Kaley and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2010/5064-5065)
Judgment date: 8 July 2011
Date published: 9 December 2011

Summary of decision:
Outlines the ATO's response to this case which concerned the deductibility of a number of work related and business related expenses by an architect who claimed to be carrying on a business while employed.

Overview of facts:
The Taxpayer is an architect who, during the 2007 and 2008 income years, was employed on a full time basis. In each of the 2007 and 2008 income years the Taxpayer made claims to deduct expenses said by him to have been incurred by him in connection with his profession. The Commissioner rejected the claims and issued amended assessments for the 2007 and 2008 income years. Penalties were imposed at a rate of 50% on the basis of recklessness. The Taxpayer sought a review of the Commissioner's decision. | Issues decided by the tribunal | 1. Whether the Applicant was entitled to claim work related deductions. Other than the amounts conceded by the Commissioner, the Taxpayer was not entitled to his work related deductions but for one amount for professional registration. 2. Whether the Applicant was carrying on a business to entitle him to claim the 2008 expenses as business deductions. The Tribunal was not satisfied the Taxpayer was carrying on a business during the 2008 income year. 3. Whether an ex gratia payment of $1,000 payment was assessable income. The payment was not assessable income. 4. Whether penalties were correctly imposed. Other than the 2007 income year, where the Commissioner conceded the penalty should not be imposed, no basis was shown for remission of the 2008 penalty. | 1. Whether the Applicant was entitled to claim work related deductions. Other than the amounts conceded by the Commissioner, the Taxpayer was not entitled to his work related deductions but for one amount for professional registration. 2. Whether the Applicant was carrying on a business to entitle him to claim the 2008 expenses as business deductions. The Tribunal was not satisfied the Taxpayer was carrying on a business during the 2008 income year. 3. Whether an ex gratia payment of $1,000 payment was assessable income. The payment was not assessable income. 4. Whether penalties were correctly imposed. Other than the 2007 income year, where the Commissioner conceded the penalty should not be imposed, no basis was shown for remission of the 2008 penalty.

Issues decided:
1. Whether the Applicant was entitled to claim work related deductions. Other than the amounts conceded by the Commissioner, the Taxpayer was not entitled to his work related deductions but for one amount for professional registration. 2. Whether the Applicant was carrying on a business to entitle him to claim the 2008 expenses as business deductions. The Tribunal was not satisfied the Taxpayer was carrying on a business during the 2008 income year. 3. Whether an ex gratia payment of $1,000 payment was assessable income. The payment was not assessable income. 4. Whether penalties were correctly imposed. Other than the 2007 income year, where the Commissioner conceded the penalty should not be imposed, no basis was shown for remission of the 2008 penalty. 1. Whether the Applicant was entitled to claim work related deductions. Other than the amounts conceded by the Commissioner, the Taxpayer was not entitled to his work related deductions but for one amount for professional registration. 2. Whether the Applicant was carrying on a business to entitle him to claim the 2008 expenses as business deductions. The Tribunal was not satisfied the Taxpayer was carrying on a business during the 2008 income year. 3. Whether an ex gratia payment of $1,000 payment was assessable income. The payment was not assessable income. 4. Whether penalties were correctly imposed. Other than the 2007 income year, where the Commissioner conceded the penalty should not be imposed, no basis was shown for remission of the 2008 penalty.

ATO view of decision:
In the Commissioner's view, the decision reflects the application of settled principles to the particular factual situation. The decision does not impact upon any current rulings or published views of the Commissioner.

Administrative treatment:
Implications for ATO precedential documents (Public Rulings & Determinations etc) | None. | Implications for Law Administration Practice Statements | None.

Legislative references: Income Tax Assessment Act 1997 (Cth) 8-1 28-12 900-115
Case references: Ferguson v Federal Commissioner of Taxation [1979] FCA 29 (1979) 37 FLR 310 9 ATR 873 79 ATC 4261
Subject references: income tax allowable deductions applicant claiming deductions for work-related expenses objection decision under review varied in part