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Edited version of private ruling
Authorisation Number: 1011789543927
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Ruling
Subject: Furniture removal and storage - rental property
Question:
Are you entitled to a deduction for the expenses incurred in the removal and storage of your furniture?
Answer:
No
This ruling applies for the following periods
Year ending 30 June 2011
Year ending 30 June 2012
The scheme commenced on
1 July 2010
Relevant facts
In order to rent the family home unfurnished you will have the furniture in it removed to a storage facility, where you will incur storage costs while the home is rented.
Reasons for decision
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 number of significant court decisions have established that, for an expense to satisfy the requirements of section 8-1 of the ITAA 1997:
· It must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income producing expense (Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166)
· 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. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236); 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 their assessable income (Charles Moore & Co Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; (1956) 11 ATD 147; (1956) 6 AITR 379 and Federal Commissioner of Taxation v. Hatchett (1971) 125 CLR 494; 71 ATC 4184; (1971) 2 ATR 5570.
In your case, you will place your furniture in storage so that your property can be rented. The costs incurred are related directly to the removal and storage of your furniture, not to the derivation of your rental income. As such the costs are considered to be a private expense.
Accordingly, you are not entitled to a deduction under section 8-1 of the ITAA 1997 for the expenses incurred in removing and storing your furniture.