of the Act for the costs of attendance at theatre or film performances if the performances have a content specifically related to the employee performing artist's current work. Costs associated with attendance at performances for general interest or entertainment or other private purposes are not an allowable deduction.

173. Example: Ellen is a member of a professional ballet company. She attends a performance of Swan Lake by the Bolshoi Ballet Company that is on tour in Australia. The style and standard of performance of a world famous ballet company has a direct nexus to Ellen's own income-earning activities as a ballet dancer and the cost of attending the performance is allowable under subsection 51(1) of the Act.

174. Example: Bruce is an actor. He regularly attends films and stage plays out of general interest and for entertainment. The connection between Bruce's attendance at these productions and his income-earning activities as an actor is too remote for a deduction to be allowable under subsection 51(1) of the Act.

Tolls

175. A deduction is allowable for bridge and road tolls paid by an employee performing artist when travelling in the course of employment, e.g., between work venues.

Transport expenses

176. A deduction is allowable for the costs incurred by an employee performing artist in undertaking work-related travel.

177. Transport expenses include public transport fares, and the running costs associated with using motor vehicles, motor cycles, bicycles, etc. They do not include accommodation, meals and incidental expenses ( Travel expenses , paragraphs 202 to 207). The treatment of transport costs incurred by an employee performing artist when travelling is considered below:

Travel between home and work

178. A deduction is not allowable for the cost of travel by an employee performing artist between home and his or her normal work place as it is generally considered to be a private expense. This principle is not altered by the performance of incidental tasks en route (paragraph 34 of Taxation Ruling MT 2027).

179. The High Court considered travel expenses incurred between home and work in the case Lunney's case. Williams, Kitto and Taylor JJ stated that (CLR at 498-499; ATD at 412-413):


'The question whether the fares which were paid by the appellants are deductible under section 51 should not and, indeed, cannot be solved simply by a process of reasoning which asserts that because expenditure on fares from a taxpayer's residence to his place of employment or place of business is necessary if assessable income is to be derived, such expenditure must be regarded as "incidental and relevant" to the derivation of income. . .But to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income.'

180. The fact that the travel is outside normal working hours, or involves a second or subsequent trip, does not change this principle. For more information see paragraph 6 of Taxation Ruling IT 2543, Taxation Ruling IT 112 and Taxation Determination TD 93/113.

Travel between home and work - transporting bulky equipment

181. A deduction is allowable if the transport costs can be attributed to the transportation of bulky equipment rather than to private travel between home and work (see FC of T v. Vogt 75 ATC 4073; 5 ATR 274). If the equipment is transported to and from work by the performing artist as a matter of convenience, it is considered that the transport costs are private and no deduction is allowable. A deduction is not allowable if there is a secure area provided at the work place for storage of the equipment.

182. Example: On a particular day, George, a drummer, drives from home to rehearsal with his full drum kit in the back of his station wagon. He is allowed a deduction for his travelling costs because when viewed objectively, the travel is attributed to the transport of his bulky drum kit rather than getting himself to rehearsal.

183. Example: Geoffrey, a trumpet player, carries only his trumpet to work in his car. Geoffrey's car expenses are private as his travel from home to work is not attributable to carrying bulky equipment.

Travel between two separate work places if there are two separate employers involved

184. A deduction is allowable for the cost of travelling directly between two work places.

185. Example: Anna is employed as an actress by a production company making a commercial. After filming she travels directly from the studio to a regular job as a sales assistant. As Anna travels directly between the two jobs, the travel expenses are an allowable deduction.

Travel from the normal work place to an alternative work place while still on duty and back to the normal work place or directly home

186. A deduction is allowable for the cost of travel from an employee performing artist's normal work place to other work places. A deduction is also allowable for the cost of travel from the alternative work place back to the normal work place or directly home is also an allowable deduction. This travel is undertaken in the performance of an employee performing artist's duties. It is incurred in the course of gaining assessable income and is an allowable deduction.

187. Example: Ingrid, a dancer, travels from the dance studio where she normally works to a school auditorium for a special performance for the school children. She then travels back to the studio. The cost of this travel is an allowable deduction.

188. Example: If, in the above example, Ingrid had travelled directly home from the school performance, the cost incurred in travelling from the regular studio to the school and then directly home is also allowable.

Travel from home to an alternative work place for work-related purposes and then to the normal work place or directly home

189. A deduction is allowable for the cost of travel from home to an alternative work place. The cost of travel from the alternative work place to the normal place of employment or directly home is also allowable (paragraphs 32 to 35 of Taxation Ruling MT 2027).

190. Example: Elizabeth plays a cello in a city orchestra and is required to travel to a country venue to give a performance with the orchestra. The cost of the travel from home to the country venue and back is an allowable deduction.

Travel between two places of employment or between a place of employment and a place of business

191. A deduction is allowable for the cost of travelling directly between two places of employment or between a place of employment and a place of business. This is provided that the travel is undertaken for the purpose of engaging in income-producing activities.

192. If the employee performing artist lives at one of the places of employment or business a deduction may not be allowable as the travel is between home and work. It is necessary to establish whether the income-producing activity carried on at the person's home qualifies the home as a place of employment or business. The fact that a room in the employee performing artist's home is used in association with employment or business conducted elsewhere will not be sufficient to establish entitlement to a deduction for travel between two places of work (Taxation Ruling IT 2199).

193. A deduction is not allowable for the cost of travel between a person's home at which a part-time income-producing activity is carried on, and a place of full-time employment, unless there is some aspect of the travel that is directly related to the part-time activity.

194. In Case N44 81 ATC 216; 24 CTBR (NS) Case 114 , a qualified accountant employed by a firm of accountants, conducted a limited private practice from his home. He set up a separate room in his home as an office. The taxpayer claimed a deduction for car expenses incurred in travelling between his residence/office and his place of employment. The fact that the taxpayer's home was, incidentally, used in the production of income was insufficient to make the travel between his home and his place of employment an outgoing incurred in the production of assessable income. The travel retained its essential character of travel between home and work and therefore, it was not an allowable deduction.

195. Example: Virginia is employed as a television actress during the day and teaches guitar at her home on Monday evenings. The cost of travelling from the production studio to home is not an allowable deduction. It is a private expense rather than an expense incurred in deriving assessable income.

196. Taxation Rulings IT 2199 and MT 2027 provide further information on the treatment of travelling expenses between places of employment/business.

Automobile Association/Club membership fees

197. A deduction is allowable for the annual fee for road service if either the log book method or one-third of actual expenses method of claiming work-related car expenses is used. Membership of an Automobile Association/Club usually entitles members to additional benefits such as a magazine and legal advice. These benefits are considered to be incidental to the main purpose of membership, which is the provision of roadside or breakdown service. The entitlement to a deduction for the annual subscription fee is not affected by this arrangement. A deduction is not allowable for a joining fee or for any additional fees paid to gain entitlement to benefits other than road service.

Depreciation cost limit for motor vehicles

198. Section 57AF of the Act imposes a limit on the depreciable cost base of a motor vehicle (including a vehicle known as a four-wheel drive vehicle) that is a motor car or station wagon, if the acquisition costs is greater than a specified amount. The depreciable cost base limit applies to both new and second hand vehicles (see Taxation Ruling TR 93/24).

Calculation of motor vehicle balancing adjustment

199. A depreciation balancing adjustment may be necessary on the disposal of a motor vehicle that has been used for income-producing activities (see Taxation Ruling IT 2493).

Motor vehicle provided by employer

200. A deduction is not allowable for car expenses incurred by an employee performing artist if:

(a)
the car is provided by the employer for the exclusive use of the employee performing artist and/or their relatives; and
(b)
the employee performing artist and/or their relatives are entitled to use the car for private purposes

(see section 51AF of the Act).

201. Costs associated with the operation of the car such as parking fees and tolls are not precluded by the operation of section 51AF of the Act (see Case Y43 91 ATC 412; AAT Case 7273 (1991) 22 ATR 3402). Parking fees and tolls are also discussed at paragraphs 133 and 134.

Travel Expenses

202. A deduction is allowable for the costs incurred by a performing artist in undertaking work-related travel. An example is where a performing artist attends a seminar interstate. Travel expenses include the costs of accommodation, fares, meals and incidentals.

203. Receipt of an allowance does not automatically entitle a performing artist to a deduction for travel expenses. A work-related travel expense must be incurred and only the amount actually spent is an allowable deduction.

204. The general rule is that no deduction is allowed for work-related expenses unless written evidence, such as a receipt, is obtained. However, special substantiation rules apply to travel expenses if a performing artist receives a travel allowance.

205. If a travel allowance is received and the amount of the claim for expenses incurred is no more than a reasonable amount, substantiation is not required. The Commissioner of Taxation publishes annually a Taxation Ruling that sets out the amount of reasonable expenses covered by a travel allowance.

206. If the deduction claimed is more than the reasonable amount the whole claim must be substantiated, not just the excess over the reasonable amount.

Accompanying relative's travel expenses

207. A deduction is not allowable for the expenses of a relative accompanying an employee performing artist while travelling (see section 51AG of the Act). This rule applies whether or not the accompanying relative is a fellow employee (if that employee performs no substantive duties during the trip).

Union fees and professional association fees

208. A deduction is allowable for the cost of annual union or professional association fees. A deduction is not allowable for a fee paid to join a union or professional association as it is a capital expense. Taxation Rulings IT 299 IT 327, IT 2062 and IT 2416 provide further information on the treatment of union and professional association fees.

209. IT 2062 sets out our views on the treatment of levies paid to unions and associations. It says:


'...where levies are paid by employees to a trade union or professional association it is necessary to have regard to the purposes for which the payments are made in order to determine whether they satisfy the terms of subsection 51(1). It is not decisive that the levies may be compulsory. What is important is the connection between the payment of the levy and the activities by which the assessable income of the employee is produced.

Levies made specifically to assist families of employees suffering financial difficulties as a result of employees being on strike or having been laid off by their employers are not considered to be allowable deductions under subsection 51(1) - they are not sufficiently connected with the activities by which the assessable income is produced to meet the requirements of the subsection' (IT 2062 paragraphs 2 and 3).

210. A deduction is allowable for a levy paid to enable a trade union or professional association to provide finance to acquire or construct new premises, to refurbish existing premises or to acquire plant and equipment to conduct their activities (see IT 2416).

211. A deduction is allowable for a levy if it is paid into a separate fund and it can be clearly shown that the monies in that fund are solely for protecting the interests of members and their jobs, and for the obtaining of legal advice or the institution of legal action, etc. on their behalf (see IT 299). A deduction is not allowable for payments to staff social clubs or associations (subsection 51AB(4) of the Act).

Alternative views

Evening wear for orchestral members

212. The view was expressed that the costs of evening dress worn by orchestral members should be an allowable deduction. The view of the Commissioner is that the expenditure is of a private nature, see TD 93/111.

Protective clothing and equipment

213. The view was expressed that allowable deductions for 'Protective clothing' and 'Protective equipment' should include sunglasses, sunhats, sunscreens, wet weather gear, etc., that provide protection against the natural environment. The view of the Commissioner is that the expense is a personal or living expense, similar to the cost of travel between home and work, conventional clothing and daily meals. A deduction is allowable for the cost of protective clothing and equipment where the conditions of the work (rather than the natural environment) make it necessary for a performing artist to provide protection to his or her person or clothing.

Telephone installation or connection costs

214. The view was expressed that deductions for telephone installation or connection costs should be allowable based on the Commissioner's stated policy in Taxation Ruling IT 2197. The view of the Commissioner is that IT 2197 only applies when the telephone installation costs or connection fees have a revenue nature. Where these expenses are incurred by an employee, they are not on revenue account but are of a capital or private nature.

Transporting expensive instruments

215. The view was expressed that a deduction should be allowed for transport expenses incurred when transporting musical instruments which are not bulky but are very valuable. The view of the Commissioner is that the carriage of such equipment is motivated by personal reasons and that the travel expenses are essentially incurred in getting the taxpayer to and from work.

Index of explanations

216. The following index refers to the paragraph references in the Explanations section of the Ruling.

  paragraph
Agent's fees 38
Audition expenses 43
Child care expenses 44
Clothing, uniforms and footwear 47
Protective clothing 49
Occupation specific clothing 51
Compulsory uniform or wardrobe 53
Non-compulsory uniform or wardrobe 58
Conventional clothing 60
Laundry and maintenance 76
Coaching classes 77
Computers and software 82
Conferences, seminars and training courses 86
Deductibility of work-related expenditure 26
Depreciation of equipment 92
Driver's licence 100
Fares 103
Fines 104
Fitness expenses 105
Gifts 107
Glasses and contact lenses 108
Grooming 109
Hairdressing (see Grooming)
Home office/home studio expenses 112
Place of business 113
Private study/studio 116
Laundry 119
Make-up (see Grooming) 109
Meals 121
Motor vehicle expenses 127
Newspapers 128
Overtime meal expenses 129
Parking fees and tolls 133
Photographs 135
Professional library 136
Removal and relocation expenses 142
Research expenses 148
Self education expenses 150
Social functions 157
Substantiation 36
Tapes/compact discs/cassettes 160
Technical or professional publications 161
Telephone, mobile phone, pager, beeper and other telecommunications equipment expenses 164
Cost of calls 164
Installation and connection costs 166
Rental costs 168
Silent numbers 170
Television receivers/ recorders/compact disc players 171
Theatre/film tickets 172
Tolls 175
Transport expenses 176
Travel between home and work 178
Carrying bulky equipment to and from work 181
Travel between work places (different employers) 184
Travel between normal and alternative work places 186
Travel between home and alternative work place 189
Travel between two places of employment 191
Automobile Association/Club membership fees 197
Depreciation cost limit for motor vehicles 198
Calculation of motor vehicle balancing adjustment 199
Motor vehicle provided by employer 200
Travel expenses 202
Travel accompanied by a relative 207
Union fees and professional association fees 208

Commissioner of Taxation
16 June 1995

Previously released in draft form as TR 95/D5

References

ATO references:
NO 94/8178-8

ISSN 1039 - 0731

Related Rulings/Determinations:

IT 26
IT 85
IT 112
IT 299
IT 327
IT 2062
IT 2084
IT 2197
IT 2198
IT 2199
IT 2406
IT 2416
IT 2452
IT 2477
IT 2481
IT 2493
IT 2543
IT 2566
IT 2614
IT 2641
IT 2673
IT 2685
MT 2027
TR 92/8
TR 92/15
TR 93/24
TR 93/30
TR 94/3
TR 94/22
TD 92/142
TD 92/154
TD 93/108
TD 93/111
TD 93/113
TD 93/114
TD 93/115
TD 93/145
TD 93/159
TD 93/162
TD 93/195
TD 93/232
TD 93/244

Subject References:
- agents
- artist
- allowable deductions
- allowances
- associations
- cars
- child care expenses
- clothing
- computers and software
- conferences and seminars
- depreciation
- dry cleaning
- education expenses
- effective life
- employment related expenses
- entertainer
- entertainment
- entertainment expenses
- equipment
- fines
- gifts
- hairdressing
- home office expenses
- laundry
- licence fees
- meals
- motor vehicles
- music industry
- newspapers
- overseas travel expenses
- optometrical expenses
- parking fees and tolls
- performers
- prescribed course of education
- private or domestic expenditure
- professional associations
- publications
- relocation of employees
- removal expenses
- self education expenses
- subscriptions
- sun screens
- tape recordings
- telephone expenses
- trade union subscriptions
- travel
- travel expenses
- use of home to produce income

Legislative References:
ITAA 25(1)
ITAA 26(e)
ITAA 26(eaa)
ITAA 51(1)
ITAA 51(4)
ITAA 51(6)
ITAA 51AE
ITAA 51AE(4)
ITAA 51AF
ITAA 51AG
ITAA 51AGA
ITAA 51AH
ITAA 51AL
ITAA 51AL(26)
ITAA 53
ITAA 54
ITAA 54(1)
ITAA 55
ITAA 55(8)
ITAA 57AF
ITAA 61
ITAA 82A

Case References:
Charles Moore & Co (WA) Pty Ltd v. FC of T
(1956) 95 CLR 344
11 ATD 147
6 AITR 379


FC of T v. Anderson
(1956) 11 ATD 115

FC of T v. Cooper
(1991) 29 FCR 177
91 ATC 4396
(1991) 21 ATR 1616

FC of T v. Edwards
(1994) 49 FCR 318
94 ATC 4255
(1994) 28 ATR 87

FC of T v. Faichney
(1972) 129 CLR 38
3 ATR 435
72 ATC 4245

FC of T v. Finn
(1961) 106 CLR 60
12 ATD 348

FC of T v. Forsyth
(1981) 148 CLR 203
81 ATC 4157
11 ATR 657

FC of T v. Hatchett
(1971) 125 CLR 494
71 ATC 4184
2 ATR 557

FC of T v. Maddalena
71 ATC 4161
2 ATR 541

FC of T v. Vogt
75 ATC 4073
5 ATR 274

Frankcom v. FC of T
(1982) 65 FLR 25
82 ATC 4599
13 ATR 636

Fullerton v. FC of T
91 ATC 4983
(1991) 22 ATR 757

Handley v. FC of T
(1981) 148 CLR 182
81 ATC 4165
11 ATR 644

Jayatilake v. FC of T
91 ATC 4516
(1991) 22 ATR 125
101 ALR 11

Lodge v. FC of T
(1972) 128 CLR 171
72 ATC 4174
46 ALJR 575
3 ATR 254

Lunney v. FC of T;Hayley v FC of T
(1958) 100 CLR 478
11 ATD 404

Ronpibon Tin NL v. FC of T
(1949) 78 CLR 47
4 AITR 236

Case C47/ Case 44
71 ATC 219
17 CTBR (NS) 296

Case K2 / Case 21
78 ATC 13
22 CTBR (NS) 178

Case M53/ Case 73
80 ATC 357
24 CTBR (NS) 234

Case N44/ Case 114
81 ATC 216
24 CTBR (NS) 915

Case N84/ Case 43
81 ATC 451
25 CTBR (NS) 305

Case P26/ Case 90
82 ATC 110
25 CTBR (NS) 658

Case P30/ Case 94
82 ATC 139
25 CTBR (NS) 696

Case P114/ Case 47
82 ATC 586
26 CTBR (NS) 365

Case P124/ Case 55
82 ATC 629
26 CTBR (NS) 416

Case Q11/ Case 75
83 ATC 41
26 CTBR (NS) 522

Case R49/ Case 104
84 ATC 387
27 CTBR (NS) 836

Case R55/ Case 109
84 ATC 411
27 CTBR (NS) 867

Case R62/ Case 113
84 ATC 454
27 CTBR (NS) 913

Case R70/ Case 123
84 ATC 493
27 CTBR (NS) 977

Case T47 / Case 56
18 TBRD 243
14 CTBR (NS) 306

Case U80/ Case 66
87 ATC 470
18 CTBR (NS) 511

Case U91
87 ATC 525

Case U95
87 ATC 575

Case W39
89 ATC 395

Case 5073
(1989) 20 ATR 3523

Case Y8
91 ATC 166

Case 6587
(1991) 22 ATR 3037

Case Y11
91 ATC 184
(1991) 22 ATR 3063

Case Y43
91 ATC 412
(1991) 22 ATR 3402

Case 48/
94 ATC 422

Case 9808
(1994) 29 ATR 1077