ATO Interpretative Decision

ATO ID 2002/397 (Withdrawn)

Income Tax

Deductions - cash shortages paid by an employee
FOI status: may be released
  • This ATO ID is withdrawn. The ATO view expressed in the ATO ID is current and represents a straight application of the law. Guidance on the view contained in the ATO ID is available at Cash shortages or client bad debts (QC 53953).
    This document has changed over time. View its history.

Status of this decision: Decision withdrawn 4 October 2018.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.


Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for cash shortages they are required to repay to their employer?


Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for cash shortages they are required to repay to their employer.


The taxpayer is an employee. As part of their duties they are required to deal with money paid by customers or clients.

The taxpayer made an error while dealing with this money which resulted in a cash shortage. The taxpayer's employer required the taxpayer to repay the amount of the cash shortage.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, relate to the earning of exempt income, or where a provision of the ITAA prevents a deduction being claimed.

Taxation Ruling TR 95/19 deals with deductions applicable to employees in the airline industry.

Paragraph 38 of TR 95/19 provides that where during the course of their duties the flight attendant is required to deal with monies paid by passengers, and cash shortages occur, the flight attendant is required to make up the shortage. The Ruling provides that a deduction is allowable to the flight attendant for amount of the cash shortage made up.

Although this ruling relates to employees in the airline industry the principle with regard to cash shortages is applicable to employees in other occupations.

Where employees are required to:

deal with money as part of their employment, and
the conditions of their employment require them to repay to the employer any amounts in respect of cash shortages,

the employee will have incurred a loss or outgoing in gaining or producing their assessable income that is not of a private or domestic nature. Providing the employee is able to substantiate the amount claimed, they will be entitled to a deduction for the amount paid under section 8-1 of the ITAA 1997.

Amendment History

Date of Amendment Part Comment
27 March 2015 Reasons for Decision Additional words inserted to provide technical clarity
Keywords Grammatical change

Date of decision:  7 March 2001

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

Related Public Rulings (including Determinations)
TR 95/19

Deductions and expenses
Salary and wages expenses
Work related expenses

Siebel/TDMS Reference Number:  DW318435; 1-6B12MSS,1-CA1NFOE

Business Line:  Small Business/Individual Taxpayers

Date of publication:  28 March 2002

ISSN: 1445-2782

  Date: Version:
  7 March 2001 Original statement
  27 March 2015 Updated statement
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