Private ruling: Deduction - work related expense
Date of advice: 8 July 2016
Published: August 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Can you claim a deduction for the payment excess under employer's motor vehicle insurance policy for a vehicle you damaged during the course of employment? | A1: Yes

Relevant facts and circumstances: You are employed as an apprentice. As part of your work duties, you drive clients to and from your work place in a vehicle provided by your employer You were involved in an at fault accident in the work vehicle It was a condition of your work contract that you were responsible to pay the insurance excess. Your employer held you responsible to pay the insurance excess.

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

Reasons for decision: Summary: Your circumstances are similar to those described in ATO Interpretive Decision 2004/393 and the same principles can be applied in your case. Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for any losses or outgoings which are incurred in the course of gaining and producing assessable income, unless the losses or outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431, the Court established that, for a loss or outgoing to be an allowable deduction, there must be a nexus between the outgoing and the assessable income so that the expenditure is incidental and relevant to the taxpayer's income-producing or business operations. In your case, you work as an apprentice and, during the course of your duties, you had an at fault accident in a work vehicle. Your employer had the vehicle repaired through their insurance however, your employer held you responsible for the insurance excess payable. You paid the excess as there is a condition in your work contract that you are responsible for any insurance excess. As the accident occurred during the course of you producing your assessable income and the expense associated in paying the insurance excess was a condition of your employment, the expense is considered to be incidental and relevant to the production of your assessable income and is not of a capital, private or domestic nature. As such, you are entitled to claim a full deduction under section 8-1 of the ITAA 1997 for the expense incurred in paying the insurance excess as a result of damage you caused to a vehicle during the course of your employment.