Private ruling: Expenses - other
Published: December 2013
Ruling period: 1 July 2013 to 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Is the Special Disability Trust (SDT) entitled to a deduction for the accommodation and care expenses relating to the beneficiary? | A1: No

Relevant facts and circumstances: A SDT was established by the family of the beneficiary. The beneficiary has a severe disability and is the sole beneficiary of the Trust. The funds in the SDT are invested, earning interest and generating an annual income The Trust incurred expenses on the accommodation and care of the beneficiary. Some of the income of the trust was unexpended.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Summary: The trustee of a special disability trust is generally liable to pay tax on the whole of the net income of the trust at the principal beneficiary's personal income tax rate. The general deduction provision, 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 and producing assessable income, except where the outgoings are of a capital, private or domestic nature. Expenditure on the daily necessities of life (e.g., food and shelter) is generally a private expense and is not incurred in gaining or producing assessable income. Various court decisions have concluded that, generally, accommodation and food expenses are essentially 'living expenses' of a private or domestic nature and not deductible ( FC of T v. Cooper 91 ATC 4396; (1991) 21 ATR 1616; FC of T v. Toms 89 ATC 4373; (1989) 20 ATR 466). The circumstances of the trust do not change the essential character of these expenses as private or domestic in nature. The expenditure incurred by the trust on accommodation and care of the beneficiary is not deductible under section 8-1 of the ITAA 1997 as it is not incurred in gaining or producing assessable income and is also private or domestic in nature.

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