Can you deduct expenses incurred in carrying on your business for the purpose of gaining or producing office holder income as an independent assessor for a statutory body?
Yes. This ruling applies for the following periods : Year ended 30 June 20XX Year ended 30 June 20XX Year ending 30 June 20XX Year ending 30 June 20XX Year ending 30 June 20XX Year ending 30 June 20XX The scheme commenced on: DD MM 20XX
You are a professional who has run a specialist practice business as a sole trader for many years. In addition to providing services to the public, you perform work as an independent assessor for a statutory body on a fee for service basis. The assessment work for the statutory body is considered to be that of an office holder under paragraph 12-45(b) of Schedule 1 of the Taxation Administration Act 1953 . You are not an employee of the statutory body. The statutory body withholds tax on the payments for the independent assessments. The independent assessment work completed by you for the statutory body is similar to the work you do for other clients. You utilise your business facilities and employees to carry out the independent assessments. You are also required to be registered and have indemnification to carry out the assessment work. You provide a tax invoice for the services provided to the statutory body. You are registered for GST and submits quarterly business statements.
Income Tax Assessment Act 1997 section 8-1 Income Tax Assessment Act 1997 paragraph 8-1(1)(a) Income Tax Assessment Act 1997 paragraph 8-1(1)(b)
General deductions Deductible expenditure under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) must first satisfy either of the positive limbs of the provision. The first limb allows a deduction for any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income (paragraph 8-1(1)(a) of the ITAA 1997). The second positive limb allows a deduction for a loss or outgoing to the extent it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income (paragraph 8-1(1)(b) of the ITAA 1997). To claim a deduction under section 8-1 of the ITAA 1997 it is therefore necessary to establish sufficient connection link or nexus, between the loss or outgoing and the production of assessable income (in the case of the first positive limb) and or the carrying on of a business for the purpose of producing assessable income (in the case of the second positive limb). Regardless of which positive limb is satisfied, a deduction will not be allowed under section 8-1 of the ITAA 1997 for expenses which are capital, private or domestic in nature. Application to your circumstances
You undertake assessment work for a statutory body on a fee for service basis. You regard this work and the income it produces as part of your specialist business. You incur expenses in relation to the operation of the specialist business in relation to earning the assessor income, including for rooms used in providing your services and for support staff. The Commissioner accepts that where these expenses are incurred either directly in earning your office holder income or necessarily incurred in conducting your specialist business for the purpose of earning the office holder income, they can be deducted under section 8-1 of the ITAA 1997 to the extent they are not capital, private or domestic in nature. Your office holder income will need to be reported in the salary and wages section of the tax return. Deductions related to the office holder income will need to be apportioned on a reasonable basis and reported separately to expenses incurred in earning your other business income.