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Edited version of private ruling
Authorisation Number: 1011604737427
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
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Ruling
Subject: Work related expenses
Are you entitled to a deduction of x% of the cost of beauty products such as waxing pot, waxing strips, tweezers and massage oil?
Yes.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commenced on:
1 July 2009
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You worked as a in the beauty industry for approximately 4 months.
You were required by your employer to practice techniques at home.
You practiced on your family and friends throughout the week.
You used the purchased products and equipment x% for your work practice and y% for private use.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our 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, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
Section 8-1(1) of the ITAA 1997 states:
You can deduct from your assessable income all losses and outgoings to the extent that:
· it is incurred in gaining or producing your assessable income, or
· it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.
Section 8-1(2) of the ITAA 1997 states:
However, you cannot deduct a loss or outgoing under this section to the extent that:
· it is loss or outgoing of capital, or of a capital nature, or
· it is loss or outgoing of a private or domestic nature, or
· it is incurred in relation to the gaining or producing of exempt income, or
· a provision of this Act prevents you from deducting it.
A number of court decisions have determined that to satisfy the tests in section 8-1 of the ITAA 1997:
· it must have the essential character of an outgoing incurred in gaining assessable income, that is, be an income producing expense (Lunney v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 ATR 166)
· there must be a nexus between the outgoing and the assessable income so the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin N.L.Tongkah Compound N.L. v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236)
· 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 (Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; (1956) 11 ATD 147; (1956) 6 AITR 379), and
· its essential character (or nature) must not be of a capital, private or domestic nature (Federal Commissioner of Taxation v. Cooper (1991) 29 FCR 177; 91 ATC 4396; (1991) 21 ATR 1616).
In your case you were required as part of your employment in the beauty industry to purchase products and equipment to practice your techniques at home.
You practiced throughout the week on family and friends.
You used the products and equipment for private use.
The break down of the use was x% practice for work and y% private use.
You are able to claim a deduction for x% of the products and equipment you used in relation to your employment. The y% use for your private use is not deductible and you will need to apportion the amounts when including them in your tax return.
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