ITAA 25-5: How to claim a deduction for your company tax-related expenses in your individual tax return

ITAA 25-5: Tax affairs deduction and public officer

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Generally speaking, expenses incurred for preparing your tax returns are tax deductible.

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There is a little-known tax hack that allows the public officer of a company to claim the company's tax-related expenses as a deduction on their personal tax return, rather than seeking the deduction on the company's end.

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What is a public officer?

A public officer is a designated individual responsible for representing the entity in its tax affairs and compliance matters, acting as the main liaison between the company and the ATO.

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Every company must have a public officer appointed when the company is first registered.

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The requirements for a public officer are as follows:

• Must be at least 18 years of age
• Originally resides in Australia
• Is capable of understanding the nature of the person’s appointment as the public officer of the company

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Typically, the public officer is either a company director or an internal accountant, who is closely involved in the company's tax affairs. However, it is possible to appoint an external accountant to fulfill the role of the public officer.

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Are public officers allowed to claim the company’s tax-related expenses on their individual tax return?

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Under ITAA section 25.5, you are allowed to deduct tax-related expenditures you incur to the extent that they are for:

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1. Managing your own tax affairs.
2. Meeting obligations imposed by Commonwealth law related to tax affairs of an entity.
3. Paying the general interest charge or shortfall interest charge.
4. Paying a penalty under Subdivision 162-D of the GST Act.
5. Paying levy under the Major Bank Levy Act 2017.
6. Obtaining a valuation as specified under certain sections.

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If a public officer pays for the company's tax-related expenses and does not receive reimbursement for those expenses, they can claim those expenditures as deductions on their individual tax return.

Note that if these expenses are claimed on the individual's tax return, the company cannot also claim them.

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Example: how can I utilise this in a real business situation?

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Suppose you are the owner of a business and have registered yourself as the public officer of your company. In this financial year, your business made a loss, meaning the company will not be paying any company tax.

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Your company incurred $2,000 for tax affairs during the financial year, which were paid from your personal account on behalf of your company and have not been reimbursed by the company.

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Since the company made a loss and has no obligation to pay any business tax, you would instead claim the $2,000 company tax-related expenses on your individual tax return to reduce your individual tax liability.

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CTK Accounting is a full-scope accounting firm based in Wollongong, servicing clients nationally.

For advice on Tax, BAS, GST, Bookkeeping, and Payroll issues visit us at ctkaccounting.com.au

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