| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012301766727
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.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: Deductibility of wages and travel allowances
Question
Are you entitled to a deduction for wages and travel allowance paid to the director of your corporate trustee and his spouse where the payments are made at commercial rates?
Answer
Yes.
This ruling applies for the following periods
Year ended 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
The scheme commenced on
1 July 2011
Relevant facts and circumstances
You have been engaged to provide management services to Person X) in relation to their activities.
You have engaged Person Y and Person Z (Person X's relatives) to carry out the engagement.
Person Y is the sole director of your corporate trustee.
You pay Person Y and Person Z travel allowances for each trip they accompany Person X. The travel allowance is paid at a commercial rate.
You intend to commence paying Person Y and Person Z wages at rates that are commercial for the type of work carried out.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or necessarily incurred in carrying on a business except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income or a provision of the taxation legislation excludes it.
An entity is entitled to a deduction for wages and travel allowances paid to employees who are carrying out duties as part of the entity's income earning activities.
You earn your assessable income by co-ordinating Person X's activities and interests. You have employed Person Y and Person Z to assist with these activities.
You are entitled to a deduction for travel allowances and wages paid to Person Y and Person Z as the expenses have been incurred in earning your assessable income.
As Person Y and Person Z will be paid at commercial rates, their relationship with Person X or your corporate trustee does not affect the deductibility of the travel allowances and wages paid to them.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
