Private ruling: Work related and investment related expenses
Published: March 2014
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to claim a deduction for the cost of sunglasses? | A1: Yes. | Q2: Are you entitled to claim a deduction for the decline in value (depreciation) of a bookcase used to store your professional library? | A2: Yes. | Q3: Are you entitled to claim a deduction the following expenses relating to your share portfolio: • subscription to an investment group ('the Group') • travel to attend the annual general meeting (AGM) of companies in which you hold shares • the investment related portion of your computer and consumable costs? | A3: Yes.

Relevant facts and circumstances: Your employment duties include: • inspection of your employer's outdoor areas on a daily basis • taking contractors and visitors around your employer's premises • travelling to various airports and between offices on a regular basis. You have purchased sunglasses to wear while working outside at work. You maintain a professional library containing books and other publications relevant to your duties. In the relevant financial year you purchased a bookshelf on which to store your professional publications. You have an investment portfolio which provides you with dividends, interest and capital gains. You have invested in shares in order to obtain both dividends and capital gains. You incur travel costs to attend the AGM of companies in which you hold shares. You have a subscription to the Group who supply an investment focussed magazine. You use the information in the magazine to review your current investments, recommendations for purchases and selling your shares. You purchase and sell shares a few times each month. You use your computer and various consumables in reviewing your portfolio.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 40-25

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. For an expense to be deductible there must be a significant connection between the expense and the assessable income. It is not sufficient that the expenditure is a prerequisite to the derivation of assessable income. The expenditure must be relevant and incidental to the actual activities which gain assessable income. In summary, expenses are deductible where they have a relevant connection to the taxpayer's current income earning activities. | Detailed Reasoning - Work related expenses: Sunglasses A deduction may be claimed for the cost of sunglasses where the nature of your work requires you to work in the sun for all or part of the day and you use the sunglasses to protect you from the sun while at work. You are regularly outdoors conducting contractors and visitors around your employer's premises and checking outdoor areas. It is accepted that your duties include work performed in the sun for part of the day. As a nexus exists between your duties and the use of sunglasses, you are entitled to claim a deduction for the cost of the sunglasses. Note: where the sunglasses are used for both private and work related uses, you can only claim the work-related percentage of the cost. Bookcase - depreciation Section 40-25 of the ITAA 1997 allows you to claim depreciation on items which are used wholly or partly for carrying out income producing activities. This includes a professional library and items of equipment used at home. Where items used for business purposes are also used for domestic or private purposes you will need to apportion the depreciation allowance. To do this a bona fide estimate of the percentage of business use of the item should be made. This is the proportion of the annual depreciation which you are entitled to claim. You use your professional library for work related purposes. These books and publications are stored on a bookcase. You are entitled to claim a deduction for the depreciation of the bookcase as it relates to your income earning activities. | Detailed Reasoning - Investment related expenses: Subscription to the Group A deduction is allowable for the costs of subscriptions to share market information services to the extent that the expenditure is incidental and relevant to gaining or producing assessable dividends and interest from a portfolio of shares of bonds and is not a capital cost of putting the income earning investment in place. You have a subscription to the Group. The Group sends you share market information which you use to review your existing portfolio and determine whether to sell or buy shares. As you have an existing share portfolio which provides you with assessable dividend income, the cost of subscribing to the Group is an allowable deduction. Travel to attend the AGM of a company in which you hold shares Taxation Ruling IT 39 states you are entitled to a deduction for expenses incurred in servicing or managing income producing investments. Travel expenses incurred to attend a company AGM are costs incurred in servicing an investment portfolio. If the travel relates solely for the purpose of attending the AGM, you will be entitled to a deduction under section 8-1 of the ITAA 1997. However, if the purpose of the travel is predominantly of a private nature with attendance at the AGM being incidental, only the expenses that relate directly to the income producing purpose will be an allowable deduction. You are entitled to claim a deduction for travel costs associated with attending the AGM of a company in which you hold shares to the extent that travel relates to earning your assessable income from the shares. Computer and consumable expenses A deduction may be claimed for computer and consumable expenses to the extent they are used to manage your investment portfolio and earn assessable income. You use your computer and related consumables to monitor, review, obtain information on when to purchase and sell shares in your investment portfolio. It is accepted these expenses were incurred in earning your assessable income. A deduction is allowable to the extent the computer and consumable usage relates to your share portfolio.