Private ruling: Work related expenses
Published: June 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for the expenses incurred in relation to a screening analysis? | A1: No

Relevant facts and circumstances: You are an employee. The company you are employed with has a number of different projects around Australia and employees move from one project to another. On completion of one project and prior to commencing a new project, you were required to seek permission from company X to be allowed on site due to a previous breach in site policy. In order to be allowed on site you had to undertake screening and were then allowed on site. A condition was placed on you to participate in a program which consisted of a screening analysis, with the cost being borne by you with no reimbursement from the employer.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for losses and outgoings which are incurred in gaining or producing assessable income. However, no deduction is allowed where the losses or outgoings are capital, or are of a capital, private or domestic nature or another provision prevents the taxpayer from deducting it. Certain expenditure is incurred in order to be in a position to be able to derive assessable income, for example unless one arrives at work it is not possible to derive income. This does not mean that the expenditure is incurred in the course of gaining or producing assessable income. Rather, the expenses are incurred to enable the taxpayer to commence income earning activities ( Lunney v. FC of T (1958) 100 CLR 478). The fact that an expense is incurred by an employee at the direction of their employer does not mean that a deduction is automatically allowable. The issue of expenses incurred as a condition of employment has been considered in numerous cases including Case L61 79 ATC 488; 23 CTBR (NS) Case 73 , where an army officer was denied a deduction for his haircuts. It was held that, although it was a condition of employment to be well groomed, the expense was private in nature. In Taxation Determination TD 93/112 Income tax: is a taxpayer who is required, as a condition of employment, to be within a specified weight to height ratio entitled to a deduction for a weight reduction program? , the Commissioner adopted the reasoning of Hill J in FC of T v Cooper (1990) 21 ATR 525; 90 ATC 4580, in that an employer's requirement that an employee incur expenditure which is not related to the income-producing activities of that employee, does not convert the expenditure into a deductible outgoing. In your case, you have incurred expenses to undertake screening analysis. Although it is a condition of your employment that these steps are undertaken, the expense was not incurred in the performance of your work duties, but rather to put you in a position to perform your work duties. Therefore, you are not entitled to a deduction for the expenses incurred under section 8-1 of the ITAA 1997