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ATO Interpretative Decision

ATO ID 2002/426 (Withdrawn)

Income Tax
Deductibility of work-related expenses prior to income being derived

Attention This ATO ID is withdrawn. Guidance on this issue contained in this ATO ID can be found at Deductions you can claim (QC 31967).
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 29 September 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Issue

Is a taxpayer entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses incurred in a year prior to the derivation of income?

Decision

Yes. A taxpayer is entitled to claim a deduction under section 8-1 of the ITAA 1997 for expenses incurred prior to deriving income where the taxpayer has incurred the expenses with the intention of producing assessable income.

Facts

The taxpayer commenced casual employment in June of the relevant income year.

The taxpayer did not receive any income in the relevant income year. However, income was received in the following income year.

The taxpayer incurred work-related expenses during the relevant income year.

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.

The classic statement of the principle of expenditure relating to income yet to be derived comes from the case of Ronpibon Tin NL v. FC of T (1949) 78 CLR 47 at p57 where Latham CJ, Rich, Dixon, McTiernan and Webb JJ said:

   'In brief substance, to come within the initial part of the sub-section it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income or, if none be produced, would be expected to produce assessable income.'

The taxpayer incurred work-related expenses in the relevant income year. The taxpayer expected to produce assessable income as a result of these expenses, and did so, albeit in the following income year. Thus the taxpayer incurred these expenses in order to gain or produce assessable income.

Accordingly, the taxpayer is entitled to claim a deduction under section 8-1 of the ITAA 1997 for the work-related expenses incurred in the relevant income year.

Date of decision: 4 March 2002

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) 56 ALR 47
   (1949) 4 AITR 236
   8 ATD 431

Keywords
Deductions & expenses

Siebel/TDMS reference number: DW289804; 1-6B1B3ZM, 1-AX95BUA

Business line: Small Business/Individual Taxpayers

Date of publication: 12 April 2002
Date reviewed: 18 May 2015

ISSN: 1445-2782

ATO ID 2002/426 (Withdrawn) history   Top  
   Date   Version 
    4 March 2002   Original statement   
 You are here ®  29 September 2017   Withdrawn   


 


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