ATO ID 2002/319: Beverage Analyst - purchase of wine for tasting
Date of decision: 30 August 2001
Business line: Small Business/Individual Taxpayers

Issue
Is the taxpayer, a food and beverage analyst, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenditure incurred in purchasing wine for tasting?

Decision
No. The taxpayer, a food and beverage analyst, is not entitled to a deduction under section 8-1 of the ITAA 1997 for expenditure incurred in purchasing wine for tasting.

Facts
The taxpayer is a food and beverage analyst whose main role is compiling new wine lists for restaurants. To maintain their knowledge, the taxpayer purchases several cases of mixed wine for tasting and assessment at their private residence. The taxpayer is not required by their employer to incur this expenditure although they did arrange for the taxpayer to receive a discount price on purchase. The taxpayer consumes approximately 1/4 of the bottle for tasting and the remainder for private use.

Reasons for decision
Summary: 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 the earning of exempt income. 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 wine for tasting purposes 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. The taxpayer is not required to incur the expense by their employer. While knowledge acquired from the wine tastings may assist the taxpayer to carry out employment duties more efficiently, the expense is not necessarily incurred in order to earn that income. The tasting of the wines at the taxpayer's home has the character of a private expense. The connection is too general or tenuous to allow a deduction for any portion of the cost. Accordingly, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for the cost incurred in purchasing the wine.

Legislative references: Income Tax Assessment Act 1997 section 8-1
Case references: Case P30 / Case 94 82 ATC 139 25 CTBR (NS) 30
Subject references: Work related expenses Private or domestic expenses