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Is a deduction available under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses paid on behalf of a company in which he is a director?

No. The taxpayer cannot claim a deduction under section 8-1 of the ITAA 1997 for expenses paid on behalf of a company in which he is a director.

The taxpayer is the sole director of a company. The taxpayer paid several accounts on behalf of the company and was to be reimbursed. However, the company was placed under administration before the amounts were reimbursed.

All payments would have been deductible expenses for the company. The amounts will not be reimbursed as the company will be liquidated without distribution to creditors. The company will not claim a tax deduction for these expenses.

Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing the taxpayer's assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are necessarily incurred in gaining or producing exempt income.

In this case the expenses paid on behalf of the company are not referable to the taxpayer's income producing activities and as such, no deduction is allowable.