Edited version of private advice

Authorisation Number: 1052352742193

Date of advice: 28 January 2025

Ruling

Subject: Deductions - gym membership

Unless otherwise stated, all legislative references below are to the Income Tax Assessment Act 1997.

Question

Are you entitled to claim a deduction for the gym membership fees incurred under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

You are a sole trader, and you operate a gardening business.

The business was registered in the 20XX financial year.

You commenced your business activities in the same year.

Your duties include:

•         Landscaping

•         Digging

•         Carrying heavy materials such as pots and bags of soil.

On average, you spend 25 hours a week undertaking your business activities.

In order to maintain your physical fitness level, you obtained a gym membership.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Section 8-1 of the ITAA 1997 allows a deduction for a loss and outgoing to the extent that it is incurred in gaining or producing assessable income. However, a loss or outgoing is not deductible if it is of a capital, private or domestic nature, or it is incurred in gaining or producing exempt income.

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 (Lunney's case)),

•                     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).

The Commissioner generally takes the view that expenses incurred in keeping fit are inherently private in nature as it ultimately involves the person's own physical wellbeing. This position does not change even if the person is employed to undertake physical activity as part of their duties.

Taxation Ruling TR 95/17 Income tax: employee work-related deductions of employees of the Australian Defence Force discusses the deductibility of fitness related expenses for Australian Defence Force (ADF) members. TR 95/17 states that a deduction is not allowable for fitness expenses in maintaining a general standard of fitness expected of an ADF member as such expenses are generally private in nature. However, a deduction is allowable for these costs if the ADF member can demonstrate that strenuous physical activity is an essential and regular element of his or her income earning activities and that these costs were incurred to maintain a level of fitness well above the ADF general standard.

An example provided in TR 95/17 refers to a member of the Special Air Services Regiment (SAS) who is paid to maintain the very highest level of fitness, and plainly differentiates between the level of fitness required of a SAS member and that of other ADF members.

The principle outlined in TR 95/17 is that unless a taxpayer's normal duties require an advanced (above and beyond normal) fitness level, deductibility of expenses will be denied. That is, expenses incurred in keeping fit (for example, gym memberships) are generally considered to be of a private nature, unless strenuous physical activity is an essential and regular element of performing the employee's duties.

Taxation Determination TD 93/114 Income tax: is a police officer, who is required to maintain an adequate level of physical fitness in order to undertake police duties, entitled to claim a deduction for fitness related expenditure states that where police duties do not require an officer to undertake regular strenuous physical activity, expenses of keeping fit are not deductible. This type of expense does not have the essential character of being incurred in the course of gaining or producing assessable income. Whilst Police Regulations may require an officer to remain in a physically fit condition, this does not mean expenditure related to keeping fit is allowable as an income tax deduction.

In your case, we acknowledge that your duties require you to maintain a certain level of fitness.

However, the level of fitness required is not at a level comparable to that of a physical training instructor or an officer in special combat. It is comparable to maintaining a general standard of fitness expected as a member of the Defence Force or a member of the Police Force.

Although you are required to be fit, the level of fitness required cannot be considered to be at the highest level nor at a level which makes it an essential and a regular element of your duties given the varied nature of your responsibilities.

There is an insufficient connection between the fitness expenses and the derivation of assessable income.

Whilst the gym membership may benefit and help you maintain your fitness, this does not in itself mean that the expenditure was incurred in gaining or producing assessable income.

Your gym membership fees are more private in nature.

Therefore, you are not entitled to a deduction for the gym membership fees incurred under section 8-1 of the ITAA 1997.

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