Edited version of your written advice

Authorisation Number: 1013034041423

Date of advice: 15 June 2016

Ruling

Subject: Gym fees

Question

Are you entitled to a deduction for your gym fees?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2015

The scheme commenced on

1 July 2014

Relevant facts

You are a teacher in a specified area.

You also perform in your field.

You need to be fit and keep your strength built up for your employment.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Fitness expenses

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 or are necessarily incurred in carrying on a business for the purpose of 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, or a provision of the ITAA 1997 prevents it.

A number of significant court decisions have determined that for an expense to be an allowable deduction:

• it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; (1958) 100 CLR 478 (Lunney's case)),

• there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47), and

• it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v. FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).

You are entitled to deduct work-related expenses for costs that directly relate to your work. The Commissioner generally takes the view that expenses incurred in keeping fit are inherently private in nature as it ultimately involves the person's own physical wellbeing. This position does not change even if the person is employed to undertake physical activity as part of their duties.

Taxation Ruling TR 95/17 Income tax: employee work-related deductions of employees of the Australian Defence Force discusses the deductibility of fitness related expenses for Australian Defence Force (ADF) members. TR 95/17 states that a deduction is not allowable for fitness expenses in maintaining a general standard of fitness expected of an ADF member as such expenses are generally private in nature. However a deduction is allowable for these costs if the ADF member can demonstrate that strenuous physical activity is an essential and regular element of his or her income earning activities and that these costs were incurred to maintain a level of fitness well above the ADF general standard.

An example provided in TR 95/17 refers to a member of the Special Air Services Regiment (SAS) who is paid to maintain the very highest level of fitness, and plainly differentiates between the level of fitness required of a SAS member and that of other ADF members.

The principle outlined in TR 95/17 is that unless a taxpayer's normal duties require an advanced (above and beyond normal) fitness level, deductibility of expenses will be denied. That is, expenses incurred in keeping fit (for example, gym memberships) are generally considered to be of a private nature, unless strenuous physical activity is an essential and regular element of performing the employee's duties.

Taxation Ruling TR 95/20 Income tax: employee performing artists - allowances, reimbursements and work-related expenses states that a deduction is not allowable for the costs of maintaining general fitness or body shape. A deduction may be allowable if a performing artist can show that physical fitness and physical activity are essential elements of the income-earning activities and are the means by which the performing artist earns his/her income.

The example outlined in paragraph 106 states that where a circus trapeze artist regularly attends a gymnasium to maintain fitness and strength to perform his rigorous aerial routines, the fitness costs have the essential character of an income producing expense. The cost of attending the gymnasium in these circumstances has a direct nexus to the earning of assessable income and is an allowable deduction.

Taxation Determination TD 93/114 Income tax: is a police officer, who is required to maintain an adequate level of physical fitness in order to undertake police duties, entitled to claim a deduction for fitness related expenditure? states that where police duties do not require an officer to undertake regular strenuous physical activity, expenses of keeping fit are not deductible. This type of expense does not have the essential character of being incurred in the course of gaining or producing assessable income. Whilst Police Regulations may require an officer to remain in a physically fit condition, this does not mean expenditure related to keeping fit is allowable as an income tax deduction.

In your case, we acknowledge that your duties require you to maintain a certain level of fitness. However your employment duties are not considered to be similar to the SAS or a circus trapeze artist. Although you are required to be fit, your level of fitness required cannot be considered to be at the highest level nor at a level which makes it an essential element of your employment. There is an insufficient connection between your gym fee expenses and the derivation of your income.

Whilst the gym exercise may benefit you and help you keep fit, this does not in itself mean that the expenditure was incurred in gaining or producing assessable income. Your fitness expenses are more private in nature. As your ordinary duties do not require regular strenuous physical activity, no deduction is available for your gym fees.