Private ruling: Deduction
Published: June 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a deduction for paying your spouse to proofread? | A1: No.


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 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. The Board of Review had dealt with the issue of wages paid by an employee in Case M55 80 ATC 366; (1980) 24 CTBR (NS) Case 30 . In that case an employee pathologist was denied a deduction for wages paid to his wife to take messages for him when he was on call. The Board considered that the expenditure was not incurred in gaining or producing the assessable income and is of a private or domestic nature. Dr Beck stated at ATC page 368, CTBR (NS) page 242 that: 'If an employee pays another party to render some of the services for which the employee is paid this expenditure is not a cost of deriving the income. It can be regarded as a cost of lightening the work load, of gaining time off, of filling a gap in the employees competence, or, perhaps of rendering service beyond that which he is being paid for, and all expenditure of this kind is private and hence specifically excluded ...[from being deductible]' Where a taxpayer pays another to perform part of the duties of their employment it is not an expense which is incurred by the taxpayer in gaining or producing their employment income.

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. | Relevant facts: You are a contract worker. | You do not receive bonuses as part of your employment. | You wish to contract proofreading to your spouse's business.