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Edited version of your private ruling
Authorisation Number: 1012485583380
Ruling
Subject: Business - deductions
Question 1
Are you entitled to a deduction for car and air travel expenses?
Answer
Yes
This ruling applies for the following period
Year ending 30 June 2014
The scheme commences on
1 July 2013
Relevant facts and circumstances
The entity is run as a small business on a part-time basis.
The entity has an ABN and is registered for GST.
The entity provides inspections and reporting services to their clients.
In order to provide these services to their clients, travel to the client's site is required to complete an inspection.
An example of travel required would be from the entity's office to the client premises to conduct the inspection, then either travel to another client's site to conduct another inspection or travel back to the entity's office to complete the report for the client.
The cost of the travel to and from the clients' site is charged to the client in the following way:
· car travel - Y cents per kilometre + $X per hour of time
· air travel - cost of the airfare + $X per hour of time
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
Income Tax Assessment Act 1997 Division 28
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you can deduct from your assessable income any loss or outgoing to the extent that it was incurred in gaining or producing assessable income and is not:
· capital, private or domestic in nature;
· incurred in gaining or producing exempt income; or
· prevented from being deductible by another provision of the ITAA 1997.
In order for a loss or outgoing to be deductible it must have been incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income.
Travel costs, such as car expenses and airfares incurred while undertaking travel on behalf of the business would be considered an allowable deduction as these expenses are incurred in earning assessable income of the business.
The allowable deduction for car expenses is the business use proportion of actual expenses incurred. You are unable to use one of the four methods of calculating your car expenses as these methods are only available to individuals under Division 28 of the ITAA 1997. You can however, use your logbook to assist in the calculation of your business use proportion.