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Ruling
Subject: Federal Court fee
Question
Are you entitled to a deduction for the Federal Court fee paid for your superannuation surcharge assessment appeal?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You received superannuation surcharge assessments.
You filed a notice of appeal to the Federal Court in regards to the assessments.
You paid a fee of $X to the Federal Court to file your appeal.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Income Tax Assessment Act 1997 Section 25-5.
Reasons for decision
Section 25-5 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for certain tax related expenses.
Paragraph 25-5 (1)(a) of the ITAA 1997 provides a deduction for expenditure you incur for managing your tax affairs.
Paragraph 25-5 (1)(b) of the ITAA 1997 provides a deduction for expenditure you incur for complying with an obligation imposed on you by a Commonwealth law, insofar as that obligation relates to the tax affairs of an entity.
Section 995-1 of the ITAA 1997 defines tax affairs as affairs relating to tax.
Tax is defined in section 995-1 to mean:
(a) income tax imposed by the Income Tax Act 1986, as assessed under this Act; or
(b) income tax imposed as such by an other Act, as assessed under this Act.
Income tax as defined in section 995-1 of the ITAA 1997 means income tax imposed by any of these:
(a) the Income Tax Act 1986;
(b) the Income Tax (Diverted Income) Act 1981;
(c) the Income Tax (Former Complying Superannuation) Funds) Act 1994;
(d) the Income Tax (Former Non-resident Superannuation Funds) Act 1994;
(e) the Income Tax (Fund Contributions) Act 1989.
This Act as defined in section 995-1 of the ITAA 1997 includes the Income Tax Assessment Act 1936 (ITAA 1936) but does not include the Superannuation Contributions Tax Imposition Act 1997.
The superannuation contributions surcharge is imposed by the Superannuation Contributions Tax Imposition Act 1997. The Superannuation Contributions Tax (Assessment and Collection) Act 1997 and its Regulations provide for the assessment and collection of the tax. The Superannuation Contributions Tax (Members of Constitutionally Protected Funds) Assessment and Collection Act 1997 and the Superannuation Contributions Tax (Members of Constitutionally Protected Funds) Imposition Act 1997 extend the surcharge to members of constitutionally protected funds.
As the superannuation contributions surcharge is not imposed by any of the Acts as listed in the definition of income tax in section 995-1 of the ITAA 1997, it is not considered to be a tax for the purposes of section 25-5 of the ITAA 1997.
The decision in Drummond v. FC of T [2005] FCA 1129; 2005 ATC 4783; 60 ATR 356 confirms that the definition of tax does not extend to superannuation contributions tax.
Although the Commissioner of Taxation has the administration of the superannuation contributions surcharge, the surcharge is not imposed or assessed by the ITAA 1936 or the ITAA 1997.
In your case you incurred expenses in filing an appeal to the Federal Court regarding the imposition of the superannuation contributions surcharge. Although the superannuation contributions surcharge was imposed by a Commonwealth law, that Commonwealth law does not relate to your tax affairs as defined in section 995-1 of the ITAA 1997.
The surcharge is not an income tax as defined in section 995-1 of the ITAA 1997.
As the requirements of section 25-5 of the ITAA 1997 are not satisfied, a deduction is not allowable for your expenses incurred in filing an appeal to the Federal Court regarding the imposition of the superannuation contributions surcharge.
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of 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, or a provision of the ITAA 1997 prevents it.
There is no evidence to show that your expense was incurred in gaining or producing your assessable income, therefore no deduction is allowable under section 8-1 of the ITAA 1997.