Issue
Is a deduction allowed under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for a proportion of the expenses incurred by the taxpayer's overseas based administration company?
Decision
No. A deduction is not allowed under section 8-1 of the ITAA 1997.
Facts
The taxpayer, an individual, is a resident of an overseas country. An administration company has been established in the taxpayer's country of residence through which all the taxpayer's worldwide earnings and expenses are disclosed.
As a result of having competed in Australia, income was derived in the taxpayer's own name. This income having been earnt in Australia is subject to tax in Australia. Against this income the taxpayer sought to claim a proportion of the indirect expenses incurred in operating the overseas administration company.
Reasons for Decision
Expenses incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income are allowable deductions except to the extent that they are capital, private or domestic in nature (section 8-1 of the ITAA 1997).
The indirect expenses claimed were incurred by the administration company in running the company. They were not incurred by the taxpayer as a result of competing in sporting events in Australia. The administration company is a separate legal entity from the taxpayer for Australian income tax purposes.
Expenses incurred by the administration company are not allowable deductions against the income earnt by the taxpayer as an individual in Australia.
Therefore no deduction is allowable.