Private ruling: Deductions - theft
Date of advice: 14 June 2024
Published: 29 July 2024
Ruling period: 1 July 2019 to 30 June 2023

Ruling: Q1: When referring to section 25-45 of the Income Tax Assessment Act 1997 (ITAA 1997), does the term 'agent' include the company's public officer? | A1: Yes. The term 'agent' described in subsection 960-105(1) of the ITAA 1997 describes an individual who has control of the debit and receipt of a taxpayer's money. Your public officer had direct control over the bank accounts of the company and could make payments independently of the director of the company. Based on the definition of the term, it could be concluded that a public officer can be considered an agent for the purposes of section 25-45 of the ITAA 1997.

Relevant facts and circumstances: You are the director of the company. Your relative was appointed as public officer. It was the public officer's responsibility to keep the company up to date with its taxation obligations such as income tax, BAS and superannuation. You recently discovered that the company was four years behind in its lodgement obligations, and that funds that were designated for paying the company's tax obligations were allegedly transferred elsewhere. You allege that the company's public officer embezzled the funds that were meant to pay outstanding obligations of the company. A complaint was lodged with the police department. The police report issued on this matter states that they would not be investigating this matter due to no offence being identified.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 25-45 | Income Tax Assessment Act 1997 section 960-105

Reasons for decision: Summary: Under subsection 25-45(b) of the ITAA 1997, you can deduct a loss in respect of money if the loss was caused by theft, stealing, embezzlement, larceny, defalcation, or misappropriation by your employee or agent (other than an individual you employ solely for private purposes). The term agent is defined under subsection 960-105(1) of the ITAA 1997 as someone who, for or on behalf of the taxpayer, holds, or has control, receipt or disposal of, the taxpayer's money. The company's public officer had access to the company's bank accounts and was authorised to make payments on the company's behalf without authorisation from the director. Based on the definition of the term under section 960-105 of the ITAA 1997, the public officer could be considered an 'agent' for the purposes of section 25-45 of the ITAA 1997.