ATO Interpretative Decision

ATO ID 2004/370 (Withdrawn)

Income Tax

• This ATO ID is withdrawn as the interpretative issue is covered in TR 2005/1
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the taxpayer, the writer of an unpublished book, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for travel expenses incurred in conducting research?

Decision

No. The taxpayer, the writer of an unpublished book, is not entitled to a deduction under section 8-1 of the ITAA 1997 for travel expenses incurred in conducting research, as the expenditure has been incurred at a point too soon to be regarded as being incurred in gaining or producing assessable income.

Facts

The taxpayer is in the process of writing a book.

The taxpayer does not carry on a business of writing books and the project is not related to their employment.

The taxpayer has not secured any agreement to have the book published upon completion, and there is no evidence to suggest that the taxpayer will self-publish or sell the copyright of the completed book.

Travel was undertaken by the taxpayer in order to conduct research for the book and various associated costs were incurred.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a general deduction for 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, or relate to the earning of exempt income.

For expenditure to be regarded as being incurred in the course of gaining or producing assessable income, it must be 'incidental and relevant to that end' (Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 8 ATD 431; (1949) 4 AITR 326). The expenditure must be related to the production of assessable income and not incurred at a 'point too soon' to be deductible (Federal Commissioner of Taxation v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 and Steele v. Deputy Commissioner of Taxation (1999) 197 CLR 459; 99 ATC 4242; (1999) 41 ATR 139).

The taxpayer incurred travel expenses in order to carry out research for a book they are in the process of writing. These travel expenses were incurred prior to the taxpayer securing any agreement to have the book published upon completion, and there is no evidence to suggest that the taxpayer will self-publish or sell the copyright of the completed book. Based on these facts, even if the writing of the book is eventually completed, there is no evidence to suggest that the book will produce assessable income of any kind. Therefore, there is an insufficient nexus between the expenditure incurred and the production of any assessable income from the taxpayer's activities.

The expenditure has been incurred at a 'point too soon' and cannot be regarded as having been incurred in gaining or producing assessable income. Consequently, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for travel expenses incurred in conducting research.

Year of income:  Year ended 30 June 2004

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

Case References:
Ronpibon Tin NL v. Federal Commissioner of Taxation
   (1949) 78 CLR 47
   (1949) 8 ATD 431

Keywords
Deductions and expenses
Authors & Writers

Business Line:  Business & Personal Taxes Centre of Expertise

Date of publication:  7 May 2004

ISSN: 1445-2782