ATO Interpretative Decision
ATO ID 2005/204 (Withdrawn)
Income Tax
Deductions: telephone expenses and input tax creditFOI status: may be released
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This ATO ID is withdrawn. Guidance on this issue contained in this ATO ID can be found in Goods and Services Tax Ruling GSTR 2006/4 Goods and services tax determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 goods and services tax (GST) registered taxpayer required, under section 27-5 of the Income Tax Assessment Act 1997 (ITAA 1997), to reduce their deduction for telephone expenses claimed under section 8-1 of the ITAA 1997 by the amount of input tax credit to which they are entitled that is included in those expenses?
Decision
Yes. A GST registered taxpayer is required, under section 27-5 of the ITAA 1997, to reduce their deduction for telephone expenses claimed under section 8-1 of the ITAA 1997 by the amount of input tax credit to which they are entitled that is included in those expenses.
Facts
The taxpayer is in business.
The taxpayer uses their home telephone 50% for business purposes and 50% for private purposes.
The taxpayer's telephone bill for the year was $1,100 including $100 of GST.
The taxpayer is registered for GST and is entitled to claim an amount of input tax credit.
Reasons for Decision
Section 27-5 of the ITAA 1997 states that:
You cannot deduct under this Act a loss or outgoing you incur, to the extent that the loss or outgoing includes an amount relating to an input tax credit to which you are entitled ...
Accordingly, when calculating their deduction under section 8-1 of the ITAA 1997 a taxpayer must first determine the amount of the deduction to which they are otherwise entitled and then apply section 27-5 of the ITAA 1997 to reduce the deduction by the relevant amount of input tax credit.
In the present case the deduction the taxpayer is entitled to under section 8-1 of the ITAA 1997 before the application of section 27-5 of the ITAA 1997 is $550 ($1,100 x 50%).
This deduction includes an amount of input tax credit to which the taxpayer is entitled of $50 ($100 x 50%).
As such, the taxpayer is required, under section 27-5 of the ITAA 1997, to reduce the deduction for telephone expenses claimed under section 8-1 of the ITAA 1997 from $550 to $500.
Date of decision: 28 February 2005Year of income: Year ended 30 June 2005
Legislative References:
Income Tax Assessment Act 1997
section 8-1
section 27-5
ATO ID 2005/205
Keywords
Deductions & expenses
Goods and services tax
Input tax credits
ISSN: 1445-2782
| Date: | Version: | |
| 28 February 2005 | Original statement | |
| You are here | 6 October 2017 | Archived |