Here's one for the true-believers, prepared to wade through the minutiea of work-related expense claims potentially arising from attending a wedding.

Hi Michael

I started to write the attached for Brandis and Joyce and thought I’d send it to you.

Also attached are some extracts from two tax office rulings.

You can look at the full documents on their website.

There is one other thing I want to raise.

How did Fairfax link these dates and expenses to your wedding?

I think you may have invited one or two rats who happen to call themselves journalists.

Regards

According to the letter from George Brandis he is entitled to have expenses paid which are incurred in the course of attendance at a function primarily for work related purposes.

This appears to have much in common with the requirements under the general deduction provision of our tax law.

It might be thought a strange result if something which could generate a tax deduction was ineligible for claim as a Parliamentary expense.

That tax provision carries within it a requirement for an outgoing to be incurred in the course of gaining and producing assessable income and an exclusion for private expenses.

For practical purposes the requirements set out above may be thought of as different aspects of the same question.

Common sense would dictate that the nature of the duties attached to a particular position would affect the distinction between private/business expenses.

See for example; Bentley Stokes and Lowless v Benson 33 TC 491 entertainment expenses of Solicitors ; 12 TBRD Case M3 entertainment expenses of an eye specialist; Case D44 72ATC 252 entertainment expenses of a senior public servant and Taylor v Provan travelling expenses of the Canadian director of an English Brewery. See also the list of expenses claimable by politicians in TR 99/10

To be regarded as an expense of the requisite character it should result from an obligation arising from the nature of the relevant office/employment and not from the circumstances of the particular person employed.

Normally purpose is determined on an objective basis, however subjective motives can be examined in certain circumstances eg a great disparity between the outgoing and any proximate production of income. Fletcher v FCT 91 ATC 4950.

In relation to apportionment the Tax Office takes the view that, where the main purpose is the production of income, related expenses are fully deductible notwithstanding the existence of an incidental private purpose.

This can be seen as equivalent to the requirement for the expense to be primarily for work related purposes.

Apportionment for tax purposes on a time basis is inappropriate.

The correct approach is to determine the degree of predominance to be attached to the relevant business/private aspects. See TR 98/9.

A wedding would normally be a clear example of a private function.

Was Brandis primarily at that function because of the requirements of his office or because of his personal relationships; even though those relationships arose out of matters concerning his office.

That is something he would have to answer but any extended history of social interactions between he and you would, on an objective basis, be contrary to an assertion that his attendance arose primarily from the duties of his office.

It would also be necessary to fully examine the advantages he saw as arising from his attendance and their connection to those present.

Presumably the attendance of Barnaby Joyce was something that had been planned for some time.

If this is the case it is not some incidental activity which has occurred as a pleasant addition to the primary reason for his presence in Sydney.

I am assuming he was going to the wedding in any case and the Bolt interview was an opportunity to kill two birds with one stone.

However it is difficult to identify any expenses claimed that relate to your wedding.

There may of course have been other reasons for Joyce’s presence in Sydney or nearby and the expenses claimed can only have related to Comcar.

Against this you appear to have paid for his car expenses associated with the wedding so it appears the comcar expenses have no relation that.

The flight from Sydney to Moree would appear to be an entirely appropriate subject for claim.

For tax purposes an apportionment would be required if any expense was involved in getting Joyce to Sydney for the wedding and the interview but it is difficult to describe these expenses as primarily for work related purposes unless Brandis was also able to do so.

In my opinion it is probably appropriate that Brandis has made a repayment.

As you say we have to wait for Joyce to disclose more details.

TR 1999/10

Entertainment expenses

174. A deduction is not allowable under the general deduction provisions of section 8-1 for the provision of entertainment (see section 32-5). Of the exceptions to this general rule that are set out in Subdivision 32B, only section 32-35 relating to seminar expenses is relevant to Members (see paragraph 138).

175. Broadly, the 'provision of entertainment' means entertainment by way of food, drink, recreation, accommodation or travel. Entertainment includes business lunches and social functions, but excludes meals purchased during overnight work-related travel (subsection 32-10(2)).

176. A deduction is not allowable for 'donations' made under an arrangement for the specific purpose of enabling the recipient to provide entertainment, or to compensate or reimburse the recipient for the cost of providing entertainment, whether made for fund raising purposes or otherwise (see section 32-75).

177. In Case Y11 91 ATC 184; AAT Case 6641 (1991) 22 ATR 3063, the Tribunal denied a senior officer in the Australian Defence Force, who was involved in negotiations to buy defence equipment, a deduction for expenditure incurred in attending a range of lunches, cocktail parties, dinners and other forms of social contact relevant to the performance of his duties. The officer did direct business on many of those occasions. The Tribunal held that the entertainment provisions (subsection 51AE(4) of the ITAA 1936) operated to deny the claim. It did not matter that the expenditure was directly relevant to business transactions.

178. In Frankcom v. FC of T (1982) 65 FLR 25; 82 ATC 4599; (1982) 13 ATR 636, a magistrate was denied a deduction under the general deduction provisions for the costs of attending a cocktail party hosted by the Bar Association and Law Society and dinners given by the Queensland Stipendiary Magistrates' Association. The taxpayer's duties as a magistrate did not necessitate his attendance at social functions. Hence, the expenditure was not incidental and relevant to the taxpayer's income-producing activities and was of a private nature. It should be noted, however, that this case was decided prior to the enactment of the entertainment provisions.

179. Example: A Member provides light refreshments such as tea, coffee, fruit drinks, cakes and biscuits to constituents when they visit her electorate office. A deduction is allowable for the cost of providing these refreshments to the constituents because we do not consider that this amounts to the provision of entertainment, and the expenditure satisfies the general deduction tests.

180. Example: When entertaining constituents and overseas visitors, a Member often invites guests to join him for a meal, at his expense, in the Parliamentary dining room. The provision of these meals amounts to entertainment and the cost is not an allowable deduction.

181. Example: A Member hosts a barbecue at which proposals for government funding programs are debated and voted on by invited members of his local business community. The cost of this function is not an allowable deduction because it represents the provision of entertainment

Functions and presentations

185. A deduction is allowable for the cost of attending functions where a Member's attendance is for work-related purposes. A deduction is not allowable if a Member is attending a purely social function, such as a football match or family get-together. These expenses are private in nature and may also relate to the provision of entertainment (see Entertainment expenses, paragraphs 174 to 181).

186. A deduction is allowable for the cost of attending a function, such as a gathering of parents and citizens who are representing schools within a Member's electorate, where a 'meal' comprising finger food, such as sandwiches, cakes, party pies, sausage rolls and the like is served. That is, the 'meal' is incidental to the main purpose of the gathering. The principle is not altered if refreshments such as tea, coffee, cool drinks and a glass of wine are also served - the function would not constitute entertainment.

187. A deduction is allowable for the cost of attending a fund raising function if the circumstances are similar to those outlined at paragraph 186, that is, the 'meal' is incidental to the main purpose of the gathering

188. A deduction is not allowable for the cost of attending functions, such as those outlined at paragraphs 186 and 187, if a more substantial meal, perhaps in the form of a sit-down dinner, is provided. This is because the 'meal' is not merely incidental to the main purpose of the gathering - it is entertainment.

189. A deduction is not allowable for the cost of attending a function, such as a charity ball or cocktail party, whether it is held for fund raising or other purposes. This is because the main reason for gatherings of this type is for entertainment.

190. We have based the views outlined at paragraphs 185 to 189 on principles that we have considered in Taxation Rulings TR 97/17, IT 2675 and Taxation Determination 94/55. See also Entertainment expenses, paragraphs 174 to 181.

191. A deduction is not allowable for the cost of goods, such as food and clothing, purchased at fetes and fairs. These expenses are considered to be of a private or domestic nature.

191A. Where a Member pays a premium on an insurance policy that provides coverage for public liability insurance for a function or meeting that is not held in Commonwealth funded electorate offices, a deduction is allowable to the extent the premium relates to his or her work-related activities. A premium paid in relation to a purely social function or event is not allowable.

TR 98/9

(e) The intention or purpose in incurring the expense may be an element in determining whether the expense is allowable

63. An expense is deductible under section 8-1 when the essential character is that of an income producing expense. The essential character is to be determined by an objective analysis of all the surrounding circumstances (see Fletcher & Ors (199 ) 173 CLR 1 at 17; 91 ATC 4950 at 4957 and 4958; (1991) 22 ATR 613 at 622).

64. If the purpose of a study tour or attendance at a work-related conference or seminar is the gaining or producing of income, the existence of an incidental private purpose does not affect the characterisation of the related expenses as wholly incurred in gaining assessable income.

65. Both Ronpibon Tin NL (78 CLR at 59; 8 ATD at 437) and Fletcher & Ors (173 CLR at 16; 91 ATC at 4957; 22 ATR at 621) recognise there are at least two kinds of expenditure that require apportionment under section 8-1. The first is expenditure in respect of a matter where distinct and severable parts are devoted to gaining income and other parts are devoted to some other end. If a study tour or work-related conference or seminar was mainly devoted to a private purpose, such as having a holiday, and the gaining or producing of income was merely incidental to the private purpose, only those expenses directly attributable to the income-earning purpose would be allowable.

66. The second kind of apportionable expenditure is a single outlay that serves both an income-earning purpose and some other purpose indifferently. While the High Court recognised that there can be no precise arithmetical division in such cases, it said there must be some fair and reasonable division on the facts of each case. For example, if a study tour or work-related conference or seminar is undertaken equally for income-earning purposes and private purposes, it would be appropriate to apportion the expenses equally between the purposes.

67. Example: Glenn, a qualified architect, attends an eight-day work-related conference in Hawaii on trends in modern architecture. One day of the conference involves a sight-seeing tour of the island and a game of golf is held on the final afternoon of the conference. As the main purpose of attending the conference is the gaining or producing of income, the total cost of the conference (air fares, accommodation and meals) is allowable.

68. The existence of private pursuits, such as the island tour and the game of golf, is purely incidental to the main purpose and does not affect the characterisation of the conference expenses as wholly incurred in gaining assessable income.

69. Example: Jenny, a doctor, was holidaying in Cairns when she became aware of a work-related seminar on the current treatment of cancer patients. The cost of the half-day seminar was $200. Jenny is able to claim a deduction for the cost of the seminar because it is directly attributable to an income-earning purpose. However, no part of her air fare to Cairns or her holiday accommodation is an allowable deduction.