| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1012608071665
Ruling
Subject: Deductibility of expenses under section 8-1
Question 1
Will a non-recurrent payment be deductible in the year it is incurred pursuant to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
Question 2
Will the marketing and promotional expenditure be deductible in the income year it is incurred pursuant to section 8-1 of the ITAA 1997?
Answer
Yes
This ruling applies for the following periods:
1 October 2013 - 30 September 2014
1 October 2014 - 30 September 2015
1 October 2015 - 30 September 2016
The scheme commences on:
1 April 2014
Relevant facts and circumstances
1. The taxpayer is a company.
2. A lump sum payment will be made by the company in relation to advertising expenses incurred as part of a brand awareness campaign.
3. Additional ongoing marketing and promotional expenses will also be incurred as part of the brand awareness campaign.
4. Research from previous brand campaigns, has shown that brand campaigns have a demonstrable and measurable impact on business outcomes. The taxpayer anticipates that the brand awareness campaign will have a positive impact on customer consideration and that this uplift should lead to a substantial increase in product sales.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
Reasons for decision
Question 1
Will a non-recurrent payment be deductible in the year it is incurred pursuant to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Summary
Yes, the non-recurrent payment will be deductible under section 8-1 of the ITAA 1997 in the year it is incurred.
Reason for decision
Under section 8-1 of the ITAA 1997, a deduction is allowed for losses or outgoings to the extent that the loss or outgoing is incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.
However, a deduction is not allowed under section 8-1 of the ITAA 1997 where the loss or outgoing is of a capital, private or domestic nature, is incurred in producing exempt income, or where another provision of the ITAA 1997 prevents a deduction.
Therefore, the deduction is allowed under section 8-1 of the ITAA 1997 for the lump sum payment as the expense is incurred in gaining or producing assessable income, thus satisfying the positive limb of section 8-1, whilst not being excluded from deduction under any of the negative limbs of that section.
Question 2
Will the marketing and promotional expenditure be deductible in the income year it is incurred pursuant to section 8-1 of the ITAA 1997?
Summary
Yes, the marketing and promotional expenditure will be deductible under section 8-1 of the ITAA in the year it is incurred.
Reason for decision
Under section 8-1 of the ITAA 1997, a deduction is allowed for losses or outgoings to the extent that the loss or outgoing is incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.
However, a deduction is not allowed under section 8-1 of the ITAA 1997 where the loss or outgoing is of a capital, private or domestic nature, is incurred in producing exempt income, or where another provision of the ITAA 1997 prevents a deduction.
Therefore, the deduction is allowed under section 8-1 of the ITAA 1997 for the ongoing marketing and promotional expenses, as the expenses are incurred in gaining or producing assessable income, thus satisfying the positive limb of section 8-1 whilst not being excluded from deduction under any of the negative limbs of that section.
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).
