Edited version of your written advice

Authorisation Number: 1012839811122

Date of advice: 14 July 2015

Ruling

Subject: Deduction- Personal assistant/carer expenses

Question:

Are you entitled to a deduction for any portion of the cost of reimbursing a relative for their relocation, immigration, health insurance premiums, personal expenses, telephone/internet and Voip costs as work related expenses?

Answer:

No.

This ruling applies for the following periods:

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commenced on:

1 July 2014

Relevant facts

You are employed to work at your employer's office at location A.

Your duties required you to produce written reports for your employer and to attend meetings with customers at a number of locations.

You suffered an injury at work.

Due to your injury you have problems sitting for long periods of time and driving during work hours.

You have engaged a relative as a personal assistant to assist you with your duties.

Your relative moved from overseas to live in your home to be your personal assistant and carer during your recovery.

Your relative does not hold a working visa while living in Australia.

You are reimbursing your relative the following expenses:

• relocation costs

• immigration costs

• health insurance premiums

• personal expenses

• local telephone/internet costs

Your relative did not receive a salary or wage for the service provided.

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 you to claim a deduction for a loss or outgoing that is incurred in gaining or producing your assessable income, or necessarily incurred in carrying on a business to gain or produce assessable income. These deductions are limited by the exclusion of losses or outgoings that are capital, private or domestic in nature.

In Ronpibon Tin N. L v. Federal Commissioner of Taxation (1949) 78 CLR 47 Dixon J indicated that the character of the expenditure must be relevant and incidental to the gaining or producing of assessable income.

Generally, expenses directly related to the taxpayer's personal circumstances such as their health, immigration, insurance, relocation, meals, accommodation, personal telephone/internet and Voip costs are characterised as being private or domestic in nature. Further, the cost of employing a carer or similar service such as home-help by a taxpayer is not deductible under section 8-1 of the ITAA 1997.

In Frisch v Commissioner of Taxation [2008] AATA 462; 2008 ATC 10-031 (Frisch's case), the taxpayer employed and paid an assistant to type, write notes and memos, to retrieve, move and open files, to photocopy documents as well as provide some personal care. The taxpayer paid the assistant an hourly wage. She also paid superannuation guarantee and took out workers compensation insurance in respect of the assistant. She received no allowance or reimbursement for the expenses incurred. The AAT held that the expenses were clearly distinguishable from a travel expense incurred in a point of time prior to the commencement of the relevant income earning activities. The non-personal services were an expense incurred in order to enable the taxpayer to carry out her duties and incurred in the derivation of the relevant income. The AAT went on to say that an expense to overcome a physical disability in most cases would probably be non-deductible as private or domestic.

Your case can be distinguished from Frisch's case in that the arrangement entered into is a non-arm's length arrangement. While you have engaged a relative to drive and assist with some of your duties, the arrangement with your relative is mainly to provide for domestic and personal care services while you are recovering from an injury.

In Frisch's case as noted above the assistant was paid an hourly rate and provided with superannuation guarantee and workers compensation insurance. A review of the arrangement with your relative indicates you are not remunerating your relative for work related services by paying them a salary or wage. You are reimbursing your relative's expenses in respect of their relocation, immigration, health insurance, personal local telephone/internet costs which are of a private nature.

Generally where an employer provides such benefits to an employee these types of expenses are deductible to an employer as they are necessarily incurred in carrying on their business to gain or produce the business's assessable income. However such benefits are subject to Fringe benefits tax.

In your case it is considered that your relative is not your employee. When viewed objectively the arrangement with your relative is a private arrangement of a non-arm's length nature and the expenditure does not have a sufficient connection with your income-earning activities. Therefore no deduction is allowable under section 8-1 of the ITAA 1997.