ATO Interpretative Decision

ATO ID 2001/318

Income Tax

Deductibility: Theft by a person other than an employee
FOI status: may be released

This ATO ID was amended to improve clarity and update case references.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.

Issue

Whether a loss of cash takings by a taxpayer carrying on a business through theft by a person who is not an employee is deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

Decision

Yes. The loss is deductible under section 8-1 of the ITAA 1997.

Facts

Prior to banking, the cash takings of a business were held in a safe at the taxpayer's business premises. The cash was stolen from the safe during business hours. The cash takings were included in the assessable income of the business as part of sales. It is unlikely that an employee stole the money.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a deduction for any loss or outgoing necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.

In this case the loss arose as a direct result of the taxpayer's income earning activities. The loss is not of a capital nature because it was incurred in an operation of the business concerned with the regular inflow of revenue. The loss was not associated with the 'profit yielding structure' of the business. See Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; (1956) 11 ATD 147; (1956) 6 AITR 379.

The loss is not of a private or domestic nature because the money had not yet been appropriated for private purposes.

The taxpayer is, therefore, entitled to a deduction for the loss.

Amendment History

Date of Amendment	Part	Comment
18 November 2016	Related ATO Interpretative Decisions	ATO ID 2001/86 was withdrawn on 1 April 2010.

Date of decision: 8 August 2001

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

Case References:
Charles Moore & Co (WA) Pty Ltd v FC of T
   (1956) 95 CLR 344
   (1956) 11 ATD 147
   (1956) 6 AITR 379

Keywords
Losses from fraud, theft & embezzlement

Siebel/TDMS Reference Number: DW241399, 1-A748JHS

Business Line: Private Groups and High Wealth Individuals

Date of publication: 12 September 2001
Date reviewed: 18 November 2016

ISSN: 1445-2782

history

	Date:	Version:
	8 August 2001	Original statement
You are here	18 November 2016	Updated statement

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