Question

Sally is a single parent who is employed as an accountant. In order to attend employment she must put her young child in a day-care centre. Sally considers the expense is necessarily incurred in gaining her income. Would she be entitled to a tax deduction under s8-1? Required Advise Sally of her tax consequences.

You shoud follow Issue, Law, Application , Conclusion (ILAC) model

Answer 1

Issue-

Whether Sally will be allowed deduction for the Day-care expense of her Child under Section 8-1.

Law-

As per the provision of Section 8-1 of the ITAA-

(1) You can deduct from your assessable income any loss or outgoing to the extent

that:

(a) it is incurred in gaining or producing your assessable income; or

(b) it is necessarily incurred in carrying on a business for the purpose of

gaining or producing your assessable income.

However, deduction is not allowed in the following cases

(a) if it is loss or Outgoing of capital, or of a Capital Nature

(b) If it is of private or domestic nature

(c) it is incurred in relation to gaining or producing your exempt income or your

non-assessable non-exempt income; or

(d) a provision of this Act prevents you from deducting it.

Application-

In the given case Sally has incurred outgoing for the purpose of gaining her income. There fore the section is applicable to this case.

But the outgoing incurred i.e. The day care center expense for her child is of private or Domestic nature.

this is covered under the deduction not allowed section.

Conclusion-

Sally will not be allowed a deduction for the Day care center expense of her child under Section 8-1 of the ITAA as this outgoing is a private or Domstic nature.

Note-

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