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Edited version of private advice
Authorisation Number: 1012690060805
Ruling
Subject: Deduction for consumption of products
Question
Are you entitled to a deduction for the cost of the products you consume?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2014
The scheme commenced on
1 July 2013
Relevant facts
You are an agent for X products.
You consume the products to demonstrate their success.
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 except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
In establishing a connection, it must be shown that the outgoing is relevant and incidental to the gaining of assessable income.
In most circumstances the use of product would be considered a private expense. In some limited circumstances this expense may be characterised as an income producing expense and may be an allowable deduction. However there is an onus on the taxpayer to prove that such an outlay should be an allowable deduction.
This was highlighted in Case P30 25 CTBR (NS); Case 94 82 ATC 139 when the Board of review disallowed a claim for the purchase of newspapers by a real estate salesman. The real estate salesperson would gather information from the daily papers to assist him in selling real estate. The salesperson was however, unable to demonstrate that his income was affected by expenditure on the newspapers. The expense retained its private character and the deduction was not allowed.
While we accept that consuming your product may make you feel better, there is no way of demonstrating that it is the product that makes you feel that way and there is no way of demonstrating this to clients.
Consuming your product has the character of a private expense. The connection is too general or tenuous to allow a deduction for any portion of the cost. Accordingly you are not entitled to a deduction for the cost incurred in purchasing the product for your own consumption.
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