| Disclaimer This edited version has been archived due to the length of time since original publication.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 private advice
Authorisation Number: 1051525752660
Date of advice: 13 June 2019
Ruling
Subject: Deductibility of wages and travel allowances.
Question 1
Are the travel allowances paid to management engaged by the trust deductible to cover the domestic and overseas travel costs?
Answer
Yes.
Question 2
Are the salary and wages paid to the management team by the trust deductible being commercial and commensurate?
Answer
Yes.
Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or necessarily incurred in carrying on a business 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 taxation legislation excludes it. An entity is entitled to a deduction for wages and travel allowances paid to employees who are carrying out duties as part of the entity's income earning activities.
Accordingly, where the management team are paid on commercial terms, the trust will be entitled to a deduction for travel allowances, salary and wages.
This ruling applies for the following periods:
Year ended 30 June 2018
Year ending 30 June 2019
Year ending 30 June 2020
Year ending 30 June 2021
Year ending 30 June 2022
Year ending 30 June 2023
The scheme commences on:
1 July 2017
Relevant facts and circumstances
XYZ Pty Ltd is the trustee for the trust.
Management fees are paid to the trust that engage the services of a management team to action and complete specific duties for the type of roles undertaken.
There a four people in this management team.
The trust has employment agreements with three of the management team.
The trust pays a reasonable travel allowance for each trip set out by the ATO domestically and internally, but the travel expenses incurred are in excess of the travel allowance received. Detailed travel diaries and all records of expenses are maintained to support the amounts being paid on the travel undertaken.
The salary and wages are paid to three of the management team for carrying out their management duties at commercial rates and commensurate with the duties performed.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1