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Edited version of private ruling
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Ruling
Subject: Deductibility of account keeping fees
Question
Are you entitled to a deduction for your account keeping fees?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts and circumstances
You currently receive dividend and other investment proceeds into a bank account.
Your wages and other cheque payments from government sources are also deposited into this account.
You withdraw cash from your bank account to pay for your daily living expenses. Your union fees are also deducted from the bank account.
You incur account keeping fees on this bank account as you are unable to maintain a bank balance above certain limit amount.
Your bank account also earned a minimal interest income.
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 a loss or outgoing to the extent to which it is incurred in gaining or producing assessable income, except where the loss or outgoing is of a capital, private or domestic nature, or relates to the earning of exempt income.
Account keeping fees are deductible expenses if the bank account is held for investment purposes, for example, a cash management account or a term deposit account. There exists a sufficient connection between the earning of an assessable income and the expenses.
In your case, the account keeping fees were incurred as you are unable to maintain a certain bank balance. The bank account is used to receive your wages, dividend income and other deposits such as from government sources. You also use the account to pay for day to day living expenses. It is therefore considered that the bank account is not held in the production of your assessable income and it is being used for private purposes.
You contended that the interest income earned is considered to be a return on your investment and therefore any fees incurred on your bank account is a cost in earning that income. However, it is the purpose of keeping the bank account that needs to be considered which is to facilitate the funds to be credited into your account rather than the derivation of your assessable income. The earning of the interest income is merely incidental to maintaining the account and not the primary purpose for keeping such account.
It is acknowledged that if not for the bank account you are unable to receive your dividends and other payments. However, this reason alone does not alter the essential private nature of the expenses. Therefore the associated costs in maintaining your bank account are not an allowable deduction.