Private ruling: Deductibility of wages and travel allowances.
Date of advice: 13 June 2019
Published: July 2019
Ruling period: Year ended 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022 | Year ending 30 June 2023
Date scheme commenced: 1 July 2017

Ruling: Q1: Are the travel allowances paid to management engaged by the trust deductible to cover the domestic and overseas travel costs? | A1: Yes. | Q2: Are the salary and wages paid to the management team by the trust deductible being commercial and commensurate? | A2: Yes. Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or necessarily incurred in carrying on a business except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income or a provision of the taxation legislation excludes it. An entity is entitled to a deduction for wages and travel allowances paid to employees who are carrying out duties as part of the entity's income earning activities. Accordingly, where the management team are paid on commercial terms, the trust will be entitled to a deduction for travel allowances, salary and wages.

Relevant facts and circumstances: XYZ Pty Ltd is the trustee for the trust. Management fees are paid to the trust that engage the services of a management team to action and complete specific duties for the type of roles undertaken. There a four people in this management team. The trust has employment agreements with three of the management team. The trust pays a reasonable travel allowance for each trip set out by the ATO domestically and internally, but the travel expenses incurred are in excess of the travel allowance received. Detailed travel diaries and all records of expenses are maintained to support the amounts being paid on the travel undertaken. The salary and wages are paid to three of the management team for carrying out their management duties at commercial rates and commensurate with the duties performed.

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