Deductibility of expenses associated with receipt of a government grant

Can the taxpayer claim deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses incurred in relation to a community project for which the taxpayer received a government grant?

Yes. Expenses incurred in relation to the community project for which the taxpayer received a government grant are deductible under section 8-1 of the ITAA 1997.

The taxpayer received a grant from a government of Australia (Commonwealth, State or Territory).

The grant is assessable income for services performed by the taxpayer as coordinator for a specific project.

The taxpayer incurred costs (i.e., travel, telephone, speaker's fees, postage, car expenses and stationery) in performing duties as coordinator for the project.

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.

There must be nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income.

The travel, telephone, speaker's fees, postage and stationery expenses were incurred by the taxpayer in relation to deriving assessable income from the government grant. The expenses are not outgoings of a capital, private or domestic nature, and therefore are allowable deductions under section 8-1 of the ITAA 1997.