Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012770346317
Ruling
Subject: Deductibility of expenses
Question 1
Are the flight costs and examination costs an allowable deduction for the company?
Answer
Yes.
Question 2
Are the transport costs between your accommodation and the airport, exam location and work related meetings an allowable deduction for the company?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2015
The scheme commenced on
1 July 2014
Relevant facts
You are the sole director and sole shareholder of a company.
You operate as a consultant through the company.
You wish to obtain status as a professional.
Graduating with a degree is not enough to qualify as a professional. You also need to be registered and licensed through entity A to obtain this designation.
The designation will allow you to market your business differently, expanding your range of offerings.
It also directly up-skills you in certain practices involved in your work.
Having the designation is a big selling point and differentiates you from competing firms. This designation will allow you to increase the rate that you bill for professional services as well as increase the range of contracts that you can bid for and increase the likelihood for success on those bids.
You had to travel to sit the examination to be granted the professional status.
You also undertook other business and personal activities while on the trip but the examination was the primary purpose for the trip.
The company is paying for the flight and examination costs. The company is also paying transport costs between your accommodation and the airport, exam location and work related meetings.
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 incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, a deduction is not allowed where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
In this case, the costs incurred for you to sit the examination were incurred in order for the company to receive increased assessable income. Having regard to all the facts in the present case it is not considered that the company is creating a new income earning activity; rather the company is simply expanding its current business activity and making it more attractive to clients. Therefore, the costs are not considered to be capital in nature.
The examination and flight expenses relate sufficiently to the company's income earning activities and are deductible for the company under section 8-1 of the ITAA 1997. Similarly, the transport costs that relate to travel between your accommodation and the airport, examination location and work related meetings are an allowable deduction for the company. However any transport or other costs that relate to your private activities are not an allowable deduction as they do not relate to the company's income earning activities.