Private ruling: Deductibility of wages and travel allowances
Published: September 2012
Ruling period: Year ended 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a deduction for wages and travel allowance paid to the director of your corporate trustee and his spouse where the payments are made at commercial rates? | A1: Yes.

Relevant facts and circumstances: You have been engaged to provide management services to Person X) in relation to their activities. You have engaged Person Y and Person Z (Person X's relatives) to carry out the engagement. Person Y is the sole director of your corporate trustee. You pay Person Y and Person Z travel allowances for each trip they accompany Person X. The travel allowance is paid at a commercial rate. You intend to commence paying Person Y and Person Z wages at rates that are commercial for the type of work carried out.

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 or necessarily incurred in carrying on a business except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income or a provision of the taxation legislation excludes it. An entity is entitled to a deduction for wages and travel allowances paid to employees who are carrying out duties as part of the entity's income earning activities. You earn your assessable income by co-ordinating Person X's activities and interests. You have employed Person Y and Person Z to assist with these activities. You are entitled to a deduction for travel allowances and wages paid to Person Y and Person Z as the expenses have been incurred in earning your assessable income. As Person Y and Person Z will be paid at commercial rates, their relationship with Person X or your corporate trustee does not affect the deductibility of the travel allowances and wages paid to them.

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