Private ruling: Deduction for work related expenses
Published: July 2013
Ruling period: Income year ended 30 June 2013 | Income year ended 30 June 2014 | Income year ended 30 June 2015 | Income year ended 30 June 2016
Date scheme commenced: The scheme has commenced.

Ruling: Q1: Are you entitled to a deduction for the expenses you incur in respect of the interlock device? | A1: No.

Relevant facts and circumstances: You were disqualified from holding a drivers licence as a consequence of a driving offence. You have been permitted to drive your work vehicle on the condition it is fitted with an interlock device. You incurred a charge to have the device installed and pay a monthly fee to monitor and recalibrate the device and this will continue for the period of your disqualification. Your income producing activity requires you be able to drive a work vehicle. There is no private use involved.

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. For an expense to be an allowable deduction, there must be a sufficient connection between the outgoing and the assessable income such that the expenditure is incidental and relevant to your income producing activities ( Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431, and it must have the essential character of an outgoing incurred in gaining assessable income ( Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 7 AITR 166); (1958) 11 ATD 404). Penalties or fines imposed for breaches of the law committed whilst exercising a trade or undertaking employment are not deductible. The nature of the penalty or fine severs it from constituting an income-producing expense ( Madad v. Federal Commissioner of Taxation 84 ATC 4739; 15 ATR 1118). Taxation Determination TD 93/108 states that licence fees are private in nature. The right to drive on public roads does not cease to be a private right merely because you are employed in some capacity which involves the use of the public road system. In your situation, the device is not considered to be incidental and relevant to your income producing activities, but rather forms part of restrictions, punishment and deterrent imposed in consequence of your driving offence, the nature of which severs it from constituting an income producing expense. Additionally, it is considered the device has restored your right to drive, albeit conditionally, which is private in nature. Accordingly you are not entitled to a deduction for the expenses incurred relating to the device as they are private in nature and not incurred in producing your assessable income.