Deductions - cash shortages paid by an employee

Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for cash shortages they are required to repay to their employer?

Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for cash shortages they are required to repay to their employer.

The taxpayer is an employee. As part of their duties they are required to deal with money paid by customers or clients.

The taxpayer made an error while dealing with this money which resulted in a cash shortage. The taxpayer's employer required the taxpayer to repay the amount of the cash shortage.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and 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, relate to the earning of exempt income, or where a provision of the ITAA prevents a deduction being claimed.

Taxation Ruling TR 95/19 deals with deductions applicable to employees in the airline industry.

Paragraph 38 of TR 95/19 provides that where during the course of their duties the flight attendant is required to deal with monies paid by passengers, and cash shortages occur, the flight attendant is required to make up the shortage. The Ruling provides that a deduction is allowable to the flight attendant for amount of the cash shortage made up.

Although this ruling relates to employees in the airline industry the principle with regard to cash shortages is applicable to employees in other occupations.

Where employees are required to: • deal with money as part of their employment, and • the conditions of their employment require them to repay to the employer any amounts in respect of cash shortages,

the employee will have incurred a loss or outgoing in gaining or producing their assessable income that is not of a private or domestic nature. Providing the employee is able to substantiate the amount claimed, they will be entitled to a deduction for the amount paid under section 8-1 of the ITAA 1997.

Date of Amendment Part Comment 27 March 2015 Reasons for Decision Additional words inserted to provide technical clarity Keywords Grammatical change

Date of Amendment | Part | Comment

27 March 2015 | Reasons for Decision | Additional words inserted to provide technical clarity

Keywords | Grammatical change