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Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 ('ITAA 1997') for expenses incurred in contesting an election as a paid union official?

No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for expenses incurred in contesting an election as a paid union official.

The taxpayer is a paid union official with a fixed term of office.

At the end of the fixed term, elections are held and the taxpayer must contest the election to maintain their position.

An election was held for the taxpayer's position during the income year. In contesting that election the taxpayer incurred expenses such as stationery, printed material and postage.

Section 8-1 of the ITAA 1997 allows a deduction for all losses or 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.

In determining whether union election expenses are incurred in gaining or producing assessable income it is relevant to consider the following cases: • In FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541; travel and legal expenses incurred by a professional footballer in seeking and obtaining a contract with a different Rugby League club were disallowed. The court held that expenditure incurred in changing or securing a new employment was not 'incurred in gaining or producing' assessable income. The expenditure was incurred at a point too soon to be deductible. • In Case S10 85 ATC 160; (1985) 28 CTBR (NS) Case 17 expenses incurred in being re-elected as an alderman of a city council were disallowed. The Board of Review found that the expenditure was incurred, not in the 'performance' of the taxpayer's duties but in 'obtaining' that appointment. • In Case V46 88 ATC 375 a union official's claim for expenses incurred in conducting a successful re-election campaign was disallowed. The Administrative Appeals Tribunal held that the re-election costs were expenses incurred in obtaining a 'separate discrete period of employment' and were regarded as 'the cost to an employee of obtaining his employment'.

The union election expenses incurred by the taxpayer do not relate to maintaining a position because there is no continuity of office. The holding of an election represents the expiration of one term of office and the potential start of another term. Each election thus represents a break in continuity. For continuity to exist, the taxpayer would have to be guaranteed their union position without the need for an election.

The re-election expenses were incurred, not in the performance of their union duties but in obtaining a new term in office. Accordingly, a deduction is not allowable under section 8-1 of the ITAA 1997 for expenses incurred by the taxpayer in contesting an election as a paid union official.

Note: section 25-60 of the ITAA 1997 allows a deduction for expenses incurred in contesting elections for membership of the Federal or a State Parliament or the ACT or Northern Territory Legislative Assembly. Section 74A of the Income Tax Assessment Act 1936 allows a deduction for expenses incurred in contesting elections for membership of local government. However neither of these provisions extend to allow election expenses incurred in relation to union positions.