Issue
Is the taxpayer entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 ('ITAA 1997') for the costs they incurred with the intention of attending an interstate investment seminar which was later cancelled?
Decision
No. The taxpayer is not entitled to claim a deduction under section 8-1 of the
ITAA 1997 for the costs incurred in order to attend an interstate investment seminar which was later cancelled.
Facts
The taxpayer holds an investment portfolio of shares.
The taxpayer registered to attend an interstate investment seminar.
The intention of the taxpayer was to attend the interstate seminar and remain interstate for an extra amount of time for private purposes.
The taxpayer received a phone call, prior to leaving, from the seminar presenter stating that the seminar the taxpayer was to attend was cancelled.
As the flight ticket was not refundable, the taxpayer decided to go interstate anyway for private purposes.
The taxpayer incurred the cost of a flight ticket, accommodation, food and transfers in relation to the interstate travel.
Reasons for Decision
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, or relate to the earning of exempt income.
A number of significant court decisions have determined that, for an expense to satisfy the tests in section 8-1 of the ITAA 1997: • it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 7 AITR 166; (1958) 11 ATD 404) • there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] HCA 15;(1949) 4 AITR 236; (1949) 8 ATD 431); and • it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; (1956) 11 ATD 147 (1956); 6 AITR 379; FC of T v. Cooper (1991) 29 FCR 177; 91 ATC 4396; (1991) 21 ATR 1616; Roads and Traffic Authority of NSW v. FC of T (1993) 43 FCR 223; 93 ATC 4508; (1993) 26 ATR 76; Federal Commissioner of Taxation v. Hatchett (1971) 125 CLR 494; 71 ATC 4184; (1971) 2 ATR 557).
The taxpayer's intention at the time of incurring the expenses was to attend an interstate seminar. Had the seminar not been cancelled, the taxpayer may have been entitled to claim a deduction for a portion of the expenses incurred.
However, the taxpayer used the trip wholly for private purposes. The expenses incurred did not have any connection with gaining or producing the taxpayer's assessable income and therefore do not meet the requirements of section 8-1 of the ITAA 1997.
Consequently, the taxpayer's expenses in relation to the interstate trip are not deductible under section 8-1 of the ITAA 1997 as they were not incurred in gaining or producing assessable income and were also private in nature.
Amendment History
Date of Amendment Part Comment 13 March 2015 Reasons for Decision Insert medium neutral citation: [1949] HCA 15 Case References Insert medium neutral citation: [1949] HCA 15
Date of Amendment | Part | Comment
13 March 2015 | Reasons for Decision | Insert medium neutral citation: [1949] HCA 15
Case References | Insert medium neutral citation: [1949] HCA 15