Edited version of private ruling

Authorisation Number: 1011766244478

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Ruling

Subject: work-related expenses

Question 1

Are you entitled to a deduction for fitness supplements, where you were employed as a full-time member of a disciplined force?

Answer

No.

Question 2

Are you entitled to a deduction for expenses incurred in relation to your employment as a member of a disciplined force?

Answer

No.

Question 3

Are you entitled to a deduction for the decline in value of your weapon and related equipment, for the period you were a full-time member of a disciplined force?

Answer

No.

Relevant facts and circumstances

You are a full-time member of a disciplined force.

For several years you were in a number of different areas.

You are a part of a special unit.

To get into this unit you have stated that you must possess a high level of skills and physical fitness. You also had to pass fitness tests.

You have also stated that you are required to maintain a higher level of fitness than the general standard of industry.

You incurred expenses on fitness supplements.

You have stated that you intend to incur other fitness-related expenses (while you are a member of the specified area).

While you were a full-time member of a disciplined force you purchased a weapon and related equipment to enable you to practice and maintain your skills. You have stated that you do not use the weapon for private or recreational purposes.

You do not use the weapon while you are working as you are not permitted to use it while you are on duty.

The weapon and related equipment are different from the weapons and related equipment you use in the course of your work.

While you were a member of the specified area, you enrolled in a fitness course.

You personally paid for the course.

You completed the course in your own time. Your employer did not encourage you to complete the course and did not give you specific leave for it.

You have stated that you completed the course to increase your skills and to help train yourself and your co-workers more effectively. You considered the course to be in addition to your normal job duties.

After completion of the course, your employment with the disciplined force did not change, you remained a member of the specified area.

You began new employment in the fitness industry using the qualifications you gained from the course.

You work full-time in this occupation, but you take time off when you are required to work with the disciplined force or attend related courses.

You have stated that you expect your fitness-related expenses will assist you in both types of employment. You believe that a third of these expenses will be related to your employment in the the disciplined force.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1,

Income Tax Assessment Act 1997 Section 51-5 and

Income Tax Assessment Act 1997 Section 40-25.

Reasons for decision

Summary

You are not entitled to a deduction for the cost of fitness supplements, which you purchased while you were a full-time member of the specified area within the disciplined force. These expenses are private in nature.

You are not entitled to any deductions that relate to your income producing activities as a member of this specified area. This is because the income earned is exempt from tax. Therefore, you are not entitled to a deduction for the cost incurred to complete a fitness course or the cost of any other fitness-related expenses that are incurred while you are a member of the specified area.

You are not entitled to a deduction for the decline in value of your weapon and related equipment as they are private in nature.

Detailed reasoning

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.

A specific Taxation Ruling and its subsequent addendums discuss work related deductions for employees of disciplined forces.

Fitness supplement expenses

Generally, 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. For example, a police officer or a member of the military would not generally be able to deduct the costs of maintaining their fitness levels.

The deductibility of expenses for maintaining fitness as a member of disciplined forces is outlined in the Taxation Ruling.

Although most fitness-related expenses, like gym membership, are usually considered to be a private expense, they will be allowable as a deduction if the disciplined force member can demonstrate that:

strenuous physical activity is an essential and regular element of their income-earning activities and that these costs were incurred to maintain a level of fitness well above the [disciplined force] … general standard.

However, an employer's requirement that an employee incur expenditure which is not related to income-producing activities does not convert that expenditure into a deductible outgoing. In the case FC of T v. Cooper 91 ATC 4396 at 4414; (1991) 21 ATR 1616 at 1636 (Cooper's Case) Lockhart J said:

The taxpayer incurred the expenditure on additional food and drink for the purpose of increasing his weight and thus to play professional football and earn assessable income. But its character as the cost of additional food and drink is neither relevant nor incidental to the training for and the playing of football matches, which is the activity by which he gained his assessable income. The expenditure was not incurred in or in the course of that activity. The taxpayer was paid money to train for and play football, not to consume food and drink.

In my opinion the taxpayer's expenditure on additional food and drink was not incurred in the gaining or producing of his assessable income and is therefore not deductible from his assessable income during the relevant years of income.

Further more, for the reasons already given I would regard the expenditure as being of a private nature.

Therefore, whilst certain disciplined force members may be required to maintain a high level of physical fitness, this does not mean that all related expenditure is allowable as an income tax deduction.

In your case, while we accept that your role in a special unit required a higher standard of fitness than the general disciplined force standard, we do not consider that the cost of fitness supplements are incidental and relevant to the earning of your assessable income.

The reasoning in Cooper's Case can be applied in your case. Although taking fitness supplements support any physical activities you may undertake to maintain your fitness levels, the nexus between the expenditure and your employment is not sufficient enough to make them deductible in nature.

Therefore, we consider the cost of the fitness supplements to be private in nature and not deductible under section 8-1 of the ITAA 1997.

Expenses incurred while member of the specified area within the disciplined force

The ITAA 1997 lists the type of payments that are exempt from income tax. A specific item states that pay and allowances as a member of the specified area qualify for exemption unless it is pay or an allowance for full time service.

A deduction will therefore be denied under section 8-1 of the ITAA 1997 if the expense is incurred in the relation to the earning of exempt income.

The pay you receive while being a member of the specified area is considered to be exempt income.

At the time you incurred the expense to complete a fitness course, you were a member of the specified area. Therefore, the cost of the course can only be related to the earning of your exempt income as a member of the specified area.

For this reason, a deduction is not allowable under section 8-1 of the ITAA 1997 for the expenses you incurred to undertake your fitness course.

Similarly, any fitness-related expenses you incur will not be deductible in relation to your employment as a member of the specified area.

Weapon and related equipment

The purchase cost of a weapon and its related equipment is a capital expense and is not an allowable deduction under section 8-1 of the ITAA 1997. Rather, the weapon and its equipment are depreciating assets and a deduction for their decline in value may be allowable under division 40 of the ITAA 1997.

Section 40-25 of the ITAA 1997 allows you to deduct an amount equal to the decline in value of a depreciating asset which is purchased and held in your possession for any time during an income year and used for work-related purposes.

Weapons, ammunition, cleaning and related equipment are normally supplied and replaced by the disciplined force. However, the relevant Taxation Ruling states that a deduction will be allowable for the cost of additional and/or more sophisticated equipment used for income-earning purposes.

The Taxation Ruling explains that an expense that is incurred voluntarily for work related purposes may still be allowed as a deduction if the expense has a direct connection with the income-earning activities.

In your case, while it may be argued that the weapon and related equipment assist you in maintaining your skills for your employment, we consider the use of this type of weapon to be inherently recreational in nature.

As you do not use the weapon in your employment and you are not permitted to use it while you are on duty, a direct connection does not exist between the costs incurred and your employment duties. Using the weapon to practice in your own time does not change the recreational nature of the activity.

For this reason, you are not entitled for a deduction for the decline in value of the weapon and the related equipment where you were a full-time member of the disciplined force.

Further, you would not be entitled to a deduction while you are a member of the specified area within the disciplined force, for the reasons explained above.