Edited version of private advice

Authorisation Number: 1051738862073

Date of advice: 14 August 2020

Ruling

Subject: Work related expenses

Question 1

As a performing artist are you able to claim a deduction under section 8-1 of the Income Tax Assessment Act (ITAA 1997) for the cost of a vocal therapy session?

Answer

Yes.

Question 2

As a performing artist are you able to claim a deduction under section 8-1 of the ITAA 1997for the cost of physiotherapy sessions?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You work as a performing artist.

You performed in a musical.

Your contract states that the performer must maintain their physical and vocal fitness to perform their plot at the level prescribed by the creative team and the employer.

You provided a letter from the Associate director which stated there was little actual dancing during the production and that it was not strenuous.

You undertook vocal therapy on xx/xx/xxxx to assist with both preventative and recovery treatment to your vocal cords.

You undertook physiotherapy on xx/xx/xxxx and xx/xx/xxxx to assist with both preventative and recovery treatment to your body.

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 it:

·         is actually incurred,

·         meets the deductibility tests, and

·         satisfies the substantiation rules.

To establish a connection, it must be shown that the outgoing is relevant and incidental to the gaining of assessable income.

Taxation Ruling 95/20 Income tax: employee performing artists- allowances, reimbursements and work-related expenses states:

105. 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 (see Taxation Determination TD 93/114).

106. Example: Albin, a circus trapeze artist, regularly attends a gymnasium to maintain fitness and strength to perform his rigorous aerial routines. Albin's fitness costs have the essential character of an income producing expense. The cost of attending the gymnasium has a direct nexus to the earning of assessable income and is an allowable deduction.

Taxation Determination TD 93/114states that where police duties do not require an officer to undertake regular strenuous physical activity, expenses of keeping fit are not deductible; however, there may be circumstances where such expenditure by a police officer is an essential element of gaining income. It is considered a police academy physical training instructor may be in this category. The TD also provides the following example:

A general duties police officer regularly plays squash to ensure he maintains a high level of fitness as he may be called upon to undertake strenuous activities at any time in the line of duty. The officer claims his squash fees as a deduction. As the officer's ordinary duties do not require regular strenuous physical activity, no deduction is available to the officer for squash fees or any related expenses.

FC of T v. Cooper (1991) 21 ATR 1616; 91 ATC 4396 states that the deductibility of an expense depends upon determining the essential character of the expenditure itself and not upon the fact that, unless it is incurred, the taxpayer will not be able to engage in the activity from which his income is derived.

In Case P90 82 ATC 431; (1982) 26 CTBR (NS) Case 24 (Case P90), the taxpayer was a ballet dancer who toured overseas and appealed against disallowed massage expenses. The ballet dancer made a submission that her body was a machine that performed the artistic income producing activity.

The members of the Board applied the argument from Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60; 12 ATD 348; 8 AITR 406, that the expenditure was incidental to the proper execution of her duties and that undergoing the massage treatment was a necessary part of her job.

In your case although it is an essential element to maintain your physical and vocal fitness to perform your roles, it is at a level prescribed by the creative team and by the employer. For a deduction of this sort to be deductible, the vocal and physical activity must be undertaken on a regular and strenuous level. As you are performing in a musical there would be a substantial amount of singing during the show and this would be strenuous on your voice, therefore there is a sufficient connection between your vocal therapy and your income earning activities. Therefore, you are entitled to claim a deduction for the vocal therapy under section 8-1 of the ITAA 1997.

As for the physiotherapy, this is a part of the program to maintain your strength and flexibility which is considered to be maintaining a general standard of fitness. Expenditure to maintain a general standard of fitness is expenditure that is private or domestic in nature and is therefore not an allowable deduction under section 8-1 of the ITAA 1997.