Private ruling: Deduction for repayment of lost money
Published: August 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for paying the money that you lost? | 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. In Ronbipon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] ALR 875; (1949) 23 ALJ 139, the High Court of Australia stated that in order for expenses to be allowable as deductions, the expenses must be incidental and relevant to the gaining of the assessable income. Whether this connection exists is a question of fact to be determined by reference to all the facts of the particular case. In your case, while it may have been a common thing that businesses help each other out, you were not employed by the business and therefore, any loss was not incurred in gaining your assessable income. Consequently, you are not entitled to a deduction for the amount you repaid to the business.

Relevant facts: You live in a remote area and it is a common thing that businesses help each other out. | When you were taking your employer's banking to the bank, you also took the banking for another business. | Along the way, the other business' banking became lost. | You paid the lost amount to the business as you believed it was not their fault. | You were not employed by the other business and they do not pay you to do their banking.