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Edited version of your written advice
Authorisation Number: 1051210028188
Date of Advice: 4 April 2017
Ruling
Subject: work related expenses
Question and answer
Are the costs associated with your program fees fully deductible against your business income?
Yes.
This ruling applies for the following periods:
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You are an Australian tax resident.
You are a sole trader operating a business in website design and web development.
You were selected to join a program which runs through 2017, staying one month in 11 different cities around the world.
You estimate you will spend 60% of your time working on your normal sole trader business activities and 40% on collaborative business development with others in the program.
The cost for the program is paid in a foreign country currency. A deposit in paid in 2016 and eleven equal monthly payments of the foreign currency paid through 2017.
This cost covers the transportation, accommodation and a dedicated desk in a co-working facility in each city.
You expect to pick up new work during the program through new contacts.
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.
A deduction is only allowable if an expense:
Is actually incurred
Meets the deductibility tests
Satisfies the substantiation rules.
Relevant other work-related expenses you incur that are directly related to your work include professional seminars, courses, conferences and workshops.
In your case, you are a sole trader operating a business in website design and web development. You estimate you will spend 60% of your time working on your normal sole trader business activities and 40% on collaborative business development with the program participants.
It is considered that the program has a direct nexus with your sole trader business in producing assessable income.
Therefore, the cost of associated fees with the program is fully deductible against your business income as it satisfies the requirements of Section 8-1 of the ITAA 1997.
Deductions for the appropriate income year (convert to AUD when lodging your income tax return)
As the cost of the program is incurred over two income years, you deduct the cost when it is actually incurred.
Your expenses incurred from 1 July 2016 through 30 June 2017 are deductible against your business income in the 2016-17 income year.
Your expenses incurred from 1 July 2017 through 30 June 2018 are deductible against your business income in the 2017-18 income year.
Substantiation rules
Law Administration Practice Statement PS LA 2005/7 Substantiating an individual's work-related expenses describes what documentary or other evidence is acceptable substantiation of an individual's work-related expenses.
As your total claim for all work-related expenses will exceed $300, you must have written evidence to support your deductions.
If a taxpayer's total work-related expense claims exceed $300, they must provide written evidence for the entire amount (not just the amount over $300). A summary of the requirements are provided in the attachment to this practice statement. This summary can be found at https://www.ato.gov.au/law/view/document?DocID=PSR/PS20057/NAT/ATO/00001#P2.