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Edited version of private ruling
Authorisation Number: 1011712619225
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Ruling
Subject: Expenses for gaining permanent residency
Question
Are you entitled to a deduction for the costs incurred in obtaining permanent residency?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
You held an employer sponsored visa, being recruited overseas.
You decided to remain in Australia in your current work position. Therefore, you applied for permanent residency.
You relied on professional services to go through the visa application process and incurred expenses for legal advice and translators.
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 any losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent outgoings are of a capital, private or domestic nature.
The courts have considered the meaning of 'incurred in gaining or producing the 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 the 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.
The expenditure must therefore be related to the production of assessable income. The purpose of obtaining permanent residency was to allow you to live in Australia rather than earn assessable income as an employee.
Alternatively, the cost of obtaining permanent residency is considered private in nature and not deductible under section 8-1 of the ITAA 1997 because the purpose for applying for permanent residency was for you to remain legally in Australia.
Accordingly, the expenses for applying for permanent residency are not deductible under section 8-1 of the ITAA 1997 because they were not incurred in gaining or producing assessable income and are also private in nature.