ATO Interpretative Decision
ATO ID 2001/717 (Withdrawn)
Income Tax
Deductibility of Money Order Purchase FeeFOI status: may be released
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This ATO ID is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxpayer entitled to claim a deduction for expenditure incurred in purchasing a money order under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The cost of obtaining the money order is deductible under section 8-1 of the ITAA 1997.
Facts
As a way of earning some income, the taxpayer tutors students in certain subjects.
As part of this tutoring, the taxpayer operates through a referral service (XYZ Services). A student will contact XYZ Services requesting to be tutored in a subject(s). XYZ Services will then contact the taxpayer and give the taxpayer the details so that the taxpayer can contact the student and arrange a day for the tutoring to take place.
At the first lesson the taxpayer collects a set enrolment fee as well as the fee that is to be levied for the tutoring service.
Under the referral service arrangement the taxpayer is obliged to forward the enrolment fee to XYZ Services. The taxpayer does this by purchasing a money order from the post office and sending it to XYZ Services.
The post office charges a set fee for the provision of a money order.
Reasons for Decision
The taxpayer has an arrangement with XYZ Services who, in return for the payment of the enrolment fee, refers clients for tutoring. Without this referral service, the taxpayer would not be able to earn the assessable income from tutoring activities. Therefore, it can be said that the taxpayer is forwarding the enrolment fee to XYZ Services in order to gain assessable income as a tutor.
The cost of obtaining the money order is incurred for the purpose of forwarding the enrolment fee to XYZ Services and therefore, meets the requirements of subsection 8-1 of the ITAA 1997.
The cost of a money order would not be regarded as being capital or private or domestic in this case. The taxpayer is earning assessable income from tutoring activities and therefore it cannot be said that the cost of the money order relates to exempt income. Furthermore, there is no section contained in either the ITAA 1997 or Income Tax Assessment Act 1936 which would prevent the taxpayer from claiming a deduction for such an expense. Given this situation, subsection 8-1(2) of the ITAA 1997 would not preclude the taxpayer from claiming the cost of the money order as a deduction.
As the cost of purchasing the money order satisfies both subsection 8-1(1) of the ITAA 1997 and is not precluded from being deducted under subsection 8-1(2) of the ITAA 1997, the taxpayer will be entitled to claim a deduction for the cost of purchasing the money order.
Date of decision: 26 September 2001Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
section 6-5
section 8-1
subsection 8-1(1)
subsection 8-1(2)
Keywords
Deductions & expenses
ISSN: 1445-2782
| Date: | Version: | |
| 26 September 2001 | Original statement | |
| You are here | 1 April 2010 | Archived |