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Ruling
Subject: Deduction-renewal fee
Question
Are you entitled to a deduction for the fee to renew a airport lounge membership?
Answer:
Yes.
This ruling applies for the following period
Year ending 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You hold an airport lounge membership.
You were required to travel overseas as part of your duties for your employer.
You travelled a large number of times overseas during the financial year.
You also travelled once overseas for private reasons.
You used the business facilities such as the internet facilities at the airport lounge while travelling.
You paid a renewal fee.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Income Tax Assessment Act 1997 Section 26-45.
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.
It is accepted that fees for airport lounge membership are incidental and relevant to the conduct of a taxpayers business. However, in some instances, even though an expense may be incidental and relevant to the production of income, there are some sections of the ITAA 1997 which may nevertheless specifically exclude some types of expenditure from deductibility.
The expense in this case may potentially be excluded from deductibility by Division 32 or section 26-45 of the ITAA 1997. Division 32 precludes a deduction for expenses which are considered to be entertainment expenses. Section 26-45 does not allow a deduction for the cost of recreational club membership.
However, the airport lounge membership does not meet the definition of an entertainment expense under Division 32. It is also not considered to be a recreational club. Hence the fees are not excluded from deductibility on this basis.
Taxation Determination TD 1999/45 provides for a full deduction of membership fees if the essential character of the expense relates to the earning of assessable income. Hence there is no requirement to apportion the expense between private and business use if the essential character of the expense is primarily for business purposes.
In your case, you travelled overseas on a number of occasions during the financial year. You used the facilities of the airport lounge when you travelled. It is accepted that the renewal fee for the airport lounge membership is incidental and relevant to the earning of your assessable income as you used the facilities primarily for business purposes.
Accordingly, in your circumstances, the renewal fee is fully deductible under section 8-1 of the ITAA 1997.