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05 Jun 08 Expenses of employing an assistant incurred by disabled employee partly deductible - Frisch

The AAT has held that seven eighths of the expenses incurred by a physically disabled employee in employing an assistant to provide both personal care and administrative assistance during her working day was deductible, and has allowed the taxpayer's objection against a private ruling issued by the Commissioner which denied deductibility.

In the private ruling, the services provided by the assistant were described thus: "You have employed an administrative assistant for three months to type; to write notes, memos and papers that you dictate; to retrieve, move and open files; to photocopy documents; to arrange your desk and equipment; to get you coffee and lunch; and to provide one hour per day of personal care assistance. The personal care consists of assistance with toileting, and occasionally with eating and dressing." The taxpayer worked for 8 hours a day, and thus one eighth of the expenses were held not to be deductible, being referable to the one hour of personal care assistance.

The Commissioner argued that the expense was incurred as a prerequisite to the gaining of the income, and not in the course of gaining the income. However, the AAT noted that the non-personal services were furnished by the assistant during the period of employment and distinguished the taxpayer's case from the travel and childcare cases which had denied deductibility because in those cases the expenses were incurred in point of time prior to the commencement of the relevant income-earning activity.

The Commissioner then argued that a person who suffers from a physical disability and who overcomes that disability through the assistance of an employee paid to furnish that assistance, invariably incurs an expense which is private in nature. This argument was rejected by the AAT.

The AAT then made the following remarks, at paras 55-56:

"This case was argued before me in the main (although not exclusively) as to the question of whether or not the expense involved should be denied deduction because it was private or domestic and more particularly because it was incurred by the Applicant in order to overcome a physical disability...However, it seems to me that it is at least arguable that the “essential character” of the money spent was no more nor less than the payment of wages or in other words the acquisition for wages of services needed in order to enable the Applicant to derive her income. If this approach is correct the fact that the Applicant suffered from a disability becomes irrelevant. If a taxpayer spends money on an item in respect of which a deduction is in the ordinary course allowable in order to derive income then a deduction is available regardless of the reason why the money was spent and even if the amount spent was in some respects extravagant. We do not in such circumstances ask whether the taxpayer was disabled and all taxpayers are treated alike. Either the amount spent falls with s 8-1 of the 1997 Act or it does not."

Frisch and FCT [2008] AATA 462 (AAT, Block DP, 3 June 2008).

For a copy of the decision, go here


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