Edited version of private advice

Authorisation Number: 1051902532673

Date of advice: 22 September 2021

Ruling

Subject: General business deductions

Question 1

Are you entitled to a deduction for exercise equipment incurred in carrying on your business to the extent it is not capital in nature or used for private or domestic purposes under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

Question 2

Where the cost of the exercise equipment is greater than $300, are you eligible to claim the decline in value of the depreciating asset as a deduction pursuant to 40-25 of the ITAA 1997?

Answer

Yes

Question 3

Are you entitled to a deduction for your own branded apparel under section 8-1 of the ITAA 1997?

Answer

Yes

This ruling applies for the following period periods:

1 July 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an Australian for taxation purposes during 20XX-XX financial year.

You are a fitness advisor.

You use your social media accounts to promote your business to your followers.

You derive income from selling products through your website which is linked to your social media.

You also promote and endorse other businesses products under a social media influencer agreement or affiliate service on your social media in exchange for payment or goods and services.

You purchased home exercise equipment which you use in the creation of fitness content which you produce, film and act as a presenter or instructor in.

When you appear in social media content you wear your own branded fitness apparel which has your logo on it for the purpose of promoting your business. You also sell this apparel on your website.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

These reasons for decision accompany the Notice of private ruling.

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing your assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing your 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 Income Tax Assessment Act 1997 prevents it.

Exercise equipment

Generally, expenses incurred in the maintenance of physical fitness and well-being are not deductible as they are private and domestic expenditure.

In your situation you produce, design, edit, script, voice over, film and act as presenter or instructor in the videos for the purpose of uploading onto your TikTok or Instagram profile. These videos are produced as a part of your tailored fitness package and you use your home gym and equipment to provide instructional commentary and explanation of your fitness exercises.

As you are using this equipment to produce videos which are a part of the tailored fitness programs for your clients there is a direct nexus between income producing activity and the expense inured in producing that income. The expense is incurred in gaining or producing your assessable income and would be an allowable deduction under section 8-1 of the ITAA 1997 to the extent that it is used for earning your assessable income. To the extent that the use of the equipment and bike is for personal exercise and fitness this will not be deductible as it is private and domestic in nature.

Generally, if the cost of an asset is $300 or less, you can claim an immediate deduction for the full cost of the item at the end of the financial year. If the item costs more than $300, you can claim a decline in value deduction for the cost over the life of the item apportioned to deduct any private use.

Apparel

In your case, you appear in video content uploaded to social media platforms to promote your business and brand. You wear your own branded apparel which you also sell as merchandise.

As you wear the branded apparel during these videos which is also linked to sales income of your business, it has a direct nexus to income producing activities and is an allowable deduction under section 8-1 of the ITAA 1997.