Professional Documents
Culture Documents
S1 2015
Class 6 General
Deductions
Loss or outgoing
To the extent
Incurred
Necessarily incurred
Carrying on business to derive
assessable income
In gaining or producing your
assessable income
Copyright School of Taxation and
Business Law, UNSW
Outgoing:
Examples: Rent, Wages, Fuel, Interest
Implies voluntary payment: AGC
(Advances) Ltd
Copyright School of Taxation and
Business Law, UNSW
To the extent (1 + 2
st
nd
limb)
Incurred (1 limb)
st
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In carrying on a business
(2nd limb)
Discussed under ordinary income
Question of fact and degree
Example of relevant factors:
Profit making purpose
Repetition and regularity
Organisation and system
Size and scale
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Nexus to income
1st limb ... In gaining or producing
assessable income
Concerned with expenditure incurred in
the actual course of producing assessable
income
2nd limb ... In carrying on a business for the
purpose of gaining or producing assessable
income
Concerned with expenditure made for the
purpose of business generally
Copyright School of Taxation and
Business Law, UNSW
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Nexus to income
Is there a sufficient nexus (i.e.
connection / relationship) between the
expenditure and the income?
Tests have been developed by courts to
determine this (judicial NOT statutory
tests)
Incidental and relevant test
Essential character test
Condition of employment test
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Temporal connection
Overall:
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Negative limbs
Section 8-1(2)
However you cannot deduct a loss or outgoing
under this section to the extent that:
(a) it is a loss or outgoing of capital, or of a
capital nature;
(b) it is a loss or outgoing of a private or
domestic nature
(c) it is incurred in relation to gaining or
producing your exempt income
(d) a provision of this Act prevents you from
deducting it
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Business Law, UNSW
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Private or domestic
expenditure
Private: loss or outgoing relates to the person
incurring them as an individual member of society.
Domestic: loss or outgoing relates to the house,
home or family organisation of the person
incurring them.
Examples:
Food
Child-minding costs
Travel
Clothing
Home-office expenses
Copyright School of Taxation and
Business Law, UNSW
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Private or domestic
expenditure
Food
Generally private & non-deductible: FCT v Cooper
Meals while away overnight for work deductible
(considered work-related travel expenses)
Child-minding costs
Non-deductible as fail to satisfy positive limbs (put the
taxpayer in a position to derive taxable income rather
than incurred in deriving assessable income) OR treated
as private or domestic: Lodge v FCT; Martin v FCT
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Private or domestic
expenditure
Travel
Home to work travel: Not deductible.
Not incurred IN gaining or producing income OR private
expenditure (you choose where you live): Lunney v FCT
Occasional exceptions: FCT v Collings :
computer consultant on call after hours and deal
with queries from home.
If unable to resolve, had to go into office.
Deduction for this travel allowed as taxpayer had
already commenced working at home
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Private or domestic
expenditure
Travel
Travel between two places of work
Under s8-1, not deductible if the two places of work relate to
different income earning activities: Payne v FCT
Post Payne, introduction of s25-100
Home Job 1 Job 2 Home
Can claim the trip between Job 1 and Job 2
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Private or domestic
expenditure
Clothing
TR 97/12
4 categories of clothing which are allowed as deductions:
Non-compulsory uniform
Compulsory uniform
Occupation-specific clothing
Protective clothing and footwear
In very limited circumstances, conventional clothing may
be deductible:
FCT v Edwards
Mansfield v FCT
Copyright School of Taxation and
Business Law, UNSW
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Private or domestic
expenditure
Clothing
TR 97/12
4 categories of clothing which are allowed as deductions:
Non-compulsory uniform
Compulsory uniform
Occupation-specific clothing
Protective clothing and footwear
In very limited circumstances, conventional clothing may
be deductible:
FCT v Edwards
Mansfield v FCT
Copyright School of Taxation and
Business Law, UNSW
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Private or domestic
expenditure
Home office expenses
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Specifically denied
deduction
A specific provision may specifically deny a
deduction
Generally contained in Division 26
Examples:
Penalties
Leave payments
Payments to related entities
Illegal activities
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