Published: December 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a deduction for the purchase of equipment? | A1: No.

Relevant facts and circumstances: You work at a retail store. It is your role to recruit new customers, retain their future custom and maximise future sales. In order to do this, the company requires you to run events that showcase the stores range of products. You are provided a generous staff discount to allow you to purchase the products. However, this discount is capped, and consequently, a large portion of the products you purchase are at full retail value.

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 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 establishing a connection, it must be shown that the outgoing is relevant and incidental to the gaining of assessable income. In most circumstances the purchasing of your store's product would be considered a private expense. In some limited circumstances this expense may be characterised as an income producing expense and may be an allowable deduction. However there is an onus on the taxpayer to prove that such an outlay should be an allowable deduction. This was highlighted in Case P30 25 CTBR (NS); Case 94 82 ATC 139 when the Board of review disallowed a claim for the purchase of newspapers by a real estate salesman. The real estate salesperson would gather information from the daily papers to assist him in selling real estate. The salesperson was however, unable to demonstrate that his income was affected by expenditure on the newspapers. The expense retained its private character and the deduction was not allowed. While we acknowledge that the skills and knowledge acquired from your store's products may assist you to carry out employment duties more efficiently, the expense is not necessarily incurred in order to earn that income. The purchasing of your store's products has the character of a private expense. The connection is too general or tenuous to allow a deduction for any portion of the cost. Accordingly you are not entitled to a deduction under section 8-1 of the ITAA 1997 for the cost incurred in purchasing your store's products.

Ruling: Subject: Work related expenses