ATO Interpretative Decision

ATO ID 2001/738 (Withdrawn)

Income Tax

Company expenses paid by director
FOI status: may be released
  • This ATO ID is a simple restatement of the law and does not contain an interpretative decision.
    This document has changed over time. View its history.

Status of this decision: Decision Withdrawn 1 April 2010
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is a deduction available under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses paid on behalf of a company in which he is a director?

Decision

No. The taxpayer cannot claim a deduction under section 8-1 of the ITAA 1997 for expenses paid on behalf of a company in which he is a director.

Facts

The taxpayer is the sole director of a company. The taxpayer paid several accounts on behalf of the company and was to be reimbursed. However, the company was placed under administration before the amounts were reimbursed.

All payments would have been deductible expenses for the company. The amounts will not be reimbursed as the company will be liquidated without distribution to creditors. The company will not claim a tax deduction for these expenses.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing the taxpayer's assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are necessarily incurred in gaining or producing exempt income.

In this case the expenses paid on behalf of the company are not referable to the taxpayer's income producing activities and as such, no deduction is allowable.

Date of decision:  1 November 2001

Year of income:  Year ended 30 June 2000 Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1997
   section 8-1

Keywords
Company directors
Deductions & expenses

Business Line:  Small Business/Individual Taxpayers

Date of publication:  30 November 2001

ISSN: 1445-2782

history
  Date: Version:
  1 November 2001 Original statement
You are here 1 April 2010 Withdrawn