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Edited version of your written advice
Authorisation Number: 1051283750204
Date of advice: 28 September 2017
Ruling
Subject: Relocation expenses
Question 1
Are you entitled to a deduction for the costs of relocating to City A as a result of a court order?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commences on:
1 July 2014
Relevant facts and circumstances
As a consequence of a protracted industrial battle against your employer you suffered a breakdown resulting in your arrest.
You were compelled to front the local magistrate where a court order was issued stating that you be placed in the care of a relative in City A.
The magistrate accepted that your condition was caused by the ongoing battle with your employer.
The costs specific to the court order stipulating that you move to City A to continue your psychological therapy included airfares, vehicle transportation and removalist costs.
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, or relate to the earning of exempt income.
The courts have considered the meaning of incurred in gaining or producing assessable income. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431, the High Court stated that:
For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing assessable income, it must be incidental and relevant to that end. The words incurred in gaining or producing assessable income mean in the course of gaining or producing such income.
Relocation expenses are considered to be private in nature regardless of whether they are incurred to take up an appointment in a new or existing employment. This is so regardless of whether the relocation was involuntary. (Taxation Rulings IT 2481and IT 2614).
While it is acknowledged that your mental health condition was caused by incidents relating to your employment and that you remained an executive employee, the matter before the courts that the magistrate ruled on and the expenses you incurred to relocate to City A following the court order have no direct connection to the gaining or producing of your assessable income. Additionally, they are considered to be private in nature. Therefore you are not entitled to a deduction under section 8-1 of the ITAA 1997.
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