Home – New Forums Money matters Can I claim the business trip expenses BEFORE I first traded?

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  • #991437
    Eastern Connection
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    I set up my company in December 2013. In January 2014, I travelled overseas to attend a certification course in the field in which I trade.

    I didn’t trade (i.e. made first sale) until May 2014.

    Can I actually claim the business trip – course cost, airfairs, accomodation etc as business expense, to increase my loss for that year?

    #1181550
    Tactical Displays
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    Hi,

    *Obligatory Disclaimer*
    I’d ask my tax accountant for some advice if I were you but I am a CA so here goes.

    What you’re trying to describe is justifying a nexus between your income and the expenses that you are trying to claim. There was a considerable amount of case law around this.

    Not knowing your particular business, I’d say that the cost of the trip is deductible (provided it was entirely for business) even though you didn’t make your sale till four months later.

    The important thing is that you had a business registered at the time, you were engaged with a motive to a profit (which, in your favour ultimately lead to assessable income), and the expenses were related to the creation of that assessable income.

    Your deduction would fall under the second positive limb of s8.1 ITAA 1997 and not contravene any of the negative limbs.

    Again, I don’t know your circumstances in detail so take it with a pinch of the salty stuff.

    #1181551
    James Millar
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    The only caveat being that Section 8(2)(a) strikes out claiming an income tax deduction for capital expenditures. Case law is probably 50/50 at best regarding the treatment of the cost of initial qualifications. If the course was the first qualification then it may be considered a capital cost. I think the nexus to income is certainly there (as it is in most cases for professional education costs).

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
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