Edited version of your written advice

Authorisation Number: 1012933683799

Date of advice: 7 January 2016

Ruling

Subject: Publishing expenses

Question:

Are the expenses you incurred in writing and publishing a book on a specialist topic related to your employment deductible?

Answer:

Yes

This ruling applies for the following period:

Year ended 30 June 20YY

The scheme commenced on:

1 July 20XX

Relevant facts

You are a director of and employee of a company. 

The company provides consulting services.

You are employed by the company as a consultant.

Your employment duties include running a course in your field of expertise at an educational institution.

You wrote the book focusing on your professional expertise as a consultant.

The company expects to increase fees resulting in an increase in your salary.

Your salary is paid in direct proportion to the fees earned by the company.

You engaged a publisher to market the book and arranged the book's distribution.

The publisher produced a number of copies of the book.

You expect to receive royalties when the book goes on sale.

You paid expenses in relation to the writing and publishing of the book.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1997 Section 6-10.

Income Tax Assessment Act 1997 Section 15-20.

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

Section 6-10 of the ITAA 1997 states assessable income also includes some amounts that are not ordinary income. For example, royalties received by authors are statutory income under section 15-20 of the ITAA 1997 and are included in assessable income under section 6-10 of the ITAA 1997, regardless of whether an author is a carrying on a business or merely conducting a hobby.

Deduction

Section 8-1 of the 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 or relate to the earning of exempt income.

Income Tax Ruling IT 131 indicates that expenses incurred in producing a specialised work which is associated with a taxpayer's day to day occupation, such as a university lecturer producing a text book or a political commentator writing on current political subjects, would generally qualify as deductions under section 8-1 of the ITAA 1997 (formerly subsection 51(1) of the Income Tax Assessment Act 1936 (ITAA 1936).

In IT 131, the Commissioner takes the view that the writing of books in the taxpayer's specialised field is often just as much a part of his career as the duties for which he is paid a salary. Expenses incurred in the writing of books in this situation are incidental to the totality of the income producing activities carried on, and it is considered that the character of the expenditure does not necessarily change from revenue to capital simply because the taxpayer enjoys the protection of copyright. At the same time, it is not suggested that all outgoings incurred by a taxpayer in this category are automatically deductible as some could be capital or partly private, for example, an overseas trip undertaken partly for business purposes and partly for holidaying.

The writing activity must be viewed as an essential part of the taxpayer's career to be deductible.

In your case, you are employed as a consultant and have written and published a book associated with your day to day occupation as a consultant in your field of expertise. You expect your efforts will be rewarded by an increase in your salary from your employment. We consider that the expenses you incurred have a sufficient nexus with the income from your employment to be deductible under section 8-1 of the ITAA 1997.