Edited version of your written advice

Authorisation Number: 1012787334547

Ruling

Subject: Work related expenses

Question 1

Are you entitled to a deduction for the cost of items used for teaching such as learning materials?

Answer

Yes.

Question 2

Are you entitled to a deduction for depreciation for the cupboards?

Answer

Yes.

Question 3

Are you entitled to a deduction for the work related use of your printer, ink and sunglasses?

Answer

Yes.

Question 4

Are you entitled to a deduction for costs incurred for the UBD and running shoes?

Answer

No.

Question 5

Are you entitled to a deduction for costs incurred for stationery and other items given to students for their own individual needs?

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 a teacher.

You have purchased several items such as learning materials to use at work.

You purchased cupboards costing more than $300 to be used at home for storing your work related items.

The printer is used 40% for private purposes.

The UBD was used to find some work places.

You use some of the items to give to students who don't have any supplies. Other items are used as rewards for students.

You use your sunglasses when outside for employment duties. You also use them for private purposes.

You have receipts for the expenses incurred.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1997 Section 40-25.

Reasons for decision

Allowable deductions

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, or a provision of the ITAA 1997 prevents it.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

• it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; (1958) 100 CLR 478, 

• 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 (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47), and

• 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. FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

A deduction is only allowable if an expense:

• is actually incurred,

• meets the deductibility tests, and

• satisfies the substantiation rules.

Taxation Ruling TR 95/14 Income tax: employee teachers - allowances, reimbursements and work-related deductions discusses work related deductions for employee teachers.

Stationery and teaching aids

A deduction is allowable under section 8-1 of the ITAA 1997 for the purchase of stationery used for work-related purposes.

Paragraphs 202-204 of TR 95/14 state that no deduction is allowable where teachers supply items to students for their individual needs or purchase gifts for students. While an employee teacher may feel a moral, personal or social obligation to outlay the above expenses, there is no connection between the expenditure incurred and the gaining or producing of assessable income. The expenditure is considered to be private expenditure.

TR 95/14, paragraphs 205-207, state a deduction is allowable if an employee teacher purchases teaching aids to be used in the course of carrying out the duties of employment and that expenditure is not of a private, domestic or capital nature.

If an item or article is used for both work-related and other purposes, then the cost must be apportioned and a deduction claimed only for that portion which is work-related.

You have incurred expenses for various materials which were purchased for use at work. As the items have been used for work-related purposes, a deduction is allowed. A deduction is also allowed for prizes purchased to reward achievement and encourage students.

However, the cost of pens and other items given to students who do not have their own is not considered to be a work related expense. Therefore no deduction for these items is allowable.

Depreciating assets

The cupboards and printer and other assets are regarded as capital items and therefore a deduction under section 8-1 of the ITAA 1997 is not allowed.

However, section 40-25 of the ITAA 1997 allows a deduction for the decline in value of a depreciating asset held for the purpose of producing assessable income during the year. Only the income producing portion of the decline in value is deductible.

The decline in value of certain depreciating assets costing $300 or less is their cost. That is, you get an immediate deduction for the cost of the asset to the extent that you used it for a taxable purpose during the income year.

Your cupboard, printer and other assets are regarded as depreciating assets.

A deduction is allowable for depreciation on the cost of these assets to the extent that it is used for work related activities. That is, where assets are used for private purposes as well as work related purposes, it is necessary to apportion the expenses to determine the work related use. A deduction is only allowable for the depreciation of the work related use of these assets.

As the printer and other assets cost less than $300, an immediate deduction is allowed for the work related use of these assets.

The cupboard cost more than $300 and therefore needs to be depreciated over its effective life. For more information on calculating your allowable deduction for depreciation please refer to Guide to depreciating assets 2014 which is available on the Australian Taxation Office website www.ato.gov.au.

Running shoes

Expenditure on conventional clothing and footwear is usually not an allowable deduction under section 8-1 of the ITAA 1997 because there is not a sufficient connection between the expenditure and the income-earning activities of the taxpayer. Furthermore, these expenses are considered to be private in nature.

Paragraph 64 of TR 95/14 states expenditure by teachers on running/aerobic shoes is expenditure on conventional clothing, and is not deductible.

Sunglasses and hat

Expenditure on sunglasses and sunhats are deductible for taxpayers who are required, as part of their duties, to work outside in the open air exposed to sunlight. (Taxation Ruling TR 2003/16 Income tax: deductibility of protective items and Morris and Ors v FC of T (2002) 50 ATR 104; 2002 ATC 4404; [2002] FCA 616).

You wear sunglasses and hat when undertaking playground supervision and physical education lessons. The sunglasses are also worn when undertaking private activities.

As your duties included activities outside, you are entitled to claim a deduction for the work related expenditure on your sunglasses and hat.

UBD

Generally a deduction is not allowable for the cost of travel between home and work as it is considered a private expense. Expenditure incurred in travelling to work is a prerequisite to the earning of assessable income rather than being incurred in the course of producing that income. The essential character of the expenditure is of a private or domestic nature and therefore not an allowable deduction (Lunney's case and Federal Commissioner of Taxation v Cooper (1991) 29 FCR 177; 91 ATC 4396; 21 ATR 1616). 

The UBD is used to help find your place of work and is not incurred in carrying out your income earning activities. It is a cost of getting to work and not a cost of doing your work. The associated cost is not sufficiently connected to your assessable income and therefore no deduction is allowed.

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