Issue
Is a taxpayer able to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses relating to a boat used as an office.
Decision
No. The taxpayer is not able to claim a deduction under section 8-1 of the ITAA 1997 for expenses relating to a boat used as an office.
Facts
The taxpayer purchased a boat and uses it as an office and took it to some work sites. The taxpayer is claiming expenses relating to the acquisition and maintenance of the boat.
Reasons for Decision
Section 26-50 of the ITAA 1997 states that any loss or outgoing in relation to the acquisition, retention, ownership of, rights, or maintenance of a boat is not an allowable deduction.
However, subsection 26-50(3) of the ITAA 1997 does not stop you deducting a loss or outgoing for a leisure facility if at all times in the income year: • It is held for sale in the ordinary course of your business. • It is used mainly in the ordinary course of your business, for the purpose of providing leisure facilities for payment. • It is used mainly to produce your assessable income in the nature of rents, lease premiums, license fees, or similar charges. • It is used mainly for your employees to use, or for the care of your employees' children (this does not apply to employees who are members or directors of the company).
None of the above criteria apply to the taxpayer's situation. The use of the boat was at times convenient but it was not essential for the efficient conduct of the business. In Sinclair v. FC of T 2001 ATC 2092; (2000) 47 ATR 1001 it was considered that a business could have been carried out with equal efficiency based in another location rather than on a boat.
Therefore the expenses relating to the boat are not deductible because of the operation of section 26-50 of the ITAA 1997.
Amendment History
Date of Amendment Part Comment 20 November 2015 Legislative References Replaced subsection 26-50(5) of the ITAA 1997 with subsection 26-50(3) of the ITAA 1997 Reasons for Decision Partly rewritten for clarification
Date of Amendment | Part | Comment
20 November 2015 | Legislative References | Replaced subsection 26-50(5) of the ITAA 1997 with subsection 26-50(3) of the ITAA 1997
Reasons for Decision | Partly rewritten for clarification