ATO Interpretative Decision

ATO ID 2002/424 (Withdrawn)

Income Tax

• This ATO ID is withdrawn. Guidance on this issue contained in this ATO ID can be found at Claiming mobile phone, internet and home phone expenses (QC 46119).
  This document has changed over time. View its history.

Issue

Is a casual employee, who is contacted by telephone by their employer to advise the employee that a shift is available and to request that they perform that shift, entitled to a deduction for the cost of telephone rental under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. A casual employee who is contacted by telephone by their employer to advise the employee that a shift is available and to request that they perform that shift, is not entitled to a deduction for telephone rental costs under section 8-1 of the ITAA 1997 as it is not incurred in earning assessable income.

Facts

The taxpayer, a casual employee, is contacted by their employer when another employee needs to be replaced for a period of time or additional work has become available. The taxpayer is made aware of the vacancy sometimes as late as the morning of the day in question. The taxpayer is not on call and does not commence performing the duties from which assessable income is derived until arriving at their place of employment.

The taxpayer incurred telephone rental expenses so that they could be contacted by their employer.

Reasons for 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 assessable income except where the outgoings are of a capital, private or domestic nature, or relate to earning exempt income.

The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431 the High Court stated that:

'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing the assessable income" mean in the course of gaining or producing such income.'

The expenditure must therefore be related to the production of assessable income and not incurred at a point too soon to be deductible (FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161).

In Case N5 81 ATC 35; (1981) 24 CTBR (NS) Case 78, the Board of Review held that rental of a telephone simply put the taxpayer in a position to be able to earn additional income (overtime), but that it was not incurred in deriving that income.

The telephone puts the taxpayer in a position to earn income, as it allows the employer to contact the taxpayer when an opportunity for employment arises. The telephone is not used as an integral part of the taxpayer's duties in gaining assessable income. The expense is rather a prerequisite to earning assessable income and the cost of the telephone rental is therefore not deductible under section 8-1 of the ITAA 1997.

Amendment History

Year of income:  Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1997
   section 8-1

Case References:
Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation
   78 CLR 47
   (1949) 4 AITR 236
   8 ATD 431

Keywords
Work related expenses
Telephone rental
Deductions
Point too soon

Business Line:  Small Business/Individual Taxpayers

Date of publication:  12 April 2002

ISSN: 1445-2782