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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 the cost of the Queensland Community Ambulance Cover Levy?

Yes. The taxpayer is entitled to a deduction, under section 8-1 of the ITAA 1997, for the cost of the Queensland Community Ambulance Cover Levy.

The taxpayer carries on a business for the purpose of producing assessable income from premises that are supplied with electricity. The electricity is used solely for business purposes. From the 1 July 2003 the cost of the electricity includes an amount for the Ambulance Levy.

The Queensland Community Ambulance Cover Levy (the Ambulance Levy) is a state government charge imposed on most electricity accounts from 1 July 2003. The purpose of the levy is to fund the Queensland Ambulance Service. The levy is imposed under the Community Ambulance Cover Act 2003 (Qld).

Section 8-1 of the ITAA 1997 allows a deduction for losses and outgoings to the extent that they: • are incurred in gaining or producing 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 for losses or outgoings to the extent they are of a capital, private or domestic nature, or are incurred in relation to gaining or producing exempt income, or are otherwise prevented from being deductible by a specific provision of the Income Tax Assessment Act 1936 or the ITAA 1997.

As the Ambulance Levy is imposed on electricity accounts, it forms part of the cost of having electricity supplied. Therefore, the Ambulance Levy will receive the same treatment as the electricity account on which it is imposed. Where the electricity is used wholly for business purposes, the Ambulance Levy will be fully deductible. Where the electricity is used only partly for business purposes, the Ambulance Levy will be deductible only to the extent of the business usage of the electricity.

The Ambulance Levy will be deductible under paragraph 8-1(1)(b) as an expense necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. This treatment is consistent with the treatment the courts have given to other government taxes and charges such as payroll tax ( Layala Enterprises Pty Ltd (in liq) v. FCT (1998) 86 FCR 348; 98 ATC 4858; (1998) 39 ATR 502), stamp duty associated with revenue transactions (10 CTBR Case 34) and land tax ( Moffatt v. Webb (1913) 16 CLR 120).