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Edited version of your private ruling
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Ruling
Subject: Deduction for electronic goods purchased
Question
Are you entitled to a deduction for the purchased items?
Answer
No
This ruling applies for the following period:
Year ended 30 June 2011
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You are employed and work with clients.
You have purchased items.
You provide your clients with these items to assist to keep their brain stimulated and otherwise occupied.
These items are always on loan to clients and remain at the workplace when not in use.
You are not required to supply these items as part of your employment and you were not reimbursed by your employer for their cost.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
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 except where the outgoings are of a capital, private or domestic nature.
A deduction is generally not allowable for the cost of domestic or private items because the expenses are not considered to be incurred in producing assessable income.
Taxation Ruling TR 95/15 provides the Commissioners view on allowances, reimbursements and work related deductions for nursing industry employees and in paragraph 26 the basic tests for deductibility of work-related expenses are considered and in subsection 8-1 of the ITAA 1997.
It says: 'All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature, or are incurred in relation to the gaining or production of exempt income.'
The ruling goes on to state that number of significant court decisions has determined that, for an expense to satisfy the tests in subsection 8-1of 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, and
(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.
In your case, you have purchased items that you lend to your clients. These goods are inherently for private recreational use and are used in that manner by your clients. There is a lack of incidental and relevant connection between the purchase of these goods and the activities for which you are employed. You are therefore not able to claim a deduction for the purchase of these items.
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