Australian Taxation law ( Deduction)
Raemon
Chapter 12
General deductions
2018 Thomson Reuters (Professional) Australia Ltd. All Rights Reserved. Jonathan Teoh, Monash University
Introduction • The main provision that provides taxpayers a deduction for
an expense is the general deduction provision:
• Section 8-1 has the potential to apply to any taxpayer.
• A loss or outgoing (ie, an expense) may:
–Be deductible under s 8-1 and a specific provision. In these cases, use the “most appropriate” provision: s 8-10.
–Not qualify for a deduction under a specific provision. In these cases, consider deductibility under s 8-1.
Deductions General
Deductions (s 8-1)
Specific Deductions
(s 8-5)
PoTL 2018 paragraph [12.10]
General deduction rule: Positive limbs • A taxpayer can deduct from his or her assessable income a
loss or outgoing to the extent that it is (s 8-1(1)):
• Only one of the two positive limbs needs to be satisfied.
1 • Incurred in gaining or producing
assessable income; or
2
• Necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.
PoTL 2018 paragraph [12.20]
General deduction rule: Negative limbs • However, a loss or outgoing is not deductible under the general
deduction rule if it satisfies any of the negative limbs (s 8-1(2)):
• Deductibility is determined from the perspective of the taxpayer which incurs the loss or outgoing.
1 • Capital or capital in nature;
2 • Private or domestic;
3 • Incurred in gaining exempt or non-assessable
non-exempt income; or
4 • Prevented from being deducted by a specific
provision of the income tax legislation.
PoTL 2018 paragraph [12.20]
General deduction rule: Loss or outgoing • Section 8-1 applies to both a loss and outgoings:
– Loss: depletion of a taxpayer’s financial position: Charles Moore & Co (WA) Pty Ltd v FCT (1956)
– Outgoing: eg, an expense.
• Determining whether there is a loss or outgoing is not generally an issue in claiming a deduction under s 8-1.
PoTL 2018 paragraph [12.30]
Nexus test – positive limbs of s 8-1 • First positive limb • Requires a nexus between:
• Second positive limb • Requires a nexus between:
Loss / outgoing eg, expense
Gaining or producing assessable income
Nexus / connection
Loss / outgoing eg, expense
Carrying on a business to produce assessable income
Nexus / connection PoTL 2018 paragraph [12.40]
Nexus test – positive limbs of s 8-1: “Gaining or producing assessable income” • “Gaining or producing assessable income” to be interpreted as:
– “in the course of gaining or producing assessable income”: Amalgamated Zinc (De Bavay’s) Ltd v FCT (1935)
Loss / outgoing eg, expense
Gaining or producing assessable income
Nexus / connection: Must be sufficient and necessary that the loss or outgoing is:
1.Productive of assessable income; or 2.Expected to produce assessable income
PoTL 2018 paragraph [12.40]
Nexus test – positive limbs of s 8-1: Judicial tests • The courts have adopted a number of approaches to determine
whether a loss or outgoing is incurred in the course of gaining or producing assessable income:
1 • The incidental and relevant test;
2 • The essential character test; and
3 • The occasion of the expenditure test.
PoTL 2018 paragraph [12.50]
Nexus test – positive limbs of s 8-1: Judicial tests 1. Incidental and relevant test • A loss or outgoing is sufficiently connected to the production of
assessable income where: – “the expenditure … is incidental and relevant to the
operations or activities regularly carried on for the production of income”: W Nevill & Co Ltd v FCT (1937).
2. Essential character test • Courts have looked at the “essential character” of an expense:
– Home to work travel expenses: essential character was to put the taxpayer in a position to gain or produce assessable income, not the production of assessable income • See, Lunney v FCT; Hayley v FCT (1958).
PoTL 2018 paragraphs [12.50] – [12.60]
Nexus test – positive limbs of s 8-1: Judicial tests 3. Occasion of the expenditure test • Courts have considered whether the occasion of the
expenditure arises out of income-producing activities: FCT v Payne (2001) and FCT v Day (2008)
– Requires an assessment as to what is productive of the taxpayer’s assessable income.
PoTL 2018 paragraph [12.60]
Nexus test – positive limbs of s 8-1: Nexus sufficiently direct or too remote? • If the nexus between the expense and the production of
assessable income is too remote, it is not deductible • Some cases exist where it is questionable as to whether a
nexus can be established, for example:
1 • Expenses involving alleged or actual
wrongdoing by the taxpayer
2 • Expenses to reduce future expenses
3 • Involuntary losses or outgoings
PoTL 2018 paragraph [12.70]
Nexus test – positive limbs of s 8-1: Nexus sufficiently direct or too remote? 1. Expenses involving alleged or actual wrongdoing • Nexus satisfied for expenses arising from alleged or actual
wrongdoing incurred by: – Employees defending improper conduct charges which are
“quasi-personal”: FCT v Day (2008). – Business taxpayers in respect of defending claims (eg, for
libel actions) arising out of the ordinary course of business: Herald and Weekly Times v FCT (1932) and FCT v Snowden v Willson Pty Ltd (1958).
– Company directors incurring costs to defend criminal charges: Magna Alloys & Research Pty Ltd v FCT (1980).
– Expenses related to illegal business: FCT v La Rosa (2003).
PoTL 2018 paragraph [12.80]
Nexus test – positive limbs of s 8-1: Nexus sufficiently direct or too remote? 2. Expenses to reduce future expenses • Nexus established between an expense that improves the
taxpayer’s business overall and reduces future expenses – Termination payment to end a contract of employment for
poor performing staff: W Nevill and Co Ltd v FCT (1937). 3. Involuntary losses or outgoings • Nexus established between an involuntary loss where it
arises out of the taxpayer’s income-producing activities – Day’s earnings stolen while on way to the bank: Charles
Moore & Co (WA) Pty Ltd v FCT (1956).
PoTL 2018 paragraphs [12.100] – [12.110]
Nexus test – positive limbs of s 8-1: Sufficient temporal nexus • An issue as to whether a nexus can be established where
expenses are incurred:
1. Before the production of
assessable income Is it too remote?
Producing assessable income,
eg, carrying on a business
2. After the production of
assessable income Is it too remote?
Loss / outgoing eg, expense
PoTL 2018 paragraph [12.120]
Nexus test – positive limbs of s 8-1: Sufficient temporal nexus 1. Expenses related to the production of assessable income
in future years • An expense incurred to gain or produce assessable income in
the future may satisfy the nexus requirement – Interest associated with the purchase of an asset which
was expected to produce income in the future was deductible: Steele v DCT (1999)
• However, nexus may not be established where: – The expense is too preliminary for a business that has yet
to commence: Softwood Pulp and Paper Ltd v FCT (1976) – The expense is to put an employee in a position to gain or
produce assessable income: Lunney v FCT; Hayley v FCT (1958).
PoTL 2018 paragraph [12.130]
Nexus test – positive limbs of s 8-1: Sufficient temporal nexus 2. Expenses related to the production of assessable income
in prior years • Likely to be deductible providing the expense relates to the
time when the business was operating. For example:
– Satisfaction of obligations arising from previous business: Placer Pacific Management Pty Ltd v FCT (1995)
– Interest expense on a business: FCT v Jones (2002):
Loan drawn down
Business ceases
Interest accruing & payable nexus still maintained
PoTL 2018 paragraph [12.140]
Non-deductible expenses – negative limbs of s 8-1 • An expense is not deductible to the extent that it satisfies any
one of the negative limbs – “To the extent”: the expense is partially deductible if it
partially satisfies a negative limb: – The negative limbs are:
1 • Capital or capital in nature;
2 • Private or domestic;
3 • Incurred in gaining exempt or non-assessable
non-exempt income; or
4 • Prevented from being deducted by a specific
provision of the income tax legislation.
PoTL 2018 paragraph [12.160]
Non-deductibles – negative limbs of s 8-1 Capital or capital in nature • There is no clear test in legislation as to when an expense will
be characterised as a capital expense
• Distinction between “revenue” (not capital) and “capital”:
Loss or outgoing
Revenue Broadly relates to the taxpayer’s income- producing process
Capital Broadly relates to the taxpayer’s income- producing structure
PoTL 2018 paragraph [12.170]
Non-deductibles – negative limbs of s 8-1 Capital or capital in nature • Earlier judicial tests include:
– Expenditure spent on an “once and for all” basis (capital) or recurring basis (revenue): Vallambrosa Rubber Co Ltd v Farmer (1910)
– Expenditure made to bring an asset into existence or to bring an advantage for an enduring benefit: British Insulated and Helsby Cables Ltd v Atherton (1926).
PoTL 2018 paragraph [12.180]
Non-deductibles – negative limbs of s 8-1 Capital or capital in nature • Key judicial decision to distinguish between business
processes (revenue) and business structure (capital):
– Sun Newspapers Ltd and Associated Newspapers v FCT (1938). Three factors to be considered:
1
• Character of the advantage sought • Whether the expense has a lasting (capital) or temporary
(revenue) benefit
2
• Manner in which it is used relied upon or enjoyed • Requires a consideration of whether the benefit is used
one-off (capital) or recurrently (revenue)
3
• Means adopted to obtain the benefit • Whether the benefit was obtained through a one-off
payment (capital) or recurrent payment (revenue).
PoTL 2018 paragraph [12.180]
Non-deductibles – negative limbs of s 8-1 Capital or capital in nature • Despite Sun Newspapers, it is difficult to characterise
expenses as revenue or capital, for example:
Revenue in nature BP Australia v FCT
(1965)
• “Tied house” agreements averaging five years in duration with petrol stations
• Benefit was to be used in the continuous and recurrent to sell petrol
• Lump sum payment.
Capital in nature Strick v Regent Oil Co Ltd
(1966)
• Exclusive sales tie agreements via a lease premium arrangement
• Between 10-20 years in duration (substantially longer than BP Australia).
PoTL 2018 paragraph [12.190]
Non-deductibles – negative limbs of s 8-1 Capital or capital in nature • The courts will examine the substance of a payment and not
just its form, for example:
Revenue in nature National Australia Bank Ltd
v FCT (1997)
• Lump sum payment to become the exclusive lender under a government loan scheme
• Taxpayer sought to increase customer base and income from loans.
Capital in nature Colonial Mutual Life Assurance
Society Ltd v FCT (1953)
• Taxpayer acquired a block of land
• Payments were in the form of a “rent charge”, with monthly payments over 50 years.
PoTL 2018 paragraph [12.200]
Non-deductibles – negative limbs of s 8-1 Private or domestic • There is no clear test as to whether an expense is private or
domestic in nature. The broad distinction:
• Eg, additional food consumed by a professional sportsperson was to put the taxpayer in a position to carry out income- producing activities (private / domestic): FCT v Cooper (1991).
Loss or outgoing
Private or domestic Puts the taxpayer in a
position to gain or produce assessable income
Not private or domestic Incurred in gaining or producing assessable
income
PoTL 2018 paragraph [12.220]
Non-deductibles – negative limbs of s 8-1 Incurred in gaining / producing certain income • Losses or outgoings that are incurred in gaining or producing
exempt or non-assessable non-exempt income are not deductible under s 8-1.
Business taxpayer deriving:
1. Assessable income (eg, sales)
2. Exempt income (eg, exempt foreign
source income)
Income: Assessable
Expenses: Deductible
Income: Not assessable
Expenses: Not deductible
PoTL 2018 paragraph [12.230]
Non-deductibles – negative limbs of s 8-1 Denied deductions • A loss or outgoing will not be deductible when it has been
specifically denied by the income tax legislation
Examples of denied deductions
• Certain penalties imposed under Australian or foreign laws: s 26-5 • Expenses related to rebatable benefits (eg, Austudy): s 26-19 • Repayments of certain student assistance loans owing to the
Government in respect of studies (eg, higher education): s 26-20 • Political gifts or donations made by business taxpayers: s 26-22 • Relative’s travel expenses: s 26-30 • Excessive amounts paid to related entities: s 26-35 • Recreational club expenses: s 26-45(2) • Bribes to foreign public officials & public officials: ss 26-52 and 26-53 • Expenditure relating to illegal activities: s 26-54 • Travel expenses related to earning assessable income from
residential premises: 26-31
PoTL 2018 paragraph [12.240]
Non-deductibles – negative limbs of s 8-1 Denied deductions: entertainment expenses • Entertainment expenses are not deductible under s 8-1, unless
an exception applies – Definition of “entertainment” is broad: includes, “food, drink
or recreation”: s 32-10(1).
• Exceptions include: – Entertainment provided by way of a fringe benefit: s 32-20 – Allowance to an employee that is included in the employee’s
assessable income: s 32-30 – Provision of food or drink to an employee under industrial
arrangements relating to overtime: s 32-30 – Promotion and advertising expenses: s 32-45.
PoTL 2018 paragraph [12.250]
Non-deductibles – negative limbs of s 8-1 Denied deductions: reimbursements • Taxpayers are denied a deduction for expenditure that has
been reimbursed: s 51AH ITAA36 – Taxpayer is not actually out-of-pocket.
Employee ineligible to claim a deduction
Employee Acquires
goods/services from the supplier
Supplier Sells
goods/services to the employee
Employer Reimburses the
employee for cost of goods/services
PoTL 2018 paragraph [12.260]
Apportionment – deductibility of dual purpose expenses • A loss or outgoing is deductible “to the extent” that:
– It satisfies either positive limb of s 8-1; – It does not satisfy one of the negative limbs of s 8-1.
• Apportionment for expenses that have a dual purpose: – No precise formula for apportionment and it is necessary to
determine a fair and reasonable division on a case-by-case basis: Ronpibon Tin No Liability v FCT (1949)
Expense Eg, $1,000 phone bill
Work-related calls $700 deductible
Personal calls $300 not deductible
70%
30%
PoTL 2018 paragraphs [12.270] – [12.280]
Amount of deduction: Reasonable vs actual expense • Generally, taxpayers are entitled to deduct the full amount of a
loss or outgoing if the requirements of s 8-1 are satisfied: – “It is not for the Court or the commissioner to say how much
a taxpayer ought to spend in obtaining his income, but only how much he has spent”: Ronpibon Tin No Liability v FCT (1949).
• Objective purpose of the loss or outgoing is considered: Europa Oil (NZ) Ltd v CIR (NZ) (No 2) (1976).
• A statutory provision may limit the deduction, for example: – Payments to related parties may be limited to an amount
that is considered “reasonable”: s 26-35.
PoTL 2018 paragraphs [12.290] – [12.300]
Amount of deduction: Tax minimisation situations - purpose • A taxpayer’s subjective purpose or intention in incurring an
expense may be considered where: – The taxpayer is in a loss position; and – The taxpayer’s purpose in incurring an expense appears to
be one of tax minimisation: Ure v FCT (1981).
• For example, in Ure v FCT:
Taxpayer’s deduction of interest limited “to the extent” of the production of assessable income, ie 1%
Bank Provides a loan to
the taxpayer. Interest rates range from 7.5% to 12%
Taxpayer Moneys on-lent at an interest rate of
1%, producing assessable income
Related Parties Moneys used for
investments paying competitive market
rates
PoTL 2018 paragraph [12.310]
Substantiation of deductions • Taxpayers must be able to substantiate their deduction claims
by maintaining and keeping proper documentation.
• Documentation requirements outlined in Div 900.
• Records generally required to be kept for 5 years: s 900-165.
• Exceptions apply, for example, written evidence is not required: – For work expenses of up to $300. – For claims arising from expending a travel or overtime meal
allowance, provided the claim is within the Commissioner’s reasonable limits: see TD 2017/19 and TR 2004/6.
PoTL 2018 paragraph [12.320]
Application of s 8-1 to common expenses • Courts have had to examine whether expenses:
– Have a nexus with gaining or producing assessable income; – Private or domestic in nature; – Capital or revenue in nature in other situations (eg, legal
expenses)
PoTL 2018 paragraph [12.330]
Application of s 8-1 to common expenses: Expenses incurred in gaining employment • Expenses incurred in gaining employment are considered too
early for the production of assessable income: – See, FCT v Maddalena (1971).
• However, a distinction is made if the taxpayer is carrying on a business: – Professional sports people incurring costs for the negotiation
of employment contracts (management fees) deductible: Spriggs v FCT; Riddell v FCT (2009).
PoTL 2018 paragraphs [12.340] – [12.350]
Application of s 8-1 to common expenses: Relocation expenses • Expenses incurred by a taxpayer in relocating his or her home
have been held to be non-deductible: – Puts the taxpayer in a position to produce assessable
income, rather than incurred in gaining or producing assessable income: Fullerton v FCT (1991).
PoTL 2018 paragraph [12.360]
Application of s 8-1 to common expenses: Child care expenses • Child care expenses are non-deductible
– Puts the taxpayer in a position to produce assessable income, rather than incurred in gaining or producing assessable income: Lodge v FCT (1972)
– Also likely to be private or domestic in nature: s 8-1(2)(b).
PoTL 2018 paragraph [12.370]
Application of s 8-1 to common expenses: Travel expenses 1. Travel between home and work
• General rule: – Expenses for travel between a taxpayer’s ordinary home and
regular work location is not deductible: Lunney v FCT; Hayley v FCT (1958) and Draft Ruling TR 2017/D6
• However, may be considered deductible “work travel” if there are special demands:
– “Fly in-fly out” workers subject to employer’s direction and control during period of travel: John Holland Group Pty Ltd v FCT (2015)
– Outside normal work hours where work at home has started prior to undertaking travel: FCT v Collings (1976)
PoTL 2018 paragraph [12.390]
Application of s 8-1 to common expenses: Travel expenses 1. Travel between home and work (continued)
• Other exceptions to the general rule:
1
• By itinerant workers: FCT v Wiener (1978). Multiple unrelated jobs not requiring travel ≠ itinerant worker: Re Hill v FCT (2016)
2
• By taxpayers who are required to carry bulky items to perform employment duties: FCT v Vogt (1975) and Rafferty v FCT (2017)
3 • To alternative workplaces on a temporary basis: FCT v
Ballesty (1977).
PoTL 2018 paragraphs [12.400] – [12.430]
Application of s 8-1 to common expenses: Travel expenses 2. Travel between two places of work
• Under common law, travel between unrelated workplaces are not deductible under s 8-1: see FCT v Payne (2001)
• Statutory position (s 25-100):
• Deduction allowed for travel directly between two workplaces where the taxpayer is engaged in income-producing activities
– Not deductible if a workplace is the taxpayer’s residence.
Business A (also taxpayer’s
residence) First Job
Second (Unrelated) Job or Business B
Travel expense: Not deductible
Travel expense: Deductible
PoTL 2018 paragraph [12.440]
Application of s 8-1 to common expenses: Travel expenses 3. Car expenses • Where travel expenses relate to a car, rules in Div 28 govern
the amount of car expenses that are deductible under s 8-1: – Div 28 only applies to individuals and partnerships that
include at least one individual: s 28-10 – Taxpayer must owned or leased a car during the year.
• Choice of methods to calculate car expense deductions (but deduction still claimed under s 8-1):
PoTL 2018 paragraphs [12.450] – [12.570]
1 • “Cents per kilometre “method
2 • “Log book” method
Application of s 8-1 to common expenses: Travel expenses “Cents per kilometre” • Quantum of deduction claim under s 28-25 is equal to:
• Limit of 5,000 kilometres claim per year. Any claims for kilometres in excess of 5,000 is disregarded: s 28-25(2)
• Not required to substantiate car expenses: s 28-35.
PoTL 2018 paragraphs [12.460] – [12.480]
No. of business kms the travelled in the income year
Number of cents per kilometre
(66 cents per km for 2017-18)
Application of s 8-1 to common expenses: Travel expenses “Log book” method • Quantum of deduction claim under s 28-90 is equal to:
• Car expenses are broadly operating expenses and the decline in value (eg, petrol) and require substantiation.
• Business use percentage calculated by reference to a log book using the formula:
PoTL 2018 paragraphs [12.550] – [12.570]
Amount of each car expense
Business use percentage
100% Number of business kms the car travelled in the
period when the taxpayer held the car Total number of kms travelled by the car in the period
Application of s 8-1 to common expenses: Self-education expenses 1. Relating to taxpayer’s current career • Sufficient connection to the production of the taxpayer’s
assessable income when:
Self-education expenses
Gaining or producing assessable income
Nexus established:
Improving prospects of promotion
FCT v Studdert (1991)
Earning higher income in existing
career FCT v Hatchett (1971)
Requirement to stay up to
date Ruling TR 98/9
PoTL 2018 paragraphs [12.580] – [12.630]
Application of s 8-1 to common expenses: Self-education expenses • Travel expenses relating to self-education may be deductible
when travel relates to income-producing activities.
• High Court in FCT v Finn (1961) suggested the following factors to determine deductibility:
• Not necessary for all factors to be satisfied. Depends on individual’s circumstances.
1 • Whether there is employer support for travel
2 • Clear evidence that the travel was devoted to the collation
of information related to income-producing activities; and
3 • Resulting from (2), whether there will be an improvement
of opportunities for promotion and/or more income.
PoTL 2018 paragraph [12.620]
Application of s 8-1 to common expenses: Self-education expenses 2. Not related to employment income • Self-education expenses potentially deductible where the
receipt of income is conditional on the recipient making satisfactory educational progress: See, FCT v Anstis (2010)
– Note, a deduction for expenses related to rebatable benefits specifically denied by s 26-19.
3. Non-deductible self education expenses • Payments made under the Higher Education Support Act
2003 (Cth) (eg, HECS-HELP fees): s 26-20. • First $250 of self-education expenses: s 82A ITAA36. • Apportionment required where self-education expenses are
both income-producing and private in nature.
PoTL 2018 paragraphs [12.640] – [12.690]
Application of s 8-1 to common expenses: Home office expenses • The deductibility of home office expenses depends on:
– Type of expense: running expenses or occupancy expenses; – Whether the taxpayer uses the home office as a ‘genuine
home office’ or ‘home office for convenience only.
• Deductibility of home office expenses under s 8-1 is as follows:
• Apportionment of expenses: occupancy expenses eg, by floor area; running expenses, eg, by time basis.
Running expenses
eg, electricity
Occupancy expenses eg, interest on
mortgage Genuine home office Home office for convenience only
FCT v Faichney (1972)
PoTL 2018 paragraphs [12.700] – [12.730]
Application of s 8-1 to common expenses: Clothing and dry-cleaning expenses • Conventional clothing is not deductible under s 8-1
– Considered day-to-day living: not incurred in gaining or producing assessable income and/or private or domestic;
– Applies even where the clothing is required by the taxpayer’s income producing activities: Westcott v FCT (1997).
• Exceptions:
1
• Abnormal expenditure on conventional clothing • Eg, “additional expenditure” deductible for a significant number
of additional outfits required for work : FCT v Edwards (1994)
2
• Expenditure caused by taxpayer’s work conditions • Eg, flight attendant allowed a deduction for moisturiser and
larger shoes due to work environment: Mansfield v FCT (1995).
PoTL 2018 paragraphs [12.740] – [12.780]
Application of s 8-1 to common expenses: Clothing and dry-cleaning expenses • Occupation-specific clothing, protective clothing and uniforms
are generally deductible: Morris v FCT (2002)
• Clothing items that are expected to last a number of years (eg, a barrister’s wig) may be capital and subject to depreciation.
Term Definition Occupation-specific clothing
Identifies the wearer as a person associated with a particular profession, occupation or calling: s 34-20(1). For example, a chef’s hat.
Protective clothing Clothing to protect the wearer from a real risk of exposure to illness or injury: s 34-20(2). For example, a dentist’s goggles. Also see, Ruling TR 2003/6.
Uniform Sufficiently distinctive to an observer as clearly identifying the employee as working for a particular employer: s 34-15.
PoTL 2018 paragraphs [12.790] – [12.800]
Application of s 8-1 to common expenses: Interest expenses • Deductibility of interest expenses will depend on the taxpayer’s
use of borrowed funds: FCT v Munro (1926). For example:
Deductible
• Interest accruing on borrowed funds used to purchase an income- producing asset (eg, business asset, investment / rental property)
Non-deductible
• Interest accruing on borrowed funds used to purchase the taxpayer’s residence that does not produce assessable income.
PoTL 2018 paragraph [12.810]
Application of s 8-1 to common expenses: Interest expenses and gearing • Gearing refers to borrowing money in order to invest (eg
purchase of an investment property) – Positive gearing: income > costs of investment – Negative gearing: income < costs of investment.
• Deductibility of costs (commonly interest), based on whether s 8-1 satisfied, regardless if the investment is negative geared.
PoTL 2018 paragraph [12.820]
Application of s 8-1 to common expenses: Legal expenses • Distinguishing between capital and revenue legal expenses
can be a difficult. For example:
Capital in nature Broken Hill Theatres Pty Ltd v
FCT (1952) and John Fairfax & Sons Pty Ltd v FCT (1959)
• Legal expenses incurred to protect the taxpayer’s title in an asset or its existing business structure
Revenue in nature FCT v Consolidated Fertilizers Ltd (1991)
• Legal expenses incurred to protect the taxpayer’s business (hence, income- producing processes) where it is a regular incident.
PoTL 2018 paragraphs [12.840] – [12.850]
- Chapter 12
- Introduction
- General deduction rule:�Positive limbs
- General deduction rule:�Negative limbs
- General deduction rule:�Loss or outgoing
- �Nexus test – positive limbs of s 8-1
- Nexus test – positive limbs of s 8-1:�“Gaining or producing assessable income”
- Nexus test – positive limbs of s 8-1:�Judicial tests
- Nexus test – positive limbs of s 8-1:�Judicial tests
- Nexus test – positive limbs of s 8-1:�Judicial tests
- Nexus test – positive limbs of s 8-1:�Nexus sufficiently direct or too remote?
- Nexus test – positive limbs of s 8-1:�Nexus sufficiently direct or too remote?
- Nexus test – positive limbs of s 8-1:�Nexus sufficiently direct or too remote?
- Nexus test – positive limbs of s 8-1:�Sufficient temporal nexus
- Nexus test – positive limbs of s 8-1:�Sufficient temporal nexus
- Nexus test – positive limbs of s 8-1:�Sufficient temporal nexus
- �Non-deductible expenses – negative limbs �of s 8-1
- �Non-deductibles – negative limbs of s 8-1�Capital or capital in nature
- Non-deductibles – negative limbs of s 8-1�Capital or capital in nature
- Non-deductibles – negative limbs of s 8-1�Capital or capital in nature
- Non-deductibles – negative limbs of s 8-1�Capital or capital in nature
- Non-deductibles – negative limbs of s 8-1�Capital or capital in nature
- Non-deductibles – negative limbs of s 8-1�Private or domestic
- Non-deductibles – negative limbs of s 8-1�Incurred in gaining / producing certain income
- Non-deductibles – negative limbs of s 8-1�Denied deductions
- Non-deductibles – negative limbs of s 8-1�Denied deductions: entertainment expenses
- Non-deductibles – negative limbs of s 8-1�Denied deductions: reimbursements
- Apportionment – deductibility of dual purpose expenses
- Amount of deduction:�Reasonable vs actual expense
- Amount of deduction:�Tax minimisation situations - purpose
- Substantiation of deductions
- Application of s 8-1 to common expenses
- Application of s 8-1 to common expenses:�Expenses incurred in gaining employment
- Application of s 8-1 to common expenses:�Relocation expenses
- Application of s 8-1 to common expenses:�Child care expenses
- Application of s 8-1 to common expenses:�Travel expenses
- Application of s 8-1 to common expenses:�Travel expenses
- Application of s 8-1 to common expenses:�Travel expenses
- Application of s 8-1 to common expenses:�Travel expenses
- Application of s 8-1 to common expenses:�Travel expenses
- Application of s 8-1 to common expenses:�Travel expenses
- Application of s 8-1 to common expenses:�Self-education expenses
- Application of s 8-1 to common expenses:�Self-education expenses
- Application of s 8-1 to common expenses:�Self-education expenses
- Application of s 8-1 to common expenses:�Home office expenses
- Application of s 8-1 to common expenses:�Clothing and dry-cleaning expenses
- Application of s 8-1 to common expenses:�Clothing and dry-cleaning expenses
- Application of s 8-1 to common expenses:�Interest expenses
- Application of s 8-1 to common expenses:�Interest expenses and gearing
- Application of s 8-1 to common expenses:�Legal expenses