ATO Interpretative Decision
ATO ID 2001/86 (Withdrawn)
Income Tax
Deductibility: Embezzlement by EmployeeFOI status: may be released
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This ATO ID is a simple restatement of the law and does not contain an interpretative decision.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Whether a loss incurred by a company through embezzlement by its former employee is deductible under section 25-45 (Income Tax Assessment Act 1997 (ITAA 1997)).
Decision
Yes. The loss is deductible under section 25-45 (ITAA 1997).
Facts
A former employee of the taxpayer worked on a part time basis as a bookkeeper/administrator for a period of 18 months. The employee was responsible for entering financial transactions into the company's software system and for day to day handling of mail and cheques. During the 18-month period a number of cheques were applied for the employee's benefit without authorisation of the taxpayer.
Reasons For Decision
Section 25-45 (ITAA 1997) specifically provides a deduction for a loss caused by the theft, stealing, embezzlement, larceny, defalcation or misappropriation by an employee or agent of the taxpayer.
In the present case, the taxpayer's loss was the result of embezzlement by an employee. The loss was discovered in the income year and the money embezzled was also included in the taxpayer's assessable income for the income year. The taxpayer is, therefore, entitled to a deduction for the loss.
Date of decision: 6 September 1999
Legislative References:
Income Tax Assessment Act 1997
section 25-45
Keywords
Losses from fraud, theft and embezzlement
Deductions and expenses
ISSN: 1445-2782
| Date: | Version: | |
| 6 September 1999 | Original statement | |
| You are here | 1 April 2010 | Archived |