Private ruling: Work related expenses
Date of advice: 23 October 2018
Published: January 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: As an employee beauty therapist, can you claim for the research use of promoted products and treatments? | A1: No.

Relevant facts and circumstances: You are employed as a beauty therapist. You have purchased products for research and development purposes. You used these products on yourself. You did this, in order to properly apply and feel the product. You need to use these products to recommend and educate clients on available treatments and products. The products you tested are promoted by your employer. Some of the products are provided to you by your employer at a reduced rate. You will only claim the first time purchase of these products.

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 all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. A deduction is only allowable if it: ● is actually incurred, ● meets the deductibility tests, and ● satisfies the substantiation rules. To establish a connection, it must be shown that the outgoing is relevant and incidental to the gaining of assessable income (ATO Interpretive Decision ATO ID 2002/319). Taxation Ruling TR 96/18 considers the deductibility of cosmetics and personal grooming related expenses, including beauty products. TR 96/18 states that as a general rule, expenditure on cosmetics and personal care and grooming is private in nature and is not deductible There are some exceptions to this rule, such as a performing artist who is required to maintain hair and make-up for a particular role or in circumstances where a taxpayer is required to work in harsh working conditions. However, there is an onus on the taxpayer to prove that such an outlay should be an allowable deduction. This was highlighted in Case P30 25 CTBR (NS); Case 94 82 ATC 139 when the board of review disallowed a claim for the purchase of newspapers by a real estate salesman. The real estate salesman gathered information from the daily papers to assist him in selling real estate. The salesman was, however, unable to demonstrate that his income was affected by expenditure on the newspapers. The expense retained its private character and the deduction was not allowed. You are not required to incur the expense by your employer. While knowledge acquired from the research of products and treatments may assist you to carry out your work duties more efficiently, the expense is not necessarily incurred in order to earn your income. As stated, expenses in relation to health and beauty treatments and products are private expenses. Although you believe as a beauty therapist you are required to have knowledge of these treatments, this does not alter the private nature of the expenses. The necessary connection is too general or tenuous to allow a deduction for any portion of the cost (ATO ID 2002/319). Therefore, you are not entitled to a deduction for beauty treatment expenses under section 8-1 of the ITAA 1997.