ATO Interpretative Decision
ATO ID 2001/38 (Withdrawn)
Income Tax
Deductions and expenses: Repayment of Retention BenefitFOI status: may be released
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ATO ID 2001/38 is withdrawn as of 19 April 2002 as it has been superseded by ATO ID 2001/548This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Whether the repayment of a portion of retention benefit is an allowable deduction under subsection 51(1) of the Income Tax Assessment Act 1936 or section 8-1 of the Income Tax Assessment Act 1997.
Decision
A deduction is not allowable pursuant to subsection 51(1) of the Income Tax Assessment Act 1936 (ITAA 1936) or section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for an amount representing any repayment of the retention benefit.
Facts
The taxpayer has applied for and received a Pilot Retention Bonus payable under Defence Determination 1996/42. This bonus was included in assessable income in the year of receipt. The taxpayer was required to sign a contract securing the taxpayer's services for a period of 5 years. The contract states that if the taxpayer fails to serve the full 5 years, the taxpayer will be required to repay a portion of the retention benefit based on the amount of time not served.
Reasons For Decision
For an outgoing to satisfy the first positive limb of subsection 51(1) of the ITAA 1936 or section 8-1 of the ITAA 1997, the losses or outgoings must be 'incidental and relevant' to the gaining or producing of assessable income: Ronpibon Tin NL v FCT (1949) 78 CLR 47; 4 AITR 236.
Repayments of income by employees resulting from a failure to observe the conditions in the retention agreement are not deductible. The repayment outgoing is not incidental or relevant to the gaining or producing of the assessable income. It is incurred solely as a result of the breach of the agreement ((1958) 7 CTBR (NS) Case 130, 9 TBRD Case J20; (1958) 8 CTBR (NS) Case 50, 9 TBRD Case J60; (1963) 11 CTBR (NS) Case 58, 14 TBRD Case P20; and Case D19 72 ATC 113, (1972) 17 CTBR Case 100.)
Date of decision: 26 February 1997
Legislative References:
Income Tax Assessment Act 1936
subsection 51(1)
Case References:
Ronpibon Tin NL v FCT
(1949) 78 CLR 47
4 AITR 236
(1958) 7 CTBR (NS) 838 Case J20
9 TBRD 109 Case 50
(1958) 8 CTBR (NS) 250 Case J60
9 TBRD Case 58
(1963) 11 CTBR (NS) 355 Case P20
14 TBRD Case D19
72 ATC 113 Case 100
(1972) 17 CTBR (NS) 681
Keywords
Deductions and expenses
Defence force awards and allowances
Defence force members
Employee bonuses
Employment contracts
ISSN: 1445-2782
| Date: | Version: | |
| 26 February 1997 | Original statement | |
| You are here | 19 April 2002 | Archived |