Tax deductions for subscriptions, special fees and levies

Many professional, business or trades people are members of an association, and during their working life subscribe to an appropriate organisation.

In most cases the membership of a trade union for example, or professional association relevant to workers in a particular occupation, would qualify for a tax deduction under the general deduction provisions of the tax laws.

Eligibility can endure into retirement

The tax law also allows a deduction for such memberships, where there is no requirement that the taxpayer derives assessable income associated with that subscription (e.g. the taxpayer has retired, or no longer works in that profession).

The downside is that the deduction is then limited to only $42. So if a retired taxpayer was a member of two associations each costing $50, the deduction would be limited to $84. It has been that amount for decades and it is not adjusted for inflation.

A taxpayer could also qualify for either deduction for different subscriptions. For example, a person who is qualified as an engineer but who now works as an accountant for an engineering firm might claim a $42 deduction for the membership of an engineer’s association, and claim a full deduction for membership of an accounting body.

Deductions for special fees or levies

Sometimes, in addition to periodic subscriptions, associations may charge members joining fees, special levies and other contributions, such as a special fund for one-off purposes (for example, a trade union’s strike fighting fund).

The deductibility for those fees depends on whether there is a clear and necessary nexus between the activities by which the assessable income is derived and the purpose for which the fees are made.

The payment of a special levy or contribution is an allowable deduction if the purpose is clearly linked to the activities by which the assessable income is derived. For example, a special levy or contribution that workers may have paid to their union for pay negotiations qualifies for tax deduction. However, if the levies and contributions are used to assist a political party or families of employees suffering financial difficulties as a result of strike action, these payments are not deductible.