Private ruling: tax related expenses
Published: May 2013
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for the fees paid for the preparation and lodgment of your overseas income tax returns? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 25-5.

Reasons for decision: Summary: Section 25-5 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for certain tax related expenses. Paragraph 25-5 (1)(a) of the ITAA 1997 provides a deduction for expenditure you incur for managing your tax affairs. Paragraph 25-5 (1)(b) of the ITAA 1997 provides a deduction for expenditure you incur for complying with an obligation imposed on you by a Commonwealth law, insofar as that obligation relates to the tax affairs of an entity. Section 995-1 of the ITAA 1997 defines tax affairs as affairs relating to tax. Tax is defined in section 995-1 to mean: (a) income tax imposed by the Income Tax Act 1986 , as assessed under this Act; or (b) income tax imposed as such by an other Act, as assessed under this Act. Income tax as defined in section 995-1 of the ITAA 1997 means income tax imposed by any of these: (a) Income Tax Act 1986 ; (b) Income Tax (Diverted Income) Act 1981 ; (c) Income Tax (Former Complying Superannuation) Funds) Act 1994 ; (d) Income Tax (Former Non-resident Superannuation Funds) Act 1994 ; and (e) Income Tax (Fund Contributions) Act 1989 . The tax preparation and lodgement fees paid in relation to your overseas tax obligations are not regarded as tax affairs for the purpose of section 25-5 of the ITAA 1997. The tax imposed in country A is not imposed under any of the above Acts. The tax preparation for your overseas returns is not regarded as an obligation imposed on you by a Commonwealth law. Therefore paragraph 25-5(1)(b) of the ITAA 1997 has no application in your case. Furthermore the definition of tax affairs for Australian taxation purposes does not include your overseas tax affairs. Therefore no deduction is allowable under paragraph 25-5(1)(a) of the ITAA 1997. As the requirements of section 25-5 of the ITAA 1997 are not satisfied, a deduction is not allowable for your expenses incurred in preparing and lodging your overseas tax returns. We acknowledge that you use a recognised tax adviser, however, as the conditions outlined in subsection 25-5(1) of the ITAA 1997 are not met, no deduction is allowed. There is no other provision in the ITAA 1997 that allows a deduction for your overseas tax preparation and lodgment fees.

Relevant facts: You are an Australian resident and a citizen of country A. | You are required to file taxes in country A each year. | You do not have any taxable income from country A. | You have recognised tax adviser prepare your overseas tax returns. | You paid for the preparation and lodgment of your 2009, 2010 and 2011 overseas returns. You paid the fee in 2012. | You will incur costs for your future overseas tax returns.