Edited version of private ruling

Authorisation Number: 1011814353193

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Ruling

Subject: Business traders course

Question 1

Are you, as trustee for a trust, entitled to claim a deduction for the cost of the business traders course?

Answer: No.

Question 2

Are you entitled to claim a deduction for the costs associated with attending training as part of the business traders course, including airfares, accommodation, taxi fares and meals?

Answer: No.

Relevant facts and circumstances

You, as trustee of a trust, carry on a share trading activity.

You incurred a cost to undertake a business traders course. You registered and paid for this course before you began share trading.

The purpose of this course is to enable you to carry on the share trading business.

As part of the course, you were required to travel to attend a face-to-face training session.

To attend this session, you incurred costs on airfares, taxis, accommodation and meals. You attended this training before you started your share trading activities.

You completed training modules before your face-to-face training. You completed further modules during this training.

You have stated that there is an option to complete more modules; however this would come at an additional cost.

The business traders course provides you with ongoing support for the life of your membership. It also provides a trading platform and software to enable you to share trade.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Summary

You are not entitled to a deduction for:

· the cost of the business traders course, and

· the costs you incurred to travel and attend the face-to-face training.

These expenses were incurred at a point too soon. They enabled you to gain new skills to enable you to begin share trading activities.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature.

Taxation Ruling TR 98/9 is about the deductibility of self-education expenses and states:

1. Self-education expenses are deductible under section 8-1 where they have a relevant connection to the taxpayer's current income earning activities.

2. If a taxpayer's income earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

3. No deduction is allowable for self-education expenses if the study is to enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

In your case

You have undertaken a business traders course to increase your skills and knowledge in share trading, in order to begin trading activities and derive income.

At the time you attended the training session, you had not yet started share trading activities or earned any assessable income.

As stated in TR 98/9, self-education expenses to obtain new employment or to open up a new income-earning activity are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Therefore the cost of the course and the expenses you incurred to travel to, and attend, the face-to-face training were not incurred in the course of producing assessable income. That is, they were incurred at a point too soon. Completing the modules and attending the training enabled you to gain the skills necessary to begin a new income earning activity.

For these reasons, you are not entitled to a deduction for the cost of the business traders course or the costs to attend the face-to-face training under section 8-1 of the ITAA 1997.

Please note

While we acknowledge that the business traders course also provides ongoing support and a share trading platform and software, we consider these aspects to be capital in nature. The right to receive ongoing support and any trading software provide long lasting benefits that enable you to share trade. These types of expenses would not be deductible under section 8-1 of the ITAA 1997.

Further, as the value of the course components were not separately identified, we are unable to quantify aspects that you were entitled to once you began share trading. For this reason, we do not consider that these aspects, such as the ongoing support, warrant any apportionment of the entire course cost.

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