Private ruling: Work related expenses
Published: October 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for the cost of equipment? | 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. A number of significant court decisions have determined that for an expense to be an allowable deduction: • it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T ; (1958) 100 CLR 478), • there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T , (1949) 78 CLR 47), and • it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore Co (WA) Pty Ltd v. FC of T , (1956) 95 CLR 344; FC of T v. Hatchett , 71 ATC 4184). In your case, you buy equipment to test at home. We accept that you may get knowledge from testing the equipment at home. However, as your employer or the manufacturer does not provide you with the means or the time to test the equipment at work, it could be argued that they do not deem the testing to be necessary. Furthermore you have been directed to the supplier's product manager for any issues. The expense is not incurred in producing your assessable income. It is considered that the expense is private in nature. Therefore, you are not entitled to a deduction for the cost of the equipment you purchase and use at home.

Relevant facts: You are an employee whose responsibilities include troubleshooting and product support. | Your employer does not provide equipment or time for testing and education. | You are also not able to get any demonstration items from manufacturers. | You have been advised to contact a product manager if you have problems with the equipment. | You have purchased equipment for testing. After you have used the equipment for testing you will use it for private purposes.