The AAT has mostly affirmed the Commissioner’s decision that losses and outgoings a taxpayer incurred in earning personal services income (PSI) were not allowable deductions as there was not enough substantiation.
The taxpayer provided horticultural advice to a business through a company. The Tribunal previously concluded in AAT Case [2009] AATA 906 that the income derived by the company was PSI and therefore assessable in the hands of the taxpayer. In the current proceedings, the taxpayer returned to the Tribunal to contest whether losses or outgoings incurred in earning the PSI could be deducted under s 86-20 of the ITAA 1997. The Commissioner argued that while some of the expenses may be deductible, many of the claims were unrelated to the personal services business, or inadequately substantiated.
The AAT held that in most of the taxpayer’s claims there was not enough evidence to establish whether the expenditure was incurred in connection with gaining or producing PSI. In addition, it held the taxpayer failed to meet the challenge in respect to the substantiation requirements for many of the expenses claimed. Therefore, the Tribunal said in relation to the expenses which the Commissioner conceded were deductible, the decision was set aside. Otherwise, it affirmed the Commissioner’s decision that the expenses were not deductible.
(AAT Case [2011] AATA 359, AAT, Ref No 2008/3027-30, McCabe SM, 27 May 2011.)
[LTN 1, 4/1]