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Authorisation Number: 1012996717092
Date of advice: 11 April 2016
Subject: Deductions - tax agent fees
Question and answer:
Are you entitled to a deduction for expenses incurred in the preparation of tax returns of a company of which you were a director?
This ruling applies for the following period
Year ended 30 June 20XX
The scheme commenced on
1 July 20XX
Relevant facts and circumstances
You were the director of your company.
Your ex-spouse was a director, secretary and public officer of the company.
The company was only in business for one year before ceasing trade.
The company BAS and tax returns have been completed and lodge by a tax agent.
The tax agent fees for the company were paid by you.
You did not lodge a notice of appointment of a new public officer to the Commissioner of Taxation.
Relevant legislative provisions
Income Tax Assessment Act 1997 paragraph 25-5 (1)(b).
Income Tax Assessment Act 1936 Section 252.
Income Tax Assessment Act 1936 Subsection 252(1).
Income Tax Assessment Act 1936 Section 254.
Reasons for decision
Paragraph 25-5(1)(b) of the ITAA 1997 provides a deduction for expenditure incurred to the extent that it is for complying with an obligation imposed by a Commonwealth law, insofar as that obligation relates to the tax affairs of an entity. The obligation to lodge a tax return is placed on the public officer to perform the actions on behalf of the company (section 252 of the ITAA 1936).
Your ex-spouse was the public officer of the company. Accordingly, your ex-spouse had the obligation to lodge the company tax returns. The fact that you incurred the expense and lodged the returns does not change the obligations of the public officer. The preparation of tax returns for the company is not a deductible expense for you claim.
Under certain circumstances, it may not be reasonable to hold the Public officer responsible for discharging the compliance obligations of the company. For instance, where a Receiver, Manager, Administrator or Liquidator is appointed, section 254 of the ITAA 1936 places responsibility of a company in relation to income tax matters on the Receiver, Manager, Administrator or Liquidator as trustee. In such situations, the Commissioner could exempt the company from the requirement to appoint a Public Officer during the period when a Receiver, Manager, Administrator or Liquidator is appointed. However, if the appointment of the Receiver, Manager, Administrator or Liquidator is terminated, and the company is under the control of directors, an appointment of a Public Officer is required.
You have advised that your ex- spouse was the Public Officer and our records indicate that you did not lodge a notice of appointment of a new public officer to the Commissioner of Taxation. As you were not the Public Officer you are not entitled to a deduction for the expenses incurred for the preparation of tax returns for the company.
As the requirements of section 25-5 of the ITAA 1997 and section 254 of the ITAA 1936 are not satisfied, the expenses you incurred in preparing tax returns are not deductible.