Deductions: bargaining agent's fee payable by a non-union employee for union negotiations in relation to an enterprise agreement

Is the taxpayer entitled to a deduction, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the payment of a bargaining agent's fee to a union for negotiations in relation to a new enterprise agreement with the taxpayer's existing employer?

Yes. The taxpayer is entitled to a deduction, under section 8-1 of the ITAA 1997 for the payment of a bargaining agent's fee to a union for negotiations in relation to a new enterprise agreement award with the taxpayer's existing employer.

The taxpayer's employment is covered by an enterprise agreement.

The existing enterprise agreement is due to expire.

The taxpayer is not a union member.

The union is negotiating the terms and conditions of a new enterprise agreement to replace the existing enterprise agreement which contained a provision allowing for a renewal or extension.

The union is seeking to charge non-union employees a bargaining agent's fee for union representation in negotiations in relation to the new enterprise agreement. The union is also looking to insert a clause in the new enterprise agreement to allow them to impose the bargaining agent's fee on non-union employees.

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.

Taxation Ruling TR 2000/5 sets out the Commissioner's view regarding the deductibility, under section 8-1 of the ITAA 1997, of costs incurred by employees and employers in preparing and administering employment agreements, including enterprise agreements. Paragraph 2 of TR 2000/5 indicates, amongst other things, that the 'costs of drawing up an employment agreement with an existing employer to replace an award or in accordance with a provision in the existing agreement' incurred by an employee are allowable deductions. Paragraph 12 of TR 2000/5 also states that these costs may include 'representation (which could be a union, an employer organisation, an accountant, a lawyer or any other representative employed during the negotiation process)'.

In this case, the taxpayer's employment is covered by an enterprise agreement. The union is negotiating the terms and conditions of the new enterprise agreement that will replace the existing enterprise agreement which is due to expire. The union negotiations include pursuing pay rises and improved work conditions for union and non-union employees at the taxpayer's place of employment.

The union is seeking to charge non-union employees a bargaining agent's fee for union representation in negotiations in relation to the new enterprise agreement. The union is also looking to insert a clause in the new enterprise agreement to allow them to impose the bargaining agent's fee on non-union employees. The bargaining agent's fee is a cost of drawing up an employment agreement with an existing employer to replace an existing award or employment agreement. As indicated above, such costs are deductible under section 8-1 of the ITAA 1997.

Accordingly, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for the payment of a bargaining agent's fee, if imposed by the union.