This article examines a particular type of dual-purpose expense - one which can be linked both to the derivation of assessable income and to the generation of a private benefit. On what basis should a taxpayer be able to claim a deduction for such an expense? Significant difficulty and uncertainty underlie the apportionment process that is applied to such an expense by the courts, the Administrative Appeals Tribunal and the Australian Taxation Office. The process provides little practical guidance to taxpayers on how to apportion dual-purpose expenses. In addition, a tension exists between the apportionment process and the threshold issue of characterisation or 'relevance' of dual-purpose expenses. This article examines these issues and suggests some clear principles that should be applied to the task of deducting dual-purpose expenses of this kind.


taxation law, dual-purpose expenses, ATO, apportionment, assessable income

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