Private ruling: Sponsorship and advertising expenses
Published: December 2011
Ruling period: Year ended 30 June 2011 | The scheme commence on: | 1 July 2010
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for sponsorship and advertising expenses? | A1: Yes

Relevant facts and circumstances: You are an employee at a real estate agency. Your remuneration is paid as a base salary plus sales commission. You may also receive further remuneration based on the business opportunities you create for your employer. You have incurred expenses in relation to sponsorship with a sports club. The sponsorship relates to a player. You have no relationship with the sponsored player. The sponsorship monies are used by the sports club in accordance with their charter. You have no influence over how the money is used. In return for the sponsorship you receive advertising for your employer in a business directory. The advertisement states your name and contact number. Your employer will also receive further promotion and publicity for the payment of the player sponsorship fee.

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. Expenditure incurred for advertising and marketing is deductible under section 8-1 of the ITAA 1997 to the extent that it sufficiently relates to the production of assessable income. Taxation Ruling TR 98/6 states that real estate employees may spend money on advertising via newspapers, sponsorships and letter box drops (paragraph 38). It is accepted that these expenses, incurred by real estate salespersons that are entitled to earn commission, have a direct connection to the process by which such salespersons earn their income. Such persons have considerable flexibility in deriving their income and can be distinguished from salespersons in receipt of a fixed salary. Accordingly, it is accepted that a deduction is allowable in these circumstances (paragraph 40 and 41 TR 98/6). In your case, you paid sponsorship and advertisement fees to a sports club. In return, your name and contact number appears in an advertisement for your employer in the club's business directory. As the contact on the advertisement, this may enable you personally to obtain new business and clients. It is accepted that the costs you have incurred for sponsorship and advertising sufficiently relate to your commission income. Therefore, the costs you have incurred for sponsorship and advertising are deductible under section 8-1 of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.