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Edited version of private ruling
Authorisation Number: 1011571773508
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Ruling
Subject: Work related expenses
1. Are you entitled to deduct, as work related expenditure, the purchase and maintenance of parts for your racing bicycle?
Yes.
2. Are you entitled to deduct, as work related expenditure, the transport of your racing bicycle to the cycling events?
Yes.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You are employed in a sporting goods shop as a full time employer.
Part of your duties is to race in various sporting events, including charity events.
You regularly race both local and national events.
Your employer provides you with the basic sporting gear that they have in stock.
You pay extra for equipment that is of better quality but not stocked by your employer.
Your employer also pays an allowance for travel, accommodation and to transport your sporting equipment to the events.
You occasionally have out of pocket expenses when you travel interstate where the cost of travel is more than the allowance provided by your employer.
Relevant legislative provisions
Section 8-1 of the Income Tax Assessment Act 1997
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income.
For an expense to satisfy the tests in subsection 8-1(1) of the ITAA 1997:
(a) it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense
(b) there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income
(c) it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income.
A deduction will be denied under the exception provisions of subsection 8-1(2) of the ITAA 1997 if the expense is private or domestic in nature, is of a capital nature or has incurred in earning tax exempt income.
TR 95/34 states that a deduction may be allowable if the transport costs can be attributed to the transportation of bulky equipment rather than to private travel between home and work. If, on the other hand, the equipment is transported to and from work by the employee as a matter of convenience or personal choice, it is considered that the transport costs are private and no deduction is allowable.
In FC of T v. Vogt 75 ATC 4073; (1975) 5 ATR 274, the taxpayer transported all of his instruments, including an acoustic bass and electric bass (each with its own amplifying equipment), trumpet and flugel horn to each performance. A deduction was allowed because the expense could be attributed to the transportation of bulky equipment (musical instruments) to varying places of work, rather than to private travel between home and work.
The essential character of the expenditure was such that it should be regarded as having incurred in gaining or producing the assessable income. The expenditure was not of a private or domestic nature.
In your case, you are employed in a sporting goods shop. Part of your duties requires you to participate in various sporting events. Your employer provides you with equipment to participate in the sporting event and also provides you an allowance to cover the cost of attending the events. You pay the additional cost beyond the allowance amount to purchase better quality equipment and to transport it to the events. The additional equipment and travel expenses are seen as incurred in the course of earning your assessable income and therefore will be deductible.
Note: The income tax law requires substantiation of certain work-related expenses. If the total of these expenses is $300 or less, you can deduct the amount without getting written evidence (except for certain car, travel allowance and meal allowance expenses), although a record must be kept of how the claim was calculated.
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