Edited version of private ruling

Authorisation Number: 1011859837081

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Ruling

Subject: Work related expenses

Question 1

Are you entitled to a deduction for the expenses relating to travel to the airport, parking fees, airfares, accommodation, car hire, practice rounds and players' contribution expenses you incur in attending sporting championships and competitions while you are on duty?

Answer

Yes.

Question 2
Are you entitled to a deduction for team shirt expenses?
Answer

No.

Question 3

Are you entitled to a deduction for your sporting shoes for the portion which relates to your use while you are on duty?

Answer

Yes.

Question 4

Are you entitled to a deduction for the decline in value of your sporting equipment?

Answer

Yes.

This ruling applies for the following periods

Year ended 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

The scheme commences on

1 July 2005

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an employee.

You represent your employer in sporting championships and competitions.

You are considered to be on duty when you are competing in championships, competitions and practice rounds.

You incurred expenses when attending the championships and competitions, which includes travel to the airport, parking fees, airfares, accommodation, car hire, practice costs, players' contributions and team uniforms (with employer logo).

You incurred expenses in purchasing sporting equipment and sporting shoes. The equipment is used when you are representing your employer. You also use the equipment when you are not representing your employer.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.
Income Tax Assessment Act 1997 Section 40-25.
Income Tax Assessment Act 1997 Section 40-95.
Income Tax Assessment Act 1997 Section 40-100.
Income Tax Assessment Act 1997 Section 40-105.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Summary

You are entitled to a deduction for the expenses incurred for travel to the airport, parking fees, airfares, accommodation, car hire, practice costs, players' contributions and a portion of the costs relating to sporting equipment and shoes. The shirts however, are considered to be conventional clothing and are therefore not deductible.

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.

Taxation Ruling TR 95/17 examines the deductibility of certain expenditure incurred by members of the Australian Defence Forces (ADF). Included are cases where members incur expenses for sporting activities.

Playing expenses

Taxation Ruling TR 95/17 states that a deduction is allowable for expenses incurred by an ADF member in participating in a sporting activity if the member is considered to be on duty while participating in the activity and the member is participating as an official ADF representative at inter service or combined service competitions, or the member is required to participate in the activity as part of his/her normal income earning activities.

In your case, you participate in sporting championships and competitions representing your employer when you are on duty as part of your regular employment activities. You incur expenses for accommodation, practice costs and player's contributions which are all incurred when you are on duty. You are therefore entitled to a deduction for these expenses.

Team shirts and sporting shoes

Taxation Ruling TR 97/12 examines the deductibility of expenses for clothing purchased for work related purposes. Expenditure on clothing is generally considered to be essentially an item of private expenditure unless the clothing is incidental and relevant to your occupation. Expenditure on clothing which is in the nature of a uniform prescribed by the employer (such as a bus conductor's uniform) or is protective in nature (for example, overalls worn by a furnace worker or operating gowns worn by a surgeon) is deductible.

However, expenditure on conventional clothing (that is, clothing of a type which is usually worn by men or women regardless of their occupation) is considered to be private in nature and is not deductible.

A uniform/wardrobe is a collection of inter-related items of clothing and accessories that is distinctive to a particular organisation. In Case R55 84 ATC 411; 27 CTBR (NS) Case 109, the Tribunal said that:

... conventional clothing of a particular colour or style does not necessarily, because of those factors alone, assume the character of a uniform. Likewise, ordinary clothing is not converted into a uniform by the simple process of asserting that it fills that role or by the wearing of a name plate, etc. attached to clothing.

Taxation Ruling TR 97/12 also states that occupation specific clothing must be distinctive and unique, in the sense that by its nature or physical condition it is readily identified as belonging to a particular profession, trade, vocation, occupation or calling. To fall in this category, the clothing must be non-conventional in nature, that is, it must not be ordinary clothing of the type usually worn by men and women regardless of their occupation. Clothing which could belong to a number of occupations would not fall within the definition of occupation specific clothing.

In your case you purchased team shirts and sporting shoes for use when representing your employer when on duty. The shoes purchased are specialised sporting shoes and are therefore occupation specific. They are not conventional as they are specialised sporting shoes. Accordingly you are entitled to a deduction for the portion of the expense incurred for the purchase of the sporting shoes which relates to your use when on duty. However the team shirts are considered conventional in nature and you are not entitled to a deduction for this expense.

Sporting equipment

Taxation Ruling TR 95/17 provides an example where a defence member is required to participate in the national hockey team which plays in inter-service competitions. They are provided with transport, accommodation and official ADF monogrammed skirt and T-shirt to wear during the competition, but must provide their own hockey stick. A deduction was allowed for depreciation of their hockey stick to the extent that it is used in inter-service competitions.

Section 40-25 of the ITAA 1997 allows you to deduct from your assessable income an amount equal to the decline in value of a depreciating asset to the extent that it is used to produce assessable income.  A depreciating asset is an asset with a limited effective life that can reasonably be expected to decline in value over time.

Section 40-95 of the ITAA 1997 allows two choices to determine this effective life.

You must choose either:

(a)  to use an effective life determined by the Commissioner for a depreciating asset under section 40-100 of the ITAA 1997; or
(b)  to work out the effective life of the asset yourself under section 40-105 of the ITAA 1997.

The Commissioner has determined the effective life for various sporting equipment, such as bowling balls and ice skates as five years (Taxation Ruling TR 2011/2, which can be accessed on our internet website at www.ato.gov.au).

You can work out the effective life of a depreciating asset yourself by estimating the period (in years, including fractions of years) it can be used by any entity for a taxable purpose:

(a)  having regard to the wear and tear you reasonably expect from your expected circumstances of use; and
(b)  assuming that it will be maintained in reasonably good order and condition.

In your case, you have purchased sporting equipment which you use when representing your employer on duty. The sporting equipment is considered to be a depreciating asset. It is accepted that the sporting equipment is used in the course of your work duties and training. Therefore you are entitled to a deduction for the decline in value over its effective life, for the portion of the expense which relates to the sporting equipment's use when you are on duty.