ATO Interpretative Decision
ATO ID 2002/187 (Withdrawn)
Income Tax
Deductions and expenses: motor bike sponsorshipFOI status: may be released
-
This ATO ID is withdrawn and replaced by ATO ID 2005/284This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Can the taxpayer claim an income tax deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses in sponsoring motor bike racing?
Decision
Yes. The taxpayer is entitled to claim an income tax deduction for expenses in sponsoring motor bike racing under section 8-1 of the ITAA 1997.
Facts
The taxpayer operates a business as a sole trader.
The taxpayer would like to sponsor motor bike riding in the belief that the exposure will benefit his business in the form of advertising. The taxpayer will provide sponsorship for up to four riders. The taxpayer will pay the costs of purchasing motor bikes and other costs such as fuel, repairs, spare parts and safety clothing. The motor bikes and a support vehicle as well as the clothing and caps worn by the riders will carry the taxpayer's business name.
In addition, the taxpayer intends to hand out business cards at the motor bike events to stimulate interest in his business through his position as sponsor of the sporting event.
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 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.
The expenses associated with the taxpayer's sponsorship of motor bike riding are deductible under section 8-1 of the ITAA 1997. They are in the nature of advertising expenses and are directed to enhance the income producing activities of the taxpayer's business and are not excluded on the basis of being capital or of a private or domestic nature.
Date of decision: 20 December 2001Year of income: Year ended 30 June 2001 Year ending 30 June 2002 Year ending 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
section 8-1
Keywords
Advertising & promotion expenses
Deductions and expenses
ISSN: 1445-2782
| Date: | Version: | |
| 20 December 2001 | Original statement | |
| You are here | 14 October 2005 | Archived |