Edited version of your private ruling

Authorisation Number: 1012535875591

Ruling

Subject: Wine and self education

Question 1

Are you entitled to a deduction either as a work related expense or as self education for the cost of buying wine or for the travel to other wineries for wine tasting?

Answer

No.

Question 2

Are you entitled to a deduction for the cost of undertaking an Advanced Certificate Level 3 in wine and spirits?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts

You are general manager.

There are managers in each of the different aspects of the business.

The companies own product is sold in one part of the business. X% of the product is sold from the door front and the rest is sold wholesale.

Your contact with the public is very infrequent.

You also travel to other regions to study practices and experiences.

You use your own car which is held under a novated lease.

You also travel by plane to other areas and might possibly go overseas.

After visiting other businesses, you buy some of their product to take home for sampling.

You are undertaking a course which is designed to give a thorough understanding of the principal products of the world and their commercial importance in the world's market. The qualification will assist those who are required to make professional evaluations with regard to their commercial value.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

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, or relate to the earning of exempt income.

The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that:

For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing assessable it must be incidental and relevant to that end. The words "incurred in gaining or producing the assessable income" mean in the course of gaining or producing such income.'

In most circumstances the purchasing of alcohol for tasting purposes would be considered a private expense. In some limited circumstances this expense may be characterised as an income producing expense and may be an allowable deduction. However there is an onus on the taxpayer to prove that such an outlay should be an allowable deduction.

In considering Case R113 84 ATC 750 (Case R113), where the taxpayer was a sales manager for an airline, the Board of Review disallowed a deduction for costs associated with overseas travel. In making this decision Member P. M. Roach made the following comment:

One can well understand the proposition that travel experience is of advantage to a salesman of tour and travel services, just as experience of drinking whiskey may be of advantage to a salesman of whisky. But it does not follow for the whisky vendor that all expenditure he incurs relating to his consumption of whisky lacks any private character. Product sampling in the course of employment cannot be the only explanation for such expenditure.

In your case you travel to other regions to sample their product and you also buy some to take home. While we accept that you may get some knowledge from sampling different products, the nexus to producing your assessable income is not sufficient to allow a deduction. The consumption of the product is also considered to be a private expense.

Advanced Certificate Level 3 in wine and spirits

Taxation Ruling TR 98/9 discusses the circumstances under which self education expenses are allowable as a deduction. A deduction is allowable for self education expenses if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self education enables the taxpayer to maintain or improve that skill or knowledge (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

In your case, it is accepted that the study will maintain or enhance the skills that are required in the performance of your current employment duties. Consequently the self education expenses incurred have the necessary and relevant connection with the earning of your assessable income and are therefore deductible.