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Edited version of your private ruling
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Ruling
Subject: Deduction - membership fees
Question
Are you entitled to a deduction for the full costs of your membership renewal fees?
Answer: No
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You hold professional qualification.
You operated your practise through an entity.
The entity earns fees for the services it provides.
You are an employee of the entity.
You were paid a salary for your services by the entity.
You were injured in an accident.
You were unable to return to work.
You received payments for loss of income from an insurer and declared these payments in your tax return.
You paid renewal subscription fees to a profession organisation.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1.
Income Tax Assessment Act 1997 section 25-55
Reasons for decision
Section 8-1 of the Income Tax Assessment Act (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.
The general test is that there should be a clear connection between the expense and the gaining or producing of assessable income from a profession or employment. Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces his or her assessable income (Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344 at 349-350; (1956) 11 ATD 147 at 148; (1956) 6 AITR 379 at 384; FC of T v. Cooper 91 ATC 4396 at 4403; (1991) 21 ATR 1616 at 1624; Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508 at 4521; (1993) 26 ATR 76 at 91).
It is a long standing principle that a taxpayer does not satisfy section 8-1 of the ITAA 1997 merely by demonstrating a casual connection between the expenditure and the derivation of income. What must be shown is a closer and more immediate connection. The expenditure must be incurred in gaining or producing your assessable income (Lunney v Commissioner of Taxation (1958) 100 CLR 478). These principles have been affirmed by the High Court in Commissioner of Taxation v Payne [2001] HCA 3.
Taxation Ruling TR 2000/7 provides that subscriptions paid by a person for membership of a trade, business or professional association are deductible under section 8-1 of the ITAA 1997 where the principal activities of the association are relevant to the gaining or producing of assessable income by the member.
However, a deduction is not allowable under section 8-1 of the ITAA 1997 for subscriptions paid to an association where the person is retired from (or does not otherwise earn assessable income from) the particular trade, business or profession.
Where a payment made to an association cannot satisfy the requirements of section 8-1 of the ITAA 1997, a deduction is allowable to the person (up to a maximum amount of $42 in an income year for payments in respect of each association to which the person belongs) under section 25-55 of the ITAA 1997 if the payment is made for membership of a trade, business or professional association.
In your case, from the information provided it can be seen that you have not derive any income from your profession during the income year as you have been unable to work due to injury. Therefore, your membership fees will not satisfy the requirements of section 8-1 of the ITAA 1997 and hence, will not be deductible under that section. However, in accordance with section 25-55 of the ITAA 1997, you will be allowed to claim a deduction of $42 in respect of each of the membership fees.