Edited version of private advice

Authorisation Number: 1051930482308

Date of advice: 10 December 2021

Ruling

Subject: Residency and employment income

Question

Are you entitled to a deduction for equipment?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You work for Employer Z.

You are employed as a retail salesperson.

You spend your own money on purchasing equipment, going to shows, participate in competitions and generally keeping abreast of all items you are required to sell.

You wish to claim a deduction for several stocked items:

In testing and reviewing you can then advise customers and recommend the best products for their needs.

As Employer Z is a major sponsor of competitions in the local area, it is an expectation to have Employer Z staff representatives at the competitions.

Employer Z has a healthy relationship with the local high schools where Employer Z takes their recreational classes. This is during paid work hours.

There is an agreement in place that if the store achieves a profit margin each of the sales representatives receives a bonus.

By attending competitions and community classes people come to the store and make purchases based on your recommendations.

You spend a considerable sum per annum on items from the shop.

You use these items for personal use.

One of the requirements in your duty statement is to "utilise, test and report on new and existing stocked items".

You have provided a letter from your employer to support your application.

You are not reimbursed for any of these expenses by your employer.

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.

ATO Interpretive Decision ATO ID ATOID 2002/319 looks at the situation of a beverage analyst and the purchase of wines for tasting and providing feedback and opinions on the wines.

This case while a different situation to your equipment, has the same application of the law and the Commissioners opinion. The ATOID points out that in establishing a connection, it must be shown that the outgoing is relevant and incidental to the gaining of assessable income.

In most circumstances, the purchasing of this kind of equipment would be considered a private expense. In some limited circumstances this expense may be characterised as an income producing expense and may be an allowable deduction. However, there is an onus on the taxpayer to prove that such an outlay should be an allowable deduction.

This was highlighted in Case P30 82 ATC 139; 25 CTBR (NS) 30 Case 94 when the Board of Review disallowed a claim for the purchase of newspapers by a real estate salesman. The real estate salesman would gather information from the daily papers to assist him in selling real estate. The salesman was however, unable to demonstrate that his income was affected by expenditure on the newspapers. The expense retained its private character and the deduction was not allowed.

In your case you are not required to purchase the items by your employer. The letter you provided as part of your application says that you purchase equipment and related items at your own expense; it does not say that you are required to make these purchases.

We acknowledge that you need to test and review products to be a salesperson. You also acknowledge that you purchase and use the equipment for personal use. This personal use is considered private expenditure. Through the personal use of the equipment, you can choose to advise your clients. The expense is not necessarily incurred in order to earn your income.

As in ATOID 2002/319, the connection between incurring the expense of the equipment and your job as a salesperson is too general or tenuous to allow a deduction for any portion of the cost as a deduction.