Private ruling: Deductibility of expenses
Published: February 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are the flight costs and examination costs an allowable deduction for the company? | A1: Yes. | Q2: Are the transport costs between your accommodation and the airport, exam location and work related meetings an allowable deduction for the company? | A2: Yes.


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 incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, a deduction is not allowed where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In this case, the costs incurred for you to sit the examination were incurred in order for the company to receive increased assessable income. Having regard to all the facts in the present case it is not considered that the company is creating a new income earning activity; rather the company is simply expanding its current business activity and making it more attractive to clients. Therefore, the costs are not considered to be capital in nature. The examination and flight expenses relate sufficiently to the company's income earning activities and are deductible for the company under section 8-1 of the ITAA 1997. Similarly, the transport costs that relate to travel between your accommodation and the airport, examination location and work related meetings are an allowable deduction for the company. However any transport or other costs that relate to your private activities are not an allowable deduction as they do not relate to the company's income earning activities.

Relevant facts: You are the sole director and sole shareholder of a company. | You operate as a consultant through the company. | You wish to obtain status as a professional. | Graduating with a degree is not enough to qualify as a professional. You also need to be registered and licensed through entity A to obtain this designation. | The designation will allow you to market your business differently, expanding your range of offerings. | It also directly up-skills you in certain practices involved in your work. | Having the designation is a big selling point and differentiates you from competing firms. This designation will allow you to increase the rate that you bill for professional services as well as increase the range of contracts that you can bid for and increase the likelihood for success on those bids. | You had to travel to sit the examination to be granted the professional status. | You also undertook other business and personal activities while on the trip but the examination was the primary purpose for the trip. | The company is paying for the flight and examination costs. The company is also paying transport costs between your accommodation and the airport, exam location and work related meetings.