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QB 19/01
19 Mar 2019

What are the requirements for claiming tax deductions for payments to family members for services?

This Question We’ve Been Asked (QWBA) deals with the requirements for claiming income tax deductions for payments to spouses, partners, or other family members for services they provide to businesses or other income earning activities. It reminds taxpayers that to claim deductions the family member must provide services to the business; the amount paid must not be excessive; and if the family member is a spouse or partner, the Commissioner's prior approval for a deduction is required unless the business is run though a company (s DC 5 of the Income Tax Act 2007). The QWBA sets out the kinds of evidence that may be relevant to show the family member provided services to the business.