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20 Apr 2009
Appeal Status
Not appealed

Expenditure must be significantly in connection with determination of assessable income

2009 case note – Guidance on how section DJ(5)(a) should be interpreted - deduction, income tax, expenditure.

TRA Decision Number 08/2009, TRA Number 023/2007


Taxpayer failed to establish that expenditure incurred was significantly in connection with her determined assessable income and therefore were non-deductible under section DJ(5)(a).

Impact of decision

This decision provides guidance on how section DJ(5)(a) should be interpreted.


  1. This supplementary decision was issued pursuant to the "leave reserved" by Barber DCJ in his substantive decision issued on 14 January 2009.
  2. The substantive decision dealt with the disputant's challenge of the defendant's assessment of her income tax liability in the 2004 income tax year over the aspect of conversion of her income from social welfare benefits to ACC earnings related compensation, and receipt of residual backdated ACC lump sums.
  3. In his substantive decision, Barber DCJ, in relation to the deduction claimed for expenses incurred by the disputant in pursuing the issue, held the disputant had failed to establish that any expenditure was incurred by the disputant in the 2004 income tax year. Barber DCJ reserved leave for the disputant to provide further evidence in order to claim deductions.
  4. As a consequence of Barber DCJ reserving leave, the disputant applied for reimbursement of expenses. In her application, the disputant outlined the various Review Hearings she had brought against ACC in July 2003, August 2003, and February 2004.
  5. The disputant generally focussed on reasons for reimbursement of expenses totalling $3,706. The expenses claimed involved computer repairs in 2008 and 2009, postages over the years 2005 to 2009, photocopying over the years 2007 to 2009, obtaining copies of case law in 2005, inkjets over 2005 to 2008, and Court fees paid in 2005 and 2009.


  1. Barber DCJ stated that the authority can only make a decision in respect of the deduction of expenditure for the 2004 income year. He found that no deduction was available to the disputant, because she had not discharged the onus on her to establish that any expenditure incurred in the 2004 income year was principally, if not exclusively, in connection with the determined assessable income. He suggested that it may be more appropriate to express the threshold as requiring expenditure to be significantly in connection with the determined assessable income but found that the taxpayer also failed to establish that.
  2. Barber DCJ agreed with the Commissioner that the expenses and disbursements referred to by the disputant are not deductible in the 2004 income year because they were not incurred in that year, do not relate to that year, and do not satisfy the test of deductibility provided for in section DJ5(1)(a) of the Income Tax Act 1994.
  3. Barber DCJ went on to say that the claimed expenditure did not have the necessary nexus with the determination of the disputant's assessable income. The expenditure is related to the disputant's successful efforts to be covered by ACC and receive ACC entitlements; not to determining her assessable income. She unsuccessfully sought costs from ACC Reviewers.
  4. Barber DCJ noted that there could have been expenditure incurred by the disputant which may be deductible and reserved leave for the disputant to adduce clear evidence of that expenditure and its character and purpose.


Income Tax Act 1994